Today’s column is written by Jourdain-Alexander Casale as published by Ad Exchanger https://adexchanger.com/the-sell-sider/marketplace-correction-coming-video-cpms/

2016 saw header bidding begin to move from display and mobile into video. On the buy side, the demand for premium content escalated, and publishers continued to explore how best to optimize their video inventory.

The current market reality is that premium video inventory is in scarce supply. I’m talking about the cream of the crop, full-episode players and premium, broadcast-quality content, not in-banner video, overlays or outstream.

Many of the top media companies with the most valuable inventory continue to rely on direct sales for guaranteed commitment of revenue dollars for these video impressions. I believe this traditional method of transaction may lead to underpricing of inventory and is due for an inevitable correction.

Because quality video content is in extremely short supply, the best is often locked in guaranteed commitments, upfront. Media companies rely on guaranteed dollars to facilitate forecasting and provide reliable revenue as a means to run an expensive business.

However, if you compare the video marketplace to display, it is effectively a reverse parallel. With display, far more supply than demand exists today. This has created a buyer’s market with CPMs that still underwhelm premium media companies (although prices have improved with the advent of scaled header bidding).

With video, we have the reverse. Scarce supply and abundant demand have created a seller’s market. When demand far outstrips supply, greater competition will drive up CPMs.

One of the greatest advantages of programmatic is the opportunity for marketers to value their audiences, either in isolation or competition with their peers. This has created micro marketplaces where CPMs far exceed the wildest expectations of a publisher’s traditional rate card. Amplify this with a scarce asset – video supply – and I don’t think video CPMs as high as $100 would be farfetched in the not-too-distant future.

As publishers plan their strategies for the upcoming year, they should bear in mind the maturing programmatic video market. They should ask themselves how they set their prices today and if they’re selling their video at the right price. In any market, if you are “sold out” – which is often the case with video – chances are you’re selling at a discount compared to what the market can bear. Certainly there are exceptions to this rule, but I am referring to the majority case.

Video header bidding today feels reminiscent to me of the early days of header bidding in display. Header bidding creates a parallel channel of transaction to existing strategies. At the outset, it’s often leveraged purely for pricing intelligence. But as a publisher gains an understanding of the prices available in the market, relative to the prices they set, publishers can then take steps to change the way they transact.

Just as we saw with display, video inventory will continue to be monetized increasingly by programmatic. A market correction is coming. While things don’t always change fast, they can if the conditions are ripe for it, and those conditions are quickly materializing in video.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s