A Forrester Consulting Thought Leadership Paper Commissioned By TubeMogul

Realizing The RTB Video Opportunity For Brand Marketers

May 2012

Forrester Consulting

Realizing The RTB Video Opportunity For Brand Marketers

Table Of Contents
Executive Summary .............................................................................................................................................................. 2 Digital Video Is A Digital Brand Marketers Dream Format .............................................................................................. 2 RTB Is Bringing Efficiency And Transparency To Digital Video Buying ......................................................................... 5 RTB Video Is Showing Success For Brand Marketers When Measured Smartly .............................................................. 7 RTB-Enabled Video Use Will See Growth Among Brand Marketers ................................................................................ 8 But A Mix Of Real And Misconceived Obstacles Is Hindering Adoption ......................................................................... 9 Key Recommendations ....................................................................................................................................................... 10 Appendix A: Methodology ................................................................................................................................................. 11 Appendix B: Supplemental Material .................................................................................................................................. 11 Appendix C: Endnotes ........................................................................................................................................................ 11

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Realizing The RTB Video Opportunity For Brand Marketers

Executive Summary
In April 2012, TubeMogul commissioned Forrester Consulting to evaluate the brand marketing opportunity provided by real-time bidding (RTB)-enabled video and compare it to other forms of broad-based video buying, such as through ad networks. In conducting interviews with 11 RTB video buyers, Forrester found strong support for RTB video as an effective and efficient brand-building mechanism, but also evidence that the ecosystem is still quite nascent. This report examines the current state of RTB-enabled video, outlines barriers, both real and misperceived, that should be overcome to increase continued growth and adoption in this space, and makes recommendations for how brand marketers should move forward in pursuing RTB-enabled video.

Key Findings
Forresters study yielded five key findings: Digital video is the bridge needed to bring brand marketing dollars online in a meaningful way. RTB-enabled video is on the rise as savvy buyers recognize the benefits over more traditional networkbased buying models. Brand marketers who measure smartly are seeing performance improve with RTB video. There are both real and misperceived obstacles that are affecting continued growth and adoption of RTB video. Education is needed for brand marketers to see the value in RTB as a mechanism for more effective digital video buying, management and optimization, and for publishers still hesitant to lean into this new model.

Digital Video Is A Digital Brand Marketers Dream Format

In an ecosystem long dominated by the lowly display banner (anyone remember the good old days of the 468x60?), the emergence of digital video advertising formats over the last several years has been a game changer for brand marketers long reticent to commit significant dollars to a channel whose efficacy as a brand building mechanism they doubted. Those same marketers are finally putting their money where their mouth is, with digital video advertising expected to reach $5.4 billion by 2016, a 250% increase over 2011 video expenditure, and representing 5% of traditional TV spending (see Figure 1). 1 Three key reasons explain videos appeal to brand marketers: Brands recognize that consumers time and attention is shifting to digital video consumption. Even the most traditional marketers are beginning to recognize what we in digital have known for years: Consumer behavior is changing when it comes to how, where, and when they consume both content and advertising. In fact, consumers are now watching an average of 21 hours of digital video per month across a range of connected devices. 2 Said one trading desk executive, Whats happening in video mirrors a lot of whats happening with online behavior in general: People are spending more and more time with the stuff. For marketers, understanding

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consumer behavior online is increasingly important. What are people doing? How are they behaving? What happens during their lunch break? Video is a huge part of that. If youre a brand, you need to be there. Video feels an awful lot like TV, something brand marketers understand. Change is hard its human nature to stick with whats known and for marketers whose careers have been built on a TV-based advertising model, adoption of new (and often intimidating) digital formats and tactics can be tough. For that reason, digital video is, in many ways, the perfect entry point to help marketers bridge the gap between the old way and the new. As one independent trading desk executive explained it, Brand marketers see digital video as the closest thing to TV. Its got sight, sound, and motion they understand how that affects people. Its not a stretch for brand advertisers who can think to themselves, 10MM people watched my ad from start to finish. And when you compare video CPMs to TV its a no-brainer.

