Future of TV Briefing: How pod bidding can help to solve streaming’s ad load issue

This week’s Future of TV Briefing looks at the potential implications of pod bidding for streaming advertising — whenever streaming ad buyers and sellers start to support it.

• Pod-tential
Twitch streamers burn out, David Zaslav calls out Netflix and more

Pod-tential

The key hits:

• OpenRTB 2.6’s support for pod bidding provides a means for streaming services to strike a balance between maximizing ad revenue and minimizing ad load.
• Despite its potential, pod bidding has largely gone under the radar since OpenRTB 2.6’s release in April.
• Companies including Beachfront, Index Exchange and Roku are in the process of adding support for pod bidding.

Seventy-four pages into IAB Tech Lab’s OpenRTB 2.6 document lies buried a potential solution to the streaming advertising market’s emerging ad load problem. 

Once implemented by streaming services, adopted by advertisers and supported by demand- and supply-side platforms, this fix could thread the needle between maximizing ad revenue and minimizing ad exposures at a time when the economics of streaming is pressing services to reconsider their low ad loads that have helped them to attract ad-supported audiences but capped their ad revenue.

“It’s going to provide a lever to get that nice balance between monetization and engagement of content upfront,” said Adam Markey, director of product management at Roku.

In April, IAB Tech Lab released an updated version of its OpenRTB protocol governing the processes for the programmatic buying and selling of ads. As incremental as a x.6 update typically is, this one included support for pod bidding. As detailed in the explainer video below, pod bidding would not only permit advertisers to bid to have the first or last ads airing in an multi-ad break (called a “pod”) but also would allow streaming services to dynamically divvy up their ad breaks in a way that could enable them to maximize ad revenue without expanding ad volume.

“It really enables this new universe for publishers — I would call it like TV on steroids,” said Amit Nigam, vp of product at sell-side ad server Beachfront.

“It’s conceivable that, in addition to having a target revenue per pod, you could have a target revenue for the entire stream. And if you manage to make your target revenue within the first one or two pods, that you could decide to skip the rest of them,” said Rob Hazan, senior director of product at supply-side platform provider Index Exchange. “All of these options and trade-offs between monetization and end-user experience are now possible.”

Ad load implications

Let’s rewind a bit to break down why cherry-picking ad placements and flexing ad pod compositions seem to have such big implications for the streaming ad market. 

For starters, not all ad slots are created equal. “It’s known that on linear and on [streaming] the first and last slots are more premium positions,” said an agency executive. That premium pedigree stems from the fact that these ads are more likely to be seen by audiences because they are placed closer to the content that a viewer is actually intending to watch. As a result, being able to programmatically sell the first and last ad slots separately through pod bidding means that streaming services would be able to set higher prices for those positions. 

Then there is the option to specify whether a pod is the first or last pod in an episode or video — similarly premium positions — combined with the ability for streaming services to construct dynamic pods. While a service would need to set a fixed length for the pod, they can adjust the makeup of the pod on the fly in accordance with advertiser demand. 

As an example, let’s say that a lot of advertisers are bidding to have their ads air in the first pod, which is two minutes long and configured to carry four 30-second ads. If it’s set up as a dynamic pod, the streamer could reconfigure it to carry two 30-second ads — one in the first slot and the other in the last — and break up that middle minute into four 15-second ad slots if doing so would accommodate more advertisers and accrue more ad revenue.

“It’s the best of both worlds. I should be realizing higher CPMs for these two spots because they’re just more valuable and then, [for] everything else in the middle, I can get what I want out of it,” said Nigam.

What that boils down to is that a streaming service could use pod bidding to set a target ad revenue threshold for a piece of content, like an episode; manage the makeup of its pods as well as the number of pods needed to hit that mark; and then potentially remove ad breaks once that target revenue number has been reached in order to avoid annoying audiences by overloading them with ads.

“That’s a very exciting aspect where you’re going to see dynamic monetization from the sell side where we’re going to be optimizing to the best experience as well as trying to achieve the maximum CPM,” said Markey.

