• by Jack Loechner , Staff Writer @mp_research, March 11, 2014

The video landscape is in a time of major flux, with digital viewing on the rise, advertisers seeking integrated campaigns and yet TV networks still holding most of the cards. But with the emergence of new technologies, and new measurement capabilities, video advertising is poised for change.

According to the report of discussions conducted by Nielsen and Simulmedia, with a core group of researchers, marketers and C-suite executives from all sides of the media industry to discuss the future of video advertising, consumers spend nearly 159 hours watching video each month, including nearly 147 hours on TV. And advertising dollars follow suit: Nielsen research found that $78 billion was spent on TV advertising in 2013, and eMarketer estimates that online video will attract $5.72 billion in 2014. However, consumers are increasingly viewing video across screens, says the report.

The general consensus among the participants was that TV ad expenditures will continue to exceed online video advertising, which will grow as a segment of the online ad market. But these conversations demonstrated that while the online and TV video ad markets will remain separate for the time being, the movement toward integration is real and accelerating.

This appears to mean an imminent and total convergence of TV and online advertising, but this ignores the way video ads are actually bought and sold today, says the report. The agency model is built on two separate buying structures: one for TV and one for digital. While that’s starting to shift as advertisers seek multiscreen campaigns, the conversations demonstrated that, for the time being, the online and TV video ad markets will remain separate as they are now, but the movement toward integration is real and accelerating.

TV as an ad platform has started to absorb many of the characteristics of the digital ad world, particularly its abundance of rich viewing data and audience metrics. Enhanced measurement techniques are also making precision marketing and the connection of ad exposure to offline sales a reality. The participants agreed that this presents TV companies valuable content and tens of billions of dollars in advertising revenue, with the opportunity to be pivotal players in the future of video advertising.

The history of TV lends itself favorably to how its ads are perceived by both consumers and the industry itself, says the report. In 2013, 62% of consumers indicated that they trust ads on television and 68% take action based on TV ads. Meanwhile, the relationships cultivated between key influencers and decision makers in the television advertising industry influence transactions of media buying, selling and planning.

However, says the report, the programmatic tendency of the digital ad market lends itself to cost effectiveness and ease in measurability, yet removes the “human touch” from the buying process. Building and managing trust between buyers, sellers and third parties will play a significant role in determining the way television and online video advertising eventually come together, says the report.

Concluding, the report stresses that the future of advertising is hinged largely on precision-based planning tools that help marketers reach the right consumers, not simply the most people. Impact-based rather than reach-based advertising mechanisms will be a principle factor leading the convergence of TV and online.

By 2016, expect to see some integration of ad buying, according to the report, as the digital infrastructure underlying modern TV delivery increasingly resembles that of online. And, predicts the report, direct measurement in near real-time of all video ads, including TV, coupled with the ability to cross-ref viewing data against online activity and recent purchases, is coming soon.

By 2020, Nielsen predicts full integration.

For the full report, please visit Nielsen here.