Weve been looking at video for years as the bridge to offline dollars. Traditional marketers will get it. When convergence happens, when people dont think traditional vs. digital dollars - its just about getting my message out there then video is ripe to take those dollars. - Independent trading desk executive

Videos rich format can boost branding messages. Digital video also appeals to brand marketers in its ability to go above and beyond static display in communicating brand messages, making it a medium that brand marketers pay attention to. As one digital director of an agency explained: What you can communicate with sight, sound, and motion is more than with a static banner. You can convey emotion, which is easier when conveying a complex message to audiences. And video looks even better when you couple its dynamic message with the promise of more captive eyeballs in a less cluttered environment said one VP of a digital media agency, Banner blindness scares brand advertisers. Digital video tends to be interstitial you cant scroll away from it; cant skip it; you have to watch the pre-roll to get the content.

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Figure 1 Digital Videos Effectiveness Is Only Expected To Increase

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Figure 2 Digital Video Expenditure Will Reach $5.4 Billion by 2016

RTB Is Bringing Efficiency And Transparency To Digital Video Buying

The meteoric rise of real-time bidding (RTB) managed through liquid marketplaces like ad exchanges, supply-side platforms, and demand-side platforms (DSPs) that provide the tech and smarts to buyers to manage real-time inventory transactions is reshaping the very foundations of media buying. 3 While the last several years have been dominated by activity in display video, mobile, and social inventory represent the next frontiers of RTB. Savvy digital buyers have quickly recognized that they could couple videos potential as a branding medium with the enhanced transparency, targeting, and optimization enabled through RTB-based buying and management, and are embracing RTB video. Buyers we spoke to pointed to many specific benefits of RTB-based video buying, including:

RTB is a paradigm shift you can buy data and media separately and put them together. [This] opens up a world of analysis and creative and planning (you can find new targets and put new creative in front of them). Its a foundational evolution that sets a new standard for buying. Digital Director, Advertising Agency

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Increased granularity. The traditional ad network model of packaging and selling impressions in bundles of 1,000, and charging a flat CPM for all of them, limited buyers ability to accurately evaluate the anticipated value of any given impression in the bundle thereby limiting learnings and increasing the likelihood of wasted spend. Said one holding company trading desk executive, RTB is the fuel that allows us to evaluate each impression granularly. We can use our own data to evaluate impressions and get the right person at the right time. Deeper transparency. Looking under the covers to understand the inner workings of their digital media buys has never been something that buyers have had the power to do rather, they were forced to rely on their media partners to report out on everything from the sites where their ads might run to the optimization being performed on those buys to make them perform as needed. Direct media management through DSPs has completely changed that paradigm. Said one independent trading desk executive, Its having the ability for the buyer to be closer to the impression, to understand the costs of things, to know that things are actually happening behind the scenes. In my experience, ad networks do better the more you call and complain performance spikes when you call them up and ream them out. Now were able to be the ones keeping an eye on things. Greater fluidity. The days of annual, quarterly, or even monthly insertion orders, where buyers and sellers alike adopt a set it and forget it approach to media management and optimization, are waning. In its place, thanks to the rise of RTB and the DSPs needed to manage it, the more search-like model where media optimization is constant and budget is fluidly shifted across a portfolio of placements is increasingly being embraced. As one buyer told us, Its having the ability to track what youre buying as close to real time as possible, rather than signing on for a monthlong commitment. This marketplace allows you to pull levers and move budget around fluidly in response to what youre seeing. Improved efficiency. The dramatic and ever increasing complexity of online media buying created significant opportunity for middle men to swoop in and rescue frazzled buyers by taking the reins on management of media programs, and along with that take significant margins. Buying digital video inventory more directly through a DSP, versus through a video ad network for example, can bring significant cost savings. Said one premium publisher who sources RTB video inventory on behalf of advertising clients, The video market is so tight right now even CPMs on remnant inventory are really high. But the difference between network and RTB inventory can be $13-$14 versus $9-$10, which is substantial. Direct control. Day-to-day management and optimization of media programs has traditionally fallen to media partners, like ad networks, whove been the ones sitting in the drivers seat. Programmatic buying through a DSP, whether its display, video, or any other RTB-enabled medium, puts buyers themselves in the drivers seat, which finally gives them the direct control needed to run programs as they see fit. Said that same publisher, [You have] much more control with RTB than with a network. You can be extremely finicky, whereas on the ad network side, its a black box. When you ask for a site list from a network, you get a representative list. With RTB, you really can get as deep as you want into the inventory its a big benefit.

