2014 was a watershed year for digital video advertising. The industry made sizable gains in both spend and viewership, and saw the massive adoption of programmatic buying. The year also saw an unprecedented wave of consolidation for ad tech companies with Facebook buying LiveRail and Yahoo acquiring my company, BrightRoll. After such an eventful year, some would expect a relatively calm 2015 — but that won’t be the case. While we expect the market to settle into a more mature phase, the year promises to be anything but boring as we will continue to see IPOs and industry consolidation.
Here are my predictions for the year ahead…
1) Mobile video spend skyrockets.
Consumers around the world are shifting their attention to smartphones and tablets, so it makes sense that advertisers will look to put their messages in front of these mobile eyeballs. However, despite this movement, in 2014, mobile inventory supply outstripped demand, keeping CPMs lower than that of desktops. This year, sophisticated mobile targeting and measurement tools will give advertisers the confidence to finally go all-in on mobile. We’ll see a handful of ad tech companies make significant progress on device ID mapping to enable cross-screen targeting and measurement, in addition to more precise geo-targeting capabilities.
These advances will generate more premium inventory, causing average mobile video CPMs to rise. In fact, research by Business Insider predicts that over the course of the next few years, mobile video ads will grow almost five-times faster than desktop. That said, by the end of 2015, there’s a real possibility that advertisers will spend more on mobile video ads than desktop.
2) Programmatic hits the mainstream.
In 2014, programmatic made huge inroads into video, mobile, social, and native ad formats, becoming an increasingly trusted strategy to acquire ‘premium’ brand inventory. According to Magna Global, digital media inventory transacted through programmatic methods was estimated to reach $21 billion globally in 2014, a 52% increase compared to 2013, and will reach $53 billion by 2018.
Advertisers and publishers experimented with programmatic in 2014 and achieved great results: lower costs, better targeting, and more precise measurement. In 2015, they will be comfortable enough with programmatic technology to move larger portions of their ad budgets to automated platforms. Advertisers will also use programmatic direct or private marketplaces to buy more premium inventory.
3) Capital markets favor ad tech, consolidation continues.
Many ad tech companies will be happy to see 2014 in the rearview mirror. In the past year, a handful of smaller public ad tech companies watched as their stock prices touched new lows. With hundreds of ad tech players, advertisers grew increasingly perplexed over which partners to choose, while the rise of fraudulent activity made them more wary about where their ad dollars were going.
Amidst all this activity, it was hard to see that the industry in fact was progressing forward, as larger technology companies began to capitalize the value of video, resulting in a number of big exits via acquisition for video ad platforms. With such a tumultuous year behind us, 2015 will be the year top ad tech companies rise back to favor in the capital markets.
Video ad platforms that provide a full-service ad buying and management solution — including programmatic trading, metrics and measurement, cross-channel targeting, and partnerships with anti-fraud providers — will emerge as leaders, attracting more of advertisers’ video ad budgets. Investment banks, like Woodside Capital Partners, are bullish on the space and “foresee continuing disruption of the traditional media advertising landscape, with video and mobile Ad Tech driving the change.” On the other hand, video ad platforms that offer point solutions will either be acquired by larger players or fail to gain critical mass.
When we look at how ad tech companies have performed in the market lately, it’s easy to forget ad tech is still a young category, especially programmatic video. The future potential for automated, targeted, and measurable video advertising is tremendous. As we move into 2015, ad tech will continue to grow in step with its potential, bringing investors back to the strongest players.
Tod Sacerdoti is CEO and founder of BrightRoll, the industry’s leading programmatic video advertising platform. The company’s proprietary technologies connect buyers and sellers of digital video advertising to help them reach audiences across web, mobile and TV.