AOL is betting big on digital video advertising and is employing a “join them” approach to achieve success. With its recent acquisition of Vidible, AOL expands its suite of video advertising and marketing services and continues its push for dominance in the online and digital video advertising space.
Make no mistake: Vidible is not AOL’s first foray into digital video advertising. In September 2010, AOL began its effort to redefine itself by purchasing 5 Min Media for $65 million. For its second investment in September 2013, AOL spent a cool $405 million on Adap.TV to create a “powerful cross-screen solution for brands, agencies and publishers.” The acquisition immediately paid off when, in the same month, AOL surpassed Google in the number of online video ads being served, according to comScore.
AOL is not the only one dropping cash on video startups and services. In July, Facebook purchased LiveRail for between $400-$500 million, followed by Yahoo!’s $640 million acquisition of Brightroll in November. Both acquisitions were made as part of the race to the top of the video ad market, a spot that until recently Google’s YouTube has traditionally held.
But what does it all mean? AOL’s acquisition of Vidible validates what we all thought would happen: industry consolidation and the creation of mega ad networks.
The past few years have seen significant activity in the way of technology and financing of smaller-market players, resulting in a market that is primed for M&A activity by larger networks and players. This market consolidation activity by larger players is contributing to the creation of mega ad networks.
Take AOL and Vidible for example, in a press release announcing the acquisition AOL stated: “the addition of Vidible’s global platform to AOL Video’s offering, including premium original content, programming and publishing partner network, will create the most comprehensive set of tools in the marketplace for its partners to offer a highly differentiated experience optimizing yield and expanding premium reach for both.”
It is clear that AOL is looking to shift market perceptions and establish itself as a dominant volume player in the market. Their activity also signals the creation of mega ad networks that encompass distribution platforms, networks and resources for content producers and owners—meaning a one-stop-shop for digital video advertisers.
Despite widespread consolidation, the digital and online video advertising market is still open to disruption. Acquisitions are clearing a path for the quiet but established players to rise to the top and in 2015 we can expect to see a great deal of innovation and growth from independent players.
Two examples of growth and innovation that can already be seen—and should continue well into 2015—include the rise of casual viewership and the creation of bespoke distribution networks by independent players.
Casual viewership, which was introduced to online video advertisers by Hiro Media in October 2010, is a growing segment of online video that follows the known traits of daytime television. As part of this model, viewers do not intentionally seek out the content they’re viewing, but encounter content while browsing the Internet. In other words, viewers have content pushed to them; they do not seek it out.
Facilitating this casual viewership boom is the development of bespoke distribution networks by supply-side platforms (“SSPs,” also known as sell-side platforms). Many leading SSPs have already started developing their own distribution networks and we can expect a dramatic increase in this trend into 2015.
As mentioned, these trends are already visible in the market and can be seen with players such as Electric Sheep, the multichannel online video network that leverages a curated approach for multichannel destination sites, enabling them to bring a new immersive experience of a complete video ecosystem. By leveraging the casual viewership approach through their own distribution networks, Electric Sheep is able to monetize online videos while developing an audience extension with a reach that is matched only by broadcast TV.
Whether one of the top players or a leading independent player, the bottom line is that content producers and owners are looking for established leaders in the space, with proven services and technology to help maximize profits from online video. They seek strategic partners that offer innovative solutions that equate to long-term sustainable success.
Napchi has been instrumental in guiding online video content supply-side platform Hiro Media’s current product offerings and market strategy, including the birth of the casual viewership model.