The Polar Report
10 MIN

The Polar Report: Industry Insights #4

January 11, 2022

Welcome to The Polar Report, a curated view of what's happening in the world of digital Monetisation, Audience Development and Measurement. This week we explore an acquisition by Vox Media, Roku and Google's YouTube dispute and more!


Roku and Google reach an agreement over YouTube

Roku and Google's ongoing dispute has come to an end with an agreement that allows Google's YouTube and YouTube TV to remain on the Roku platform. The tension between the two parties had been growing throughout 2021, with Roku threatening to remove YouTube from their devices. They accused Google's terms of stifling competitiveness and also raised issue with the data asked of users who use YouTube on Roku devices. We saw a similar battle with UKTV and Virgin Media two years ago and it won't be the last contest we see between device manufacturer and content provider.

Regardless of the competitive considerations, this deal between Roku and Google came down to money. The question is who benefited more from the deal?

YouTube understands it is the authority with consumers when it comes to advertising-video-on-demand (AVOD). Advertisers are drawn to the platform due to the massive footprint YouTube provides. With growing consumption behaviour moving toward CTV, YouTube is now heavily reliant on having presence on CTV devices, including games consoles, smart TV sticks, smart TVs and set top boxes.

Not only has this helped the platform to grow, but YouTube would argue their content has enabled these devices to offer a broader entertainment ecosystem and with it increased revenue.

Understandably there is a power struggle akin to chicken or egg. Did the devices drive YouTube growth or vice versa?

It's more of a complementary relationship, like what we've seen with music streaming and mobile operators.

Roku is offering its own AVOD solution, albeit a very small one compared to YouTube, but it will still be taking a share of time on their devices. Other AVOD services are also being introduced to challenge YouTube's dominance, but success, as always, is in the hands of the viewer.

Full article on CNBC

Rakuten's AVOD platform Viki restricts ads to 2 mins per hour

What is the best balance to strike in terms of the total ad run time on AVOD platforms to drive revenue?

The fewer ads shown, the more expensive the audience-favoured ad placements. Conversely, the higher the ad load, the lower the price, which can result in a lower retained audience.

Viki, a Rakuten owned AVOD streaming service, has set its total ad load to 2 minutes per hour and waits until 8 minutes into a show before showing any mid-roll ads. This is likely to improve user experience, but it also risks constraining ad revenue because there is a limit to how much can be bought by advertisers. Ad load considerations are not something exclusively reserved to our new world’s AVOD platforms like Viki. It’s something all media owners have to consider in regards to monetising audiences without deterring them.

Traditional broadcasters have become accustomed to fixed ad slots throughout linear programming. However, with the introduction of digital and the ability to serve ads before, during and after viewing sessions, it is often too tempting to increase volumes when audiences start to dwindle.

We’ve seen Facebook come under fire for too many sponsored posts being promoted in-feed, forcing them to change their algorithm to prioritise friends posts. Equally, some website publishers make it hard to identify what’s an ad and what’s content as a result of squeezing so many display placements in view. Although ad load is primarily a user consideration, advertisers are also looking at publishers who serve too many ads, as this might dilute their own messages.

YouTube (the biggest AVOD platform globally) used to run one pre-roll ad on anything under 10mins and only a percentage of those ads would be non-skippable. Changes to mid-roll criteria (now over 8mins) and introduction of higher value formats (non-skip auction ads) will have had huge impacts on YouTube’s revenue without having to change its audience scale.

Viki’s move is a statement to attract audiences in the first instance, and in the future they will likely take YouTube’s lead on pushing the value up through advertisers and longer sessions.

Full article on Digiday

Audience Development

Vox Media acquires Group Nine

Vox Media has merged with Group Nine to create one of the biggest media companies in America. It brings together a vast number of distribution partners including Amazon, Netflix and Hulu, and brands including The Dodo, NowThis, SB Nation, New York Magazine and The Verge that will reach across a variety of demographics and categories. It also bolsters their advertising offering as well as Vox Media's existing first-party data product Forte, which is especially notable given the decline of the third-party cookie and the recent push for first-party data solutions.

Consolidation is part and parcel of the media industry with no fish too big to acquire. This acquisition is a smart one built to protect and focused on IP.

It shows that media companies are conscious of the need to adapt and find alternative means of gathering consumer data in the wake of the changing cookie landscape. While there is time before third-party cookies are gone for good, it is certainly on the minds of media companies.

As for the merger itself, Vox Media is building itself an expanded network that will allow it to reach across many of the major streaming services.

That media companies are changing their content focus is now expected, with many forms of video, audio and text being made accessible on multiple platforms from TV and websites to apps.

