It’s unsurprisingly official – we’ve passed the mobile “tipping point,” and there are now more mobile than desktop users worldwide. In the U.S. alone, people spend more than 2.5 hours each day on their mobile device – that’s more than half of the total time they spend online. And they’re spending a growing portion of that time – about 20 minutes – watching video.
For advertisers, mobile video is more immersive thanks to touch capabilities and a personalized and immediate viewing experience. It offers video relatively better targeting and measurable ROI. As a result, video advertising commands significantly higher CPMs than standard online display ads: the average pre-roll video commands a $15 CPM – five times the average CPM for mobile display.
It’s no surprise that advertiser interest in mobile video is growing. But challenges still remain. There is a vast quantity of content, but premium inventory across apps and the mobile Web falls well short of demand. Like other marketing channels, overall mobile spending still lags significantly behind adoption – in the U.S., we now spend 25 percent of our time online on mobile devices, yet mobile attracts only 17 percent of advertising spending. What does this 8 percent gap represent? A $13 billion market opportunity.
Why are advertisers missing the full market value?
If advertisers are interested, and CPMs are high, then why haven’t we captured the full market opportunity of mobile video? There are five main reasons:
- Poor User Experiences: In the mobile world, the bar is much higher for quality experiences. Smaller screen sizes, shorter engagement periods, and the personal nature of mobile devices all mean that viewers tolerate far fewer defects and poor design choices. Pages that fail to load quickly, functionality that doesn’t work, and advertising that’s intrusive or irrelevant can drive them away. Advertisers looking to thrive on mobile must pay extra attention to the quality of the experience.
- Lack of Relevance: It should go without saying that mobile video content has to be relevant, but in today’s market, that’s sadly not always a given. In this age of mobile land grabbing, some advertisers are focusing on getting content in front of larger, but not always as relevant, audiences. This might pay off in the immediate, but it’s not going to benefit advertisers in the long run, or lead to real engagement and sales. Instead, advertisers and publishers need to focus on relevant content and mobile experiences that will separate those who are successful and impactful from those who are wasting their budgets.
- Low Quality Inventory: The most common concern among advertisers about video in general, and mobile video in particular, is that there simply isn’t enough high-quality inventory. A recent Forrester study showed that 40 percent of agencies and 27 percent of advertisers believe that the lack of premium inventory is holding back spending on digital video advertising. The reality is that the quality of video content will improve as more publishers invest in production. The growth of advertising in mobile apps will also help address the inventory challenge. But the value of that inventory for buyers also has room to grow. Not only should video content do its primary job – be entertaining and compelling for viewers – it should also be supplemented by data that can help improve relevance and audience targeting. On this side of the quality equation, every additional piece of metadata counts: first- and third-party data that can tell advertisers more about who’s watching what and where and how that data has a measurable positive impact on CPMs.
- Low Standards: Once publishers have the inventory that buyers want, coupled with the data they need to sell it, they face another hurdle: the lack of consistent standards around pricing, formats and metrics. The mobile video marketplace is highly fragmented, in many ways resembling the display ad market prior to the emergence of ad networks. It’s challenging for advertisers just to get a full view of exactly where they can place their ads – much less determine a fair price or a consistent measure of effectiveness.
- Confusing Measurement: Another significant issue facing mobile video inventory is the need for better metrics. What “counts” as a view by one standard, may not by another – making the measurement of just a single channel as complex as assessing a massive cross-platform campaign. This lack of consistency leaves money on the table. According to one IAB pricing model, inventory packages with viewability guarantees can command from 15-70 percent higher prices.
With a lower supply (for now) of high-quality video inventory, publishers can already expect to command higher CPMs for quality content. However, by developing strategies to sell that inventory efficiently and at scale, they can improve quality along a different dimension: inventory that is not just compelling, but also easy to price, buy and measure. How can this be accomplished? Through workflow solutions that make it easier to sell inventory directly or through real-time bidding, yield management that can make more valuable inventory available to buyers, and real-time analytics to measure and adjust campaigns in order to maximize revenue.
What does this mean for advertisers? Luckily, because mobile video advertising is still ascendant, the time is now to address these challenges. Publishers and advertisers looking for additional information and research on mobile video can access PubMatic’s new white paper, “Delivering on the Promise of Mobile Video.” This recently released paper breaks down the current state of mobile video within the greater context of digital media and the role of key stakeholders, including publishers, buyers, technology partners and media consumers. By making the right decisions today, publishers and buyers can tap into the full potential of this channel and better prepare themselves for a mobile-first future.