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Figure 3 Buying Through Exchanges, DSPs, And Other RTB-Enabled Mechanisms Offers Myriad Benefits To Buyers

Source: The Future Of Digital Media Buying, Forrester Research, Inc., September 21, 2011

RTB Video Is Showing Success For Brand Marketers When Measured Smartly
RTB-enabled videos benefits are already being realized by brand marketers today. In fact, the majority of people we spoke with have used RTB-enabled video to accomplish branding objectives, and theyve reported improved results, both in reaching their target audience and showing measurable lift across a range of success metrics. RTB-enabled video helps brand advertisers reach their optimal audience. All interviewees stated that RTB is valuable for brand advertisers with the most frequently cited reason being leveraging the technology to reach the right audience. As the director at a digital media agency explained it, the benefit of RTB-enabled video as a branding tactic is being able to better use data, pay appropriate value for consumers, deeper segmentation, targeting, and control. And brand marketers are taking advantage of these benefits. One VP at an audience platform noted they implemented RTB-enabled video to finely target audiences for a clients political advertising campaign: We know there are moms in this ZIP code who are concerned about [a specific issue], so we can target them with a clear message.

Its about being able to target at scale: right person, right place, right time. [Now] we have the technology and power to do that faster, better, smarter and at much larger scale. - VP, Audience Platform

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Interaction metrics and branding studies prove effectiveness. Marketers are able to prove the ROI of these campaigns as well, with most people we spoke with relying on interaction metrics and branding studies to help measure the value. One executive of a trading desk explained that they provide information about how users interact with the video back to clients: We use the 12-13 engagement metrics defined by the IAB: play, audio mute, pause, how far you get, and so on. 4 Brand effectiveness studies measuring brand awareness and favorability can also help marketers make the case as one large entertainment client of a digital media agency did when they conducted offline phone and online brand studies, and as a result realized a tripled investment from the client who continues to renew. One marketer actually chose to assess the efficiency of TV spend relative to video, according to the trading desk executive whose team managed the digital portion: The client opted to run the same brand-centric video unit on TV and online. The result? We came in 20% below what the equivalent value was on TV. Budgets were smaller, but dollar for GRP, we did a great job of reaching the audience.

We are using brand effectiveness studies [conducted through partners]. [We] can get enough intelligence throughout the campaign to not have to wait till the end of it to make optimization decisions. Thats the RTB benefit you get fast insights and can be very nimble. -VP, Digital Media Agency

Weve made an effort to get clients addicted to [RTB buying]. From a performance point of view certainly, its hard for them to go back: Do you want to give up those performance metrics weve been earning? Its hard to predict the future, but right now theres no better alternative to get this performance for their business. -Executive, Trading Desk

RTB-Enabled Video Use Will See Growth Among Brand Marketers

While we see some marketers starting to use RTB-enabled video today, the market is expected to grow over the next few years. In fact, everyone we spoke with stated that they see a growth in the RTB video market among brand advertisers in the coming years. This growth will be primarily driven by the same factors that are putting it on the map today: branding value, increasing video consumption among consumers, and growing digital budgets. Marketers hoping to catch these shifting consumer eyeballs will need to boost their digital video investment, and they have to be smarter about their buys turning to RTB-enabled video to help get the job done. As one trading desk executive said, RTB is absolutely central to the future of media buying, certainly in digital buying, without question.

