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The State of Digital Video

June 8, 2016 at 8:00 AM by Caroline Watts

BlogImage_526.jpegLast year, Americans spent more time watching digital video on mobile devices than on desktops for the first time ever. Mobile video ad spend jumped a whopping 80% in 2015, and as the eMarketer report suggests, that's just the beginning. By 2017, mobile viewing time is predicted to double desktop viewing time. Meanwhile, double-digit growth is expected through 2019. It’s a significant industry trend, and advertisers are taking notice.

But despite the rapid rise of digital video consumption, and viewing, it hasn't taken over TV spending, which is predicted to hit $66 billion in 2016. 

The 800-Pound Gorilla 

Google and Facebook share dominance in most digital advertising channels, but when it comes to video dollars, YouTube is the clear front-runner (taking in about 1/5 of spend). According to Mike Shields of the Wall Street Journal, YouTube is expected to take in $2 billion in ad dollars this year.

At YouTube's 2016 Brandcast event, CEO Susan Wojcicki said that YouTube now reaches more people between ages 18 and 49 on mobile devices alone than any single TV network—that's broadcast or cable. On top of that, Shields notes how broadcast TV buys can't really help advertisers reach this audience at all, since "44% of YouTube viewers in that age bracket don’t watch prime-time broadcast TV in an average week."

Still, even though $2 billion is nothing to sneeze at, that number is a far leap from the $66 billion TV ad spend is expected to see, highlighting the fact that digital platforms like YouTube still have a ways to go. 

"YouTube has been one of the biggest beneficiaries of advertisers shifting spending from TV to chase viewers who have migrated to online video," says Shields, "but even the Google platform is siphoning away only a small fraction of marketers’ media budgets."  

One major stumbling block for YouTube securing more TV revenue has been advertisers' perceptions of its content quality. Despite the growth in YouTube viewership, many agencies (or their brand clients) perceive the programming to be a lower tier than cable programming. And because YouTube CPMs are roughly equivalent to TV CPMs, some brands are hesitant to pay the same prices to appear alongside what, in their view, is lesser content.

Up until now, the uncertainty surrounding the quality of online content led many brands to consider digital video in general as a riskier budget item, and they would consequently prefer to test it before investing in it. But that all may be changing.

For example, according to AdExchanger, Toyota "used to bucket YouTube spend within its 'blue sky' budget, or the 10% it allocated to experimental tests." Today, however, YouTube is part of the company's core 70%. 

YouTube has been hosting workshops to show agencies how to get the most out of its platform, hoping to lessen the uncertainty brands may have about investing in the platform. It recently indicated, touting a Variety poll, that of the top-10 most influential celebrities among teens in the U.S., eight are YouTube stars.  

YouTube sensation Lilly Singh put it even more bluntly: "Gone are the days of 'testing' this platform. That is soooo 2013. YouTube is proven and the audience is here. I hope you are too."

How Snapchat and Others Are Jumping In

YouTube may reign supreme in the world of digital video, but the growing trend isn't exclusive to YouTube. Snapchat is one of several platforms gaining traction in the space. A recent Lowe's campaign leveraged the widely popular application to tell a unique brand story about home improvement, targeted to Millenials.

Instagram is also pushing heavily into video (as is its parent company, Facebook) and recently announced a new ad product that allows advertisers to include videos in carousels. The first public case studiesincluding a video trailer for Disney's upcoming Alice in Wonderland movie and ads from Macy's and Airbnbare telling a promising story.

As companies adopt new platforms and utilize those platforms' revolutionary features and capabilities, they're finding new ways to drive and sustain engagement. 

The End of TV?

All that said, TV is still the mainstay of many brands and isn't going anywhere anytime soon. As a counterbalance to the studies from YouTube and other platforms, ABC released its own study which found that TV ads outperform digital video alone. Specifically, the study emphasized the importance of multiplatform TV and found that "digital can't match the long-term ROI benefits of advertising on linear TV and its related platforms."

There's no question that ad spend on digital video is rising. But with TV spending set to increase and with such a wide gap separating their financial figures, it seems extremely premature to call for the death of TV just yet.

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