Most Digital Video Monetization Still Comes from Ads - eMarketer

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Most Digital Video Monetization Still Comes from Ads

US digital video ad spending to reach $7.77 billion this year

April 2, 2015

Despite a flurry of first-quarter activity on the subscription front, advertising accounts for the lion’s share of digital video revenues and will continue to do so in the foreseeable future. According to a new eMarketer report, “Q1 2015 State of Video: Monetization, Audience, Platforms and Content,” this is true even for some of the companies that have recently launched fee-based plans.

US Digital Video Ad Spending, 2013-2019 (billions and % change)

eMarketer estimates that US digital video ad spending will climb to $14.38 billion in 2019, from $7.77 billion in 2015. Even though growth rates are slowing for this maturing category, they will remain at double-digit levels throughout eMarketer’s forecast period.

YouTube will reach $1.99 billion in net US video ad revenues by 2017, up from $1.55 billion in 2015. However, as more competitors enter the field, the channel’s revenue growth will slow to 6.2% in 2017, from 39.0% in 2015. These figures represent net revenues after subtracting acquisition costs for traffic and content.

Revenue to YouTube’s content partners has increased by 50% year over year for the past three years, according to Robert Kyncl, vice president and head of content and business operations at the company. Speaking at the February 2015 Code/Media conference, he said, “We’re seeing tremendous growth in revenue. And because of our revenue sharing, we are passing on a majority of the revenue to content creators, so they, too, are growing at the same rate.”

Growth notwithstanding, some YouTube creators have expressed dissatisfaction with the company’s revenue share, which is widely estimated at 55% for partners, but not confirmed by YouTube. Facebook and Twitter, among other platforms, are actively trying to attract video talent and brand marketers away from YouTube, and other competitors such as Vessel and Vimeo are offering more attractive terms to creators.

Primary Targeting Criteria Used by US Digital Video Advertisers, by Method, Q4 2014 (% of total video impressions served by Videology)

Besides increasing competitive pressure on YouTube, these moves have raised the stakes for marketers. As they continue to spend more on video ads on a growing range of platforms, marketers are employing increasingly sophisticated targeting methods. A study by Videology found that 97% of US video advertisers on its platform employed demo and advanced targeting criteria in Q4 2014—something other than simple demographics. Geotargeting was the most widely used method, followed by behavioral and domain targeting.

Further findings of the Videology study included:

  • In Q4 2014, there was a 38% year-over-year increase in the use of advanced targeting.
  • Targeting increased viewability rates. Viewability is generally associated with inventory quality, not targeting, but the study’s results suggest that better targeting means users are less likely to rapidly click away from a page. As a result, ads are more likely to be viewed. Behavioral targeting yielded a 71% viewability rate, compared with 46% for demographics with household income and 31% for demographics only.
  • Fully 51% of advertisers ran campaigns on more than one screen in Q4 2014, compared with 17% in Q1 2014.
  • A total of 41% of campaigns ran on a connected TV in Q4 2014, compared with 7% in Q1 2014.

Get more on this topic with the full eMarketer report, “Q1 2015 State of Video: Monetization, Audience, Platforms and Content.”

This report answers these key questions:

  • What are the latest trends in video monetization?
  • How many people are watching digital video, and what are the demographic trends in this audience?
  • How are social platforms approaching digital video advertising?

eMarketer releases over 200 analyst reports per year, which are only available to eMarketer corporate subscribers.


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