Video RTB has a huge future because all these market factors are pointing to it: Rise of video consumption, rise of digital budgets, and RTB is just too good of an idea for it not to be how things go....the genie is out of the bottle. VP, Digital Media Agency

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But A Mix Of Real And Misconceived Obstacles Is Hindering Adoption

Despite its promising future, the reality today is that in spite of the many advantages buyers see in RTB video, the ecosystem is still emerging. Many marketers are still largely unaware of the role and value of RTB as a new buying paradigm, let alone the RTB video opportunity. As a result, we found that theres an even mix of real problems and good old-fashioned misperceptions impacting RTB video adoption and growth.

People think digital video is the Wild West. This is misleading. The rise of RTB has helped here: buying through a platform allows you a choke-point it lets you layer in brand-safety rules and evaluate impressions one by one. Holding company trading desk executive
Inventory availability is adequate for some, lacking for others. Forrester got a range of answers when asking about inventory availability. These responses ranged from, Its completely fine for my needs to Its a major challenge that I wish would resolve itself. The reality is that video inventory, unlike display inventory, is finite and demand is high. The problem is only amplified when buyers put constraints, such as audience overlays or tight brand parameters, on their RTB video buys. Regardless, a consistent refrain that we heard from savvy RTB video buyers was, I wish there was more inventory. Id buy it! Said one premium publisher, All 30 of our clients want to do video. But when they talk about the audience they want, we run into major limitations. We just dont have the reach when the data overlay is applied. Inventory quality concerns remain, whether or not theyre fully warranted. Another familiar refrain we heard was, There are issues with inventory quality. But interestingly, it was a real mix between people who found that to be a genuine concern and those who believe it was nothing more than a misperception. Certainly, they noted that its a fear many marketers have. One trading desk professional explained, Theres a market dichotomy in video theres publisher direct, or premium where demand outpaces supply and prices are high and increasing, then theres the secondary market, where the inventory is more of a mix. But there is still an inclination toward thinking its all still junk. Progressive clients whove embraced RTB overall are less concerned. But in speaking to traditional people, TV people theyre totally freaked out by it. One thing all buyers we spoke to agree on: Its about being proactive and involved in your RTB video programs as well as vetting inventory both directly and regularly. Measurement challenges continue to plague buyers despite significant development here. The biggest complaint, by far, that we heard again and again in speaking to RTB video buyers is that their clients are still struggling with how to measure video despite major developments (e.g., real-time brand surveys, a wide range of reportable engagement metrics). Its worth noting that this is not unique to RTB, but to video in general, which impacts industry growth overall. Said one trading desk executive, There is a big gap around measurement for marketers to understand the value of video. Its out there; someone just has to crack it. Whats causing this is all the classic stuff agencies are organized in silos, theres politics, buyers dont know each others channels theyre Greeks and Romans. But its going to happen. The consumers behavior will force us all to change.

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The technology needed is there, but it takes more than pressing an easy button to make it work. As much as the technology ecosystem has evolved over the last several years, theres plenty of work to be done before we realize the dream of perfectly seamless, fluid, real-time multichannel buying and optimization. 5 The reality on the ground today is that many programmatic buyers are finding themselves patching solutions together if they want to buy both RTB-enabled display and video as effectively as possible. One holding company trading desk practitioner explained it this way: As an industry, we think you can take the same model that we know in display and replicate it into video. You just take a DSP, whichever is working, plug into all the exchanges, flip a switch and youre good to go. The DSPs all say they can do video. But its not quite there yet. Today, were using a video DSP and a display DSP [to manage our programmatic buying portfolio].

