Video Briefing: Hulu’s the OTT ad giant, but other players are emerging
Over-the-top streaming video has gone mainstream among users. But in terms of advertising, the U.S. market is pretty much Hulu, a couple of other emerging heavyweights, and then everybody else.
THE KEY HITS:
- Hulu, which topped $1 billion in ad revenue last year and is on pace to grow that in 2018, is capturing a majority of the $2.2 billion OTT ad market.
- There are emerging heavyweights: Roku’s ad business is expected to surpass its device sales this year and CBS’s suite of streaming channels is bringing “hundreds of millions” in ad revenue. Streaming TV services, which include Hulu, YouTube TV and Sling TV, are also expected to pull in greater ad spend.
- Marketers are also waking up to OTT, but have a lot of catching up to do as many don’t separate out OTT as its own line item in the budget.
- Ultimately, OTT is still a fraction of TV and video ad budgets, but the next 12 months will demonstrate how quickly this market can grow.
Hulu hit a milestone last year by topping $1 billion in ad revenue for the first time. What’s even more impressive, the entire OTT ad market didn’t crack $2 billion last year, according to Magna Global. It will this year, as the agency expects U.S. OTT ad spend to jump more than 40 percent and hit $2.2 billion in 2018 — and Hulu will continue to carve out a significant chunk of ad spend.
With 20 million subscribers and supposedly more than 54 million unique viewers per month, Hulu is in a class by itself as an OTT ad provider.
Hulu’s dominance also shows how much the OTT ad market still has to go to catch up with actual consumption. According to the same Magna Global forecast, U.S. national and local TV will bring in roughly $64 billion in ad spend, with digital video in total bringing in close to $13 billion.
There’s room for growth, and there are also signs that growth will come. Take Roku, which will top $293 million in ad revenue this year, according to eMarketer estimates. Roku itself has said that it expects to do more in ad revenue this year than device sales. (And with the launch this year of the free, ad-supported Roku Channel, there is even more video ad inventory for the company to sell.)
Streaming TV services such as YouTube TV, Hulu’s own live TV offering, DirecTV Now and Sling TV are also expected to draw greater ad spend as consumers migrate to skinnier, multiplatform bundles.
And more TV networks and video programmers are going over the top and direct to consumer. CBS, which is further along than most, brought in “hundreds of millions” in ad revenue last year from its suite of OTT apps, which include the ad- and subscription-based CBS All-Access as well as the free, ad-supported CBSN and CBS Sports HQ.
According to one top video ad server, in just over a year, OTT has gone from being about a couple of percentage points of their business to roughly 40 percent of the business this year. Again, the growth is there, and marketers are waking up.
For instance, Blue Apron CMO Jared Cluff told me earlier this week that the company is spending a greater amount of time in OTT advertising. Ideally, OTT can merge the branding aspect of TV and the attribution capabilities of digital media, which is ideal for a direct-to-consumer brand and direct-marketer like Blue Apron.
But here again, Hulu makes its presence felt: Cluff also said that Hulu is its own item within the Blue Apron marketing plan. Other marketers I’ve spoken to said they don’t have OTT as its own line item in the budget. In most cases, Hulu sits alongside premium TV programmers ranging from HBO to Netflix.
How agencies sort out who controls the OTT budgets will also play a big role in how the market grows. Should TV buyers control this inventory? Or should it go to digital folks who should have a greater understanding of the ins and outs of digital media? Or is it some version of both?
There are a lot of complications that need to be addressed to ensure that the OTT ad market can catch up to viewers — we haven’t even gone into the minefield that is measurement.
Again, there are encouraging signs that this market will grow, but it seems like for the foreseeable future, OTT advertising will remain in the control of a handful of major players: Hulu, Roku, some big video programmers such as CBS and AT&T’s Otter Media and, inevitably, Amazon in some fashion. The next 12 months should be fun.
“Everyone is vomiting everything into IGTV, and it’s just a ton of garbage. And no one cares.” — Social video exec
Numbers don’t lie
60: The number of data scientists employed today by WWE, which uses this team for everything from digital video programming decisions to subscriber acquisition and retention strategies for its OTT streaming channel.
$250,000: The cost for buying ads with Facebook’s version of Google Preferred over three months.
Speaking gig: Digiday Video Marketing Summit
We’re hosting our first-ever Video Marketing Summit in Nashville from Nov. 28-30. The event will tackle a wide range of topics in video marketing and advertising. Want to speak? Want to attend as a VIP? Hit me up. (Again: This opportunity is for brand marketers and ad agencies only.)
What we’ve covered
Advertisers are doubtful of Facebook’s version of Google Preferred:
- Facebook’s In-Stream Reserve ad program supposedly offers inventory from top video programmers on the platform — if you believe Nat Geo is as premium as a creator named MaxNoSleeves.
- Facebook was originally asking for a $750,000 commitment over three months, but that price has since dropped to $250,000 over three months.
Read more about Facebook’s ad program here.
Reddit is now getting a billion views per month on its own video player:
- Reddit launched its own video player last August, and more users are uploading videos with the native product versus YouTube embeds, the company said.
- Reddit is now serving more than 13 million hours of video per month, up 38 percent from the beginning of the year.
Read more about Reddit’s video growth here.
What we’re reading
Netflix dives into interactive storytelling: An episode in an upcoming season of “Black Mirror” will be done in an interactive, choose-your-own-adventure format. It’s one of several interactive specials Netflix has in its original programming slate. Netflix has already experimented with interactive storytelling with some kids’ programming, but it will be interesting to see how the streaming giant brings it to bigger, more expensive dramas. Interactive programming has mostly been a niche interest in digital video, but as Netflix and other streaming giants have already gotten people used to “interacting” with their TV apps, maybe there’s a path toward this type of programming becoming a bit more mainstream. Don’t expect large droves of people to suddenly start downloading any interactive video app out there, though.
Netflix takes foreign streaming rights to a DC Comics show: “Titans,” which will air on Warner Bros.’ upcoming DC Universe streaming service in the U.S., will be on Netflix everywhere else. This is a head-scratcher: DC is owned by Warner Bros., which is a sister division of HBO as part of AT&T’s WarnerMedia. AT&T and HBO execs have started talking about how they need to build HBO’s brand globally and produce more top-shelf content for the network. So why let Netflix distribute the show globally for a quick buck?
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