By Ralf Jacob, President, Verizon Digital Media Services
As we close the books on another year, OTT is only going to get bigger. Video now makes up 73% of all online traffic, and that number is expected to climb up to 82% of annual web traffic by 2021. Content creators will need to completely embrace OTT and new adtech if they want to thrive in the new media landscape.
For big corporations accustomed to lucrative over-the-air (OTA) TV ad revenues, there may be some growing pains – because while OTT video consumption has surged, its ad revenue hasn't yet. Handshake ad deals that guaranteed hundreds of thousands of dollars in revenue are a thing of the past, and while it can be quite profitable, the per-impression model makes total revenue harder for broadcasters to predict. Advertisers, for their part, are often unsure of the value they're getting from online advertising in general, especially from platforms that don't share rich user data with them. This is where adtech comes in.
Luckily, 2018 is likely to bring major changes that will make the true value of OTT clearer to advertisers and solve many broadcasters' monetization concerns. Here are my three adtech predictions for the future of OTT in 2018.
#1 adtech prediction: OTT platforms will share user data with advertisers
Although the OTT era presents new monetization challenges, it also offers potential solutions beyond what content creators could have envisioned 10 or 20 years ago. Broadcast TV producers never know for sure who is sitting on the couch watching their show. By contrast, OTT streaming services have that knowledge, down to an individual level, enabling them to deliver targeted advertising much more relevant to the user than any prime-time TV commercial.
This presents an enormous opportunity for OTT providers to add value for advertisers, and not just by driving more engagement with ads. Too often in today's online advertising ecosystem, the rich user data used to personalize ads is hoarded by social networks and search engines, such as Google and Facebook, that dominate online and mobile advertising. Advertisers run campaigns without knowing who they're reaching, how that person is interacting with each ad, or why. It's an enormous source of frustration to advertisers.
By sharing rather than hoarding their treasure troves of user data, OTT platforms like Verizon Digital Media Services' end-to-end platform can solve this pain point and nurture better relationships with advertisers. In 2018, I predict advertisers will pay a premium for solutions that offer them access to the useful data that other digital platforms keep for themselves, with great benefits for both parties.
#2 adtech prediction: New ad formats will boost engagement and revenues
In 2018, we'll see changes not just in how ads are personalized and data is shared, but also in the ad creative itself. New technologies will revolutionize what ads look like and how they fit into the viewing experience, taking OTT ads leaps and bounds beyond what is possible in OTA broadcasts.
One of the most exciting of these advances is augmented reality (AR). I'm especially excited about an AR technology called visible-surface detection, which allows advertisers to "spray" virtual objects or touch controls onto surfaces within a given shot. So, for example, instead of an ad interrupting a climactic scene of a TV show, causing the viewer frustration and inconvenience, it might appear within that scene as a poster on a wall or a branded object on a table. Such solutions could also be interactive, allowing the viewer to click through and learn more about a product or service that interests them.
By raising engagement without disrupting the viewing experience, such new ad formats can increase the "stickiness" of OTT programming while also boosting ad revenues. It's a win-win for both content creators and advertisers, and it's likely to start appearing on viewers' TV, computer and mobile device screens soon.
#3 adtech prediction: Deals between OTT providers will consolidate the industry
Both managing user data and innovating new AR ad formats require a lot of resources and capital. This is probably why we're observing a trend toward consolidation in the media industry moving into 2018. Since monetizing content has become more complicated, it's more difficult at the moment for smaller companies to get a foothold in the industry. Instead, they're getting bought up by larger companies that have the cash and ability to innovate in this space, but who want more intellectual property on which to enact these innovations.
Remember when Disney moved to buy certain assets of Fox in November 2017? Expect to see a lot more of that in the new year. Both big and small will be affected, basically anyone that has lagged behind in OTT. With the pace of innovation so fast and the potential payoff so great, media companies need to play it smart if they want to thrive.
What else does 2018 hold for technology? Learn more here.