KEY RECOMMENDATIONS
As both the RTB ecosystem and marketers continue to mature, Forrester believes that RTB video can become a fundamental component of brand marketers media mix in the long term if both buyers and sellers continue to lean into the opportunity. To help ensure a healthy, vibrant ecosystem and maximize their own return through RTB video over time, marketers must take some immediate steps, including: Getting educated. The average brand marketer may see one or two video line items on their agencys media plan, and not have much understanding of what those line items represent. Marketers must start asking questions of their partners be they agencies, vendors, or technologies to really get a handle on how their money is spent, and if its being managed in the optimal way. This may require some tough conversations, but if they are treated in the spirit of deeper partnership and better shared strategic vision, the outcome should be worth any possible pain. If partners DONT have good, defensible answers to explain the media decisions theyre making on marketers behalf, marketers must be prepared to walk away and identify new partners who CAN provide the right guidance and execution. Encouraging publishing partners to RTB-enable their inventory. The continued growth and development of the RTB ecosystem is not in the hands of the buy side alone. Media sellers MUST be willing to lean in to RTB as well for there to be a healthy long-term marketplace. Marketers and their media buying partners must actively engage their strategic sell-side partners in conversations about the role and value of RTB for both parties. Treating media sellers as adversaries, or simply choosing to ignore their part in the future of digital media buying, will get us nowhere. Testing RTB-enabled video buying methods. Though the market is still nascent today, marketers should start testing the waters to see if the added granularity, transparency, and real-time nature of RTB video can improve their digital marketing performance. To get started, lean on your partners to determine how much budget should be allocated to perform a meaningful test. Then be sure that you have a solid measurement plan in place to track success. To do this, determine which metrics map best to your current business objectives (for example do you need to know how long a user spent watching your ad? Or that you achieved an increase in awareness, favorability, or purchase intent?), clearly communicate these to partners, and be sure appropriate tracking is in place to capture the necessary data.

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Appendix A: Methodology
In this study, Forrester interviewed 11 organizations in the US to evaluate the perspectives of ad agencies, publishers, and DSPs in the RTB digital video market. Participants included decision-makers with sufficient insight into the current trends in the market including specific knowledge of pricing and inventory trends. Questions provided to the participants asked about factors driving spend, the quantity and quality of current inventory, differences between display and video RTB, metrics used to optimize campaign performance, and the major players in the market.

Appendix B: Supplemental Material

Related Forrester Research
The Future Of Digital Media Buying, Forrester Research, Inc., September 21, 2011

Appendix C: Endnotes
1

Marketers must consider the broader implications of increased convergence across traditional and digital channels. For more information on how to begin tackling the question of converged TV/digital video buying and measurement, see the January 5, 2012, Why Marketers Must Integrate TV And Video Strategies [60349] report.

According to Nielsens Q1 2011 report, the average US person age 2 and older watches nearly 40 hours of linear or time-shifted TV per week, while according to Comscores October 2011 data, nearly 184 million people in the US watched an average of 21.2 hours of digital video. Source: New Stats: 184 Million US Internet Users Watched Digital video Content in October, Blogworld, November 28, 2011 (http://www.blogworld.com/2011/11/28/new-stats-184million-u-s-internet-users-watched-online-video-content-in-october/).
3

To learn more about the rapid changes happening in the media buying ecosystem and to learn what steps you need to take to be prepared for success in this new buying world, see the September 21, 2011, The Future Of Digital Media Buying [58354] report. For more information about the digital video in-stream ad metric definitions from the IAB, please visit the IAB website. Source: Digital Video In-Stream Ad Metrics Definitions, Interactive Advertising Bureau (http://www.iab.net/dv_metrics_definitions).

Terence Kawajas series of LumaScapes, visual maps of the technology ecosystems in display, video, search, mobile and social, have come to represent both the dramatic growth and significant complexity in the digital ad tech space. The LumaScapes can be viewed at the Luma Partners website (http://www.lumapartners.com/resource-center/lumascapes2/).

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