Adoption status

At this point, you may be wondering what’s the catch. IAB Tech Lab released support for pod bidding eight months ago, but for all the enthusiasm and excitement evinced above, all these executives are talking about it in the subjunctive tense as if it’s some Web3 technology waiting to become a reality. And that’s because it kind of is.

“I’ve had no SSPs, no DSPs, no publishers even come to me and say, ‘Hey, this opens up a new path for better CTV,'” said Mike Fisher, vp of advanced TV and audio at media agency Essence, which is part of WPP’s GroupM.

“I think there would be interest [in pod bidding]. It’s just that not a lot of people know about it from the buy side,” said an agency executive. “And then obviously it has not been adopted from the sell side. There’s no capability right now for buyers to do this until it’s adopted on the sell side.”

Support plans

That’s starting to change, though. 

Roku — which not only owns a connected TV platform but also operates its own ad-supported streaming service The Roku Channel as well as demand-side platform OneView — is internally working on adding support for pod bidding. But Markey declined to provide a timeline for when the company expects to roll it out.

Meanwhile, Index Exchange is currently testing pod bidding in its ad exchange and plans to “deploy podded requests across as much supply as possible in Q1 2023,” said Hazan. He added, “We’ll continue to test and monitor buy-side adoption to determine when to start sending podded requests to DSPs.”

Tremor International’s Tremor Video DSP and Unruly SSP currently support bidding on the first slot in a pod and plan to roll out full support for OpenRTB 2.6 in the first quarter of 2023, according to a company spokesperson.

And Beachfront already supports pod bidding in its Unified Decisioning ad management product and plans to add support for pod bidding in its SSP in early Q1 2023. “The adoption levels are low, but the interest levels are definitely higher than average,” said Nigam.

What we’ve heard

“We have 3 million subscribers on Snapchat Discover, but revenue-wise, it’s nothing. It doesn’t cover the cost of publishing. At this point, it costs us money to publish on Snap.”

— Entertainment executive

Numbers to know

34%: Percentage share of immigrant characters on TV who were Latino as of June of this year, shy of the 44% real-world share for U.S. immigrants.

$1,200:  Maximum amount of money an Instagram Reels creator could earn in the past month after their cap had been $8,500 in October.

49%: Percentage share of top news publishers that regularly post videos to TikTok.

What we’ve covered

IAB’s David Cohen teases updates to trade group’s standard terms and conditions:

• The IAB will kick off a two-year process to update its terms and conditions template next year.
• Among the terms on the table for updating is the cancelation option that covers streaming and digital video inventory in upfront deals.

Listen to the latest Digiday Podcast here.

Why broadcast and streaming TV are key to Modelo’s World Cup strategy:

• Modelo is running ads across ESPN, Telemundo’s digital properties, YouTube and streaming TV services.
• The ad mix skews heavier on traditional TV because of the TV ratings.

Read more about Modelo’s TV and streaming ad strategy here.

Publishers prime their YouTube Shorts strategies ahead of next year’s revenue-sharing program:

• Team Whistle, Betches Media and Vox Media are among the publishers trying to build up audiences for YouTube Shorts.
• Some publishers are using Shorts to promote their long-form YouTube videos while others are hyping their podcasts.

Read more about publishers’ YouTube Shorts strategies here.

How The Wall Street Journal hopes to reach young news consumers on TikTok:

• The news publisher has gained 37,000 followers since launching its TikTok account on Oct. 3.
• The Journal has yet to start making money from its TikTok account.

Read more about The Wall Street Journal’s TikTok operation here.

What we’re reading

Twitch streamers burn out:
Twitch streamers are pulling back from the platform after overexerting themselves by trying to attain and retain large audiences on the Amazon-owned livestreaming platform that incentivizes streamers to spend a lot of time on Twitch, according to Every.

Esports orgs flame out:
Esports has yet to live up to its promise as the next major sports category — at least financially — and the economic downturn and crypto crash are exacerbating esports’ money woes, according to Bloomberg.

David Zaslav calls out Netflix:
Warner Bros. Discovery’s CEO is bucking up against Netflix’s infamously unfavorable payment terms with producers and has told the company’s teams to temporarily hold off on selling shows to the rival streamer, according to Deadline.