Here’s a projection that may not surprise many readers, particularly those taking a break from binge-watching TV on whatever device happens to be handy: The over-the-top (OTT) services market is set for sustained and substantial growth.
MarketsandMarkets forecasts the global OTT market will hit $62 billion by 2020, up from $28 billion in 2015. That’s just one of several bullish OTT predictions, and OTT TV services are in a great spot to capitalize on this growth.
But can they take full advantage of these boom times?
The trends indicate that the TV advertising dollars in play in OTT will be increasingly directed at programmatic ad-supported video, which means more reliance on the real-time bidding (RTB) technology that can help companies better reach targeted viewers. But RTB can’t work without low latency. Also, superior ad delivery requires a standardization between OTT networks and companies providing the ad content, in order to guarantee high-quality video.
Right now, neither of these things is a given for OTT TV providers.
Programmatic advertising is on the rise
Over-the-top services are essentially services delivered over the internet, rather than via a traditional cable TV provider or telephone wires. So the content is coming “over the top” of existing network services and is independent of them. VoIP phone or internet TV services are examples.
RTB uses a speed-of-light auction process where ad space in front of a particular viewer is offered at the very moment he or she is browsing online, increasing the ad’s immediacy and, potentially, its relevance and chances for success – if a company can win the bid.
Programmatic ad spending is now dominant in the digital video realm, accounting for 56% of all digital video ad spending according to eMarketer. For now, programmatic is just a tiny fraction of overall TV ad spending (1% in 2016, says eMarketer), but it is growing along with the OTT market. eMarketer predicts programmatic will jump to 6% of overall TV ad spending by next year, for a total of $4.43 billion.
Standardization is needed
As TV ad spending on OTT services grows, a problem looms. Consider that there are dozens of devices that people consume video content on – from various makes of mobile phones and tablets, to proprietary products like AppleTV or Slingbox. All have specifications to ensure that that audio plays smoothly and the video resolution is correct and doesn’t jitter.
But ad content providers don’t necessarily know those specs and, in our experience, may not know they don’t know it. So for the ad to work smoothly, OTT TV delivery companies need to re-encode the ads for particular devices, so the ads slip seamlessly into their content stream. This is time-consuming, but the alternative is glitchy ads that turn off viewers. Regardless, it’s either a drag on company resources or viewer satisfaction. As OTT TV services expand, there is the growing industry need for standardization of specifications, so digital ad delivery can be seamless. Otherwise, companies won’t truly capitalize on the opportunity in this market. Equinix has customers on all sides of digital ad delivery, and we’ve already gotten some of them to talk to each other about the issue.
Delivering low-latency and interconnected ecosystems
Another important concern is whether the OTT players relying on the RTB process for ad placement can access the kind of connectivity they need to succeed. RTB auctions are actually several times faster than the blink of any eye, so low-latency connectivity is critical to successful bids. That kind of interconnection can be found inside our Ad-IX ecosystem at Equinix.
Ad-IX brings together participants from all ad industry sectors to directly connect on our global data center platform. Those direct connections reduce latency to single-digit milliseconds during auctions, so there’s more time for analysis of the user’s profile, leading to more informed bids and winning bids, and more relevant eyeballs on a company’s ad.
Equinix also hosts the Equinix Media Cloud Ecosystem for Entertainment (EMCEE). This ecosystem’s participants are either creating film and video or improving and distributing it via satellite or OTT networks globally. And they’re supporting it all with digital video programmatic ad insertion. So the EMCEE is where content creators innovate and collaborate, and it’s also a place to directly connect to ad tech companies in Ad-IX that can maximize programmatic advertising quality and opportunities. In short, EMCEE is where the current and coming opportunities in OTT TV can be found and seized.
Watch a video on how on Ad-IX helps customer win in the real time bidding market. And check out a white paper on the EMCEE.