The Challenges of Video Content Monetization

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Video content monetization offers a tremendous revenue opportunity to publishers.

According to eMarketer, “[v]ideo is the only subcategory of display ad spending that is growing, as rich media, banner ads and sponsorship all shrink”. In addition, the industry is seeing growth of programmatic video ad buys as a key component of a video monetization strategy.

This article explores both the challenges facing video advertising as well as solutions that could address these challenges in the near future.

Challenges facing video monetization

Lower fill rates

As you know, a fill rate is the ratio of ads delivered by video ad networks to a publisher’s ad inventory relative to requests for ads to cover that inventory.

Presently, video ads have relatively low fill rates. These lower fill rates are largely due to there being less demand for ads to fill video ad inventory in contrast with display or mobile ads.

The production costs for monetizing videos are higher than other formats (I’ll discuss costs as a factor in more detail below). This means that there is less video inventory available and, as a result, ads to fill this more limited inventory tends to be the domain of brands with higher ad budgets.

As a consequence, even though video ads have higher CPMs, constrained demand ultimately means that publishers’ RPMs, revenue per thousand page views, is lower overall due to lower fill rates for video ad inventory.

RPMs, as you know, are an estimate of your earnings divided by page views or impressions and multiplied by one thousand. Higher fill rates generally lead to higher revenue because ad inventory is more likely to be filled and engaged with by your audience.

In their quest for higher CPMs, publishers unwittingly increase site latency which, in turn, tends to decrease ad revenues (I’ll explain these dynamics below).

The answer lies in moving away from a focus on CPMs as a key success metric for video ads. As Taboola’s Yoav Naveh pointed out in AdExchanger, CPMs are not an appropriate or effective metric for video ads. Actual revenue is.

One solution is to supplement video content with display banners in video players. For example, Imonomy’s InVideo product enables publishers to monetize videos in a way that boosts fill rates and creates new, less intrusive video ad inventory to delivers higher, actual revenues.

Latency and loading times

Typically, programmatic video ad sales tend to slow page load times (and increasing page latency) between 10 and 20 seconds simply because of ad trading delays.

To add to this, publishers often add more tags from more advertisers to compensate for lower ad revenues caused, in party, by lower fill rates. More tags mean even slower page load speeds.

Increased latency creates such a poor user experience that audiences would rather take their attention elsewhere or block ads where this remains possible.

This, of course, means less traffic to a site and even less ad revenue.

When it comes to waterfall-based ad sales, one solution is to automate waterfall creation using each publisher’s specific requirements.

Publishers who are more focused on header bidding solutions (and similarly frustrated by latency issues in video header bidding) will find the Rubicon Project’s recent tests with Prebid.js header bidding wrappers particularly interesting because Rubicon Project was able to deliver promising revenue lift to participating publishers.

Cost and skill overhead

Video has been touted as a “must have” for a few years and for good reason.

The format is proving to be very effective at driving engagement. According to WordStream, video can drive “a 157% increase in organic traffic from SERPs”. Video on your landing page can increase conversions by 80%, or more.

Many advertisers see digital video as roughly comparable to TV advertising and have similar expectations when it comes to production costs and skills required. Typically these expectations translate into hiring video production professionals, expensive cameras and production equipment, and, in many cases, editing software.

Fortunately, there is a fair amount of innovation in this space that brings the costs down and this is essential for an effective video monetization strategy.

To begin with, mobile video is increasingly popular. Developing content for mobile devices means adapting to different form factors and consumption habits.

Video producers are also finding that they can produce compelling, high quality video content at much lower costs than they previously thought possible.

To top it all off, the optimal video length seems to be around 2 minutes with engagement at about 70%, according to Wistia.

What this all means is that producers can produce shorter, more engaging videos with more readily available equipment at lower costs. This means more inventory becoming available and greater demand for ads to monetize that inventory. One of the results should be improved fill rates and higher RPMs for publishers.

Limited video inventory on pages

A practical limitation when it comes to video inventory is that it isn’t practical to have more than one video on a webpage, generally speaking. This, of course, also constrains the amount of available video inventory.

As a publisher, you’d probably be tempted to place multiple ads on the video in order to monetize it more effectively. This may include using pre roll, mid roll and post roll ads.

Just as consumers have resorted to ad blocking to filter out display ads online, publishers may well find that too many ads in video content will trigger a similar response. The reason is the same: too many ads, particularly intrusive ads, ruin the user experience and audiences have little tolerance for this.

The solution to this challenge is somewhat subtle. Publishers simply have to find a balance between the right combination of ads and keeping their audiences engaged. Once again, don’t lose sight of the focus on RPMs here.

YouTube’s and Facebook’s allure

With billions of users between them, YouTube and Facebook dominate online video.

YouTube monetization is a powerful revenue source for many publishers with a variety of advertising options available. In addition, given that Google is going to roll out its own ad blocker, you can be fairly sure that YouTube ads will still be presented to Chrome users.

Facebook’s anticipated mid-roll ads are also going to be an attractive option for publishers. Combine Facebook’s reach with its granular ad targeting options and publishers will have a very appealing video advertising option.

Granted, some publishers are investing heavily in one or both of these platforms. At the same time, there is a cost.

As a publisher, your biggest and most valuable asset is your site. Given how engaging videos are, committing to YouTube or Facebook likely means sacrificing lucrative audience attention on your site in the hope that you will make up for it in ads on those platforms.

In addition, Google pays publishers between 51% and 68% of ad revenue earned so publishers need to consider this revenue share in the context of other ad networks and their revenue share options. Going with Google or Facebook could be costly for publishers in terms of lost revenue.

In the near-term this may seem like a worthwhile compromise but perhaps at the expense of sustainable ad revenue in the medium- to long-term.

Autoplay and it’s impact on the user experience

One of the more popular video tactics some publishers have employed is autoplay. You’ve probably come across it yourself.

From a publisher’s perspective, autoplay videos may seem like a perfect means to ensure that audiences not only see the videos but the associated ads. This is especially the case when the video players follow you even though you scroll up and down a page.

Unfortunately, autoplay also epitomizes of the tension between a user experience focus and a focus on maximizing ad revenue. Autoplay makes for highly viewable ads but it results in a very poor user experience.

Autoplay ads with sound are also one of the video ad formats that the Coalition for Better Ads has identified as being “least preferred ad experiences” and are likely to be blocked by Google’s ad blocker.

The solution here is most likely going to be better implementing autoplay videos. Freddie Godfrey, Director of Content Syndication at Newsy, recommended that publishers take cues from their audiences.

Rather than simply setting videos to play automatically when a consumer arrives on a web page and disrupting that person’s experience of the page, give your audience an opportunity to click on a video or a link first.

When your audience takes that deliberate step, they are signaling that they want to watch the video and, in that circumstance, autoplay is not disruptive and enhances the user experience.

The opportunities that video monetization bring

Like most forms of visual content, digital video is an engaging medium and is fast becoming a lucrative ad revenue source for publishers. While it faces certain challenges, they are by no means insurmountable. The publishers who can implement effective solutions to those challenges will discover a more sustainable source of ad revenue going forward.

What do you think?