• by Jack Loechner , Staff Writer @mp_research, September 25, 2014

According Adap.tv’s 2014 US Video State of Industry report, premium video is going programmatic. This time last year, says the report, video publishers were concerned that automated inventory sales would commoditize their most prized content. Today, more than half of publishers surveyed said they make their premium inventory for sale via programmatic environments, a significant change.

And, publisher adoption of programmatic is happening because brands report that 60% of their online video ad spending has gone programmatic, putting them a good 20 points ahead of their agency buying counterparts. Key highlights of the report include:  

• Advertising spending on online video increased for the 5th consecutive year. Buyers claim spending will grow across the board in 2015 and publishers are reaping the benefits of diversified selling channels, inclusive of programmatic
• Agencies and brands are increasingly tapping into broadcast and cable TV budgets to fund their digital video ad spending
• Brands and agencies are moving away from buying direct from publishers and ad networks, in favor of buying through exchanges and DSPs
• Video buyers are already running data-driven TV campaigns, evidenced by the 40% of brands adopting the practice. Brand budgets for programmatic TV buying are predominantly coming from traditional TV spending, not from digital or incremental spending
• Brand buyers and sellers cited ad viewability as the most problematic issue for them, compared to verification/placement and bot fraud, which ranked lower

According to the report, three-quarters of publishers said they saw an increase in their video ad rates in the past 12 months, with an average growth of up to 10%, aligning a7% increase in CPMs reported last year.

The way in which publishers are selling also saw a dramatic uptick says the report. Publishers said 30% of their inventory is now sold programmatically, helping publishers deliver a much more data-driven approach to selling video, and strengthening relationships with their buying clients who are doubling down on programmatic.

The rapid publisher adoption of programmatic is further bolstered, says the report, by private marketplaces. There was a 60% jump in the number of publishers who operate private marketplaces this year, compared to 2013. While two-thirds of publishers still do not operate private marketplaces, 55% said they plan on starting or participating in one within the next 12 months.

In the last year, the willingness of brands to sacrifice display budgets for online video grew from 30% to 50%. But those willing to tap cable budgets quadrupled, from 10% to 40%, and the number of those willing to sacrifice paid search doubled.

According to the report, 67% of Agencies and trading desks ads were placed with publishers directly vs. 86% in 2013. Meanwhile, agency and brand patronage of DSPs doubled.

Ad networks, however, suffered a decline of greater than 40% in the number of brand customers. In one year, the number of brands that reported having purchased online video advertising from ad networks dropped from 75% to 53%; The number who bought from exchanges jumped by more than 30%.

Approximately 60% of brand video spending is allocated to programmatic channels vs. traditional or direct publisher sales, along with 38% allocation from agencies and trading desks and 44% from Ad Networks, says the report.

60% of all buyers have found premium inventory to be available in programmatic environments. Surprisingly, finding premium inventory isn’t as easy as buying it, says the report.Judging by their budgets, brands may have discovered that standard video performs just as well as premium inventory when purchased programmatically. While brands purchased 60% of their video inventory programmatically, only 23% of this was referred to as premium.

88% of agencies and 62% for brands predict that the TV budget will fund data-driven TV rather than the digital budget, though 38% of brands optimistically predict that funding for this innovation will be incremental.

Two-thirds of agencies and 40% of brands are using programmatic to place and manage their cross-media planning and buying, says the report, while last year 58% of advertisers said they planned to be using programmatic technology in their cross-media planning and buying. Falling short of the goal may be an acknowledgment that the overwhelming majority of brands are now making plans to bring programmatic video buying capabilities in-house.

To better understand why there has been such a transformation in just 12 months, the study looked to the advantages cited by those who have mastered the technology. 57% of the agencies who have made programmatic buying technology part of their core competency said it brings great efficiency to their planning, buying and reporting. For the brands who have already made the leap, 75% of them said in-house programmatic allows them to integrate with their in-house marketing and CRM systems. All the brands that had brought the technology in-house said they had little choice; they did so because their agencies lacked the expertise to do their programmatic buying for them.

Brands lead other buyers in owning and using a data management platform (DMP); 63% of brands in the study said they have one, vs. half of agencies and just 43% of advertising networks. And, of the one-third of brands who remain without their own DMP, more than half of these (55%) will start using a DMP within the next 12 months.

The report, in conclusion, summarizes by noting that 2014 may be viewed as the year premium video inventory went programmatic, and DSPs made dramatic strides in becoming the purchasing vehicle of choice for buyers. Both buyers and sellers clearly made great leaps in their sophistication with programmatic and data-driven technologies

• 60% of brands’ online video ad spending has gone programmatic, and more than half of brands say their investment in the medium was up again by double digits. Buyers look for even more spending increases in 2015
• Buyers, predominantly agencies, are more willing to tap traditional video budgets to fund increases in online video spending, with cable budgets possibly most vulnerable to reallocation
• The majority of buyers say they already include programmatic in their cross-screen buying and planning, and more than half of brands have adopted universal IDs to target ads to customers across channels

For additional information about the report, and access to the PDF file, please visit here.