The most valuable asset that enables multi-format and multi-distribution is IP. We saw the power that TV sitcom Friends had on Netflix and the concomitant growth of NBCUniversal's Peacock. Disney too was one of the first to remove their IP from Netflix to help drive their direct-to-consumer offering.

Content owners are fighting back against the media owners but success requires multiple IPs to cater to various audiences, otherwise a new platform will struggle to establish itself in consumers' entertainment portfolios. It wouldn't surprise us to see similar collaborations at the creator level. We've already seen early stages of this when you look at the success of The Sidemen. Stronger together appears to be the way forward for now.

Full article on Vox Media


CTV now a performance marketing channel

CTV has shifted from being perceived as merely a brand awareness channel to a performance marketing channel. Unlike linear TV, it offers the measurability of programmatic advertising, and as such it is becoming a more appealing place for advertisers to be. This Digiday article also makes the interesting distinction that advertisers are using CTV to inform their linear advertising strategies. In other words, CTV is a testing ground to discover the most effective and appealing content that can then be placed on TV.

There is now a very fine line of distinction between ads served via CTV and traditional linear TV. Both offer big screen impact in the living room.

It makes sense that clients use CTV to inform their advertising but one thing that can't be attributed is the channel association. The same ad served to the same viewer at the same time on different distribution apps or channels will not have the same impact, for not all channels have the same credibility.

TV advertising has typically provided good credibility with consumers' “it must be reputable as I saw it on TV” mentality (although this attitude may be diluting somewhat). The barriers to enter TV advertising have been reduced with CTV, and while YouTube's track record isn't great, they are working on it. It's the nature of user-generated-content platforms and mass scale to have mishaps. However, nothing will quite beat primetime ads on established broadcasters with the established consumer trust and premium perception in place.

Is CTV a performance marketing channel? Yes, if the way we're measuring performance is built on new metrics of retention, not historical performance measurement.

What's clear is that the identity of performance measurement is changing and it'll be fascinating to see where the ad dollars flow once the measurement criteria and placements are established.

Full article on Digiday

Online marketplaces are the answer to ad transparency

This article from VideoWeek suggests that the current infrastructure for digital advertising has merely been adapted from what came before, and that it needs innovation to break free from the complexity of the current systems. This should also help the industry to become more transparent. The article highlights e-commerce as a sector that could be learnt from, with advertising inventory being traded more like an online marketplace.

Transparency is the never ending saga that stifles the media industry. It's something that, as a group of publishers, agencies and buyers, we haven't found a clear solution to. It's also very unlikely to happen, given stakeholders’ competing interests.

However, the article does raise an interesting consideration as to whether marketplaces are the answer to independent media curation without the buying mechanics. Pure productisation based on fixed prices is the suggested path to improve supply and demand optimisation.

If the industry were starting from scratch this would make sense - but we're not. Media buying and selling is very much entrenched in historical relationships and value pots that will never be achieved. It's aspirational to feel we can get there but a reality check is needed.

Platforms like OpenSlate and Channel Factory have attempted to solve this problem for YouTube by providing "independent" scoring systems and content curation facilities. They will be doing their own deals with media owners and buyers that won't always be visible to advertisers. In short, this is providing a solution to generate revenue, not necessarily benefit the long-term goal.

Independent verification is required. It's why most media is bought through one of the core measurement partners: Nielsen, Comscore or Kantar. However, the methodology and transparency outside the execution is where the problems are.

We agree marketplaces are a good thing, but under agency, advertiser and supplier mindsets towards change, we don't expect to see the transparency issues improving across the board.

Full article on VideoWeek

TV advertising costs will increase by 11% in 2022

It is commonly known that digital advertising has experienced huge growth over the past few years, but what of TV? Linear advertising is experiencing slower growth than digital and as a result the cost is set to rise by 11 percent in 2022. This does not mean that linear advertising is declining however, and it remains the dominant player in the advertising world.

It shouldn't shock you to hear a media agency reportedly threatening to move ad dollars from TV due to the rise in advertising costs. It's pure self interest, as TV is still where a huge amount of margin is driven for media agencies.

What we have to consider is why the prices have increased if they are warranted. In a traditional supply and demand market, if supply decreases, price goes up. What advertisers are suggesting is that pulling demand will realign pricing, but it's highly improbable.

For every TV advertiser there are hundreds behind them looking to reach consumers; it's still the leader in advertising impact. In any market where there is limited supply of any given product, prices are set at what anyone is willing to pay. We've seen this with the eye-watering premiums for placements around the Superbowl.

Agencies are obsessed with measurement as it helps them take credit when campaigns do well and point to the data when they don't. However, they're facing difficulties with cookie deprecation and iOS14 privacy changes. So while TV advertising costs may be increasing due to supply shortages, we wouldn't be surprised if they increased further as contextual advertising demand grows.

Full article on VideoWeek