As streaming content replaces the traditional television experience, niche publishers producing long-form video content have an opportunity to access a lucrative market. What’s stopping them? Why shouldn’t it? And how can you, as a digital publisher, get in on OTT advertising?

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Remember TV ads from when you were a kid? I bet you even remember one or two by heart and find yourself randomly humming an ancient ad tune of in the shower. I know I do. A lot has changed since the days of repetitive and irrelevant ads you unintentionally memorized as a child.

TV advertising has evolved and is on the fast track to merging fully with online video advertising. One of the most important milestones on that path is the rise of OTT advertising, and it’s no longer a game of giants alone. With publishers like CNN, TMZ and ESPN already selling OTT inventory, the time for niche publishers to test the proverbial waters of OTT advertising is now.

What is OTT Advertising?

In a nutshell, OTT advertising means serving different video ads to different viewers of the same content at different intervals. From a digital publisher’s perspective, OTT is not very different from targeted banner advertising alongside articles.

The term OTT (over the top) advertising itself stems from the first smart devices introduced to connect the television to the internet as they sat “on top” of the television set. While the name is outdated (you can’t put stuff on top of a flat-screen TV, and much of the consumption of the content happens on other devices), the OTT content market is only growing, as is its audience.

The rise of OTT advertising can be seen in the growing demand from advertisers eager to tap into targeted advertising with a format that has proven itself more engaging and effective than many others with ad viewing completion as high as 98% – high-resolution (over 400px wide) video inserted in long-form streaming content.

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(Source: https://www.ctvmedia.com/ott-comic-book-page-3)

OTT Monetization Models

There are a few ways to monetize your OTT content. Different publishers and virtual Multichannel Video Programming Distributor (vMVPDs) use different approaches, often combining more than one and even changing it over time to suit advertiser and viewer needs.

Subscription & Mixed Models

The king of OTT is Netflix – the world’s most popular OTT service. Netflix is fully subscription-based, though there are those who predict they will inject some form of advertising at one point or another, or offer a “mixed” model (even though they promised not to).

Much like with any other type of content, subscription-exclusive monetization is reserved for large publishers with a track record of offering quality content the audience deems worthy of the recurring subscription charge. This is why many publishers and content producers (wisely) choose a synergy between ads and subscriptions, especially if they are new on the OTT monetization block. Good examples of mixed monetization techniques are Hulu and Spotify that offer a subscription service that (among others) eliminates the ads from the content consumption experience. Another interesting example is the BBC that monetizes only the international audiences coming from outside the UK.

Advertising

Ads and promotions in various forms have supported the production and publication of content since about ever, especially when it comes to televised content. OTT content is no different but with great technology, comes great power to target, measure and profit from your streaming audience.

When it comes to selling ad-space, most publishers already know that the two main approaches are direct and programmatic. Each has its strengths and weaknesses when considered by niche publishers.

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Direct vs Programmatic

Ads sold in direct deals will usually be at the top of your waterfall. There are a lot of good reasons for that. Not only are direct sales usually more profitable (some claim even double than with programmatic!), but they give publishers direct control of what is being shown along with their content.There is no doubt that with OTT advertising, like any other form of advertising, direct deals are the golden grail for sellers. That said, any publisher will tell you that direct advertisement deals rarely fall from the sky, especially when it comes to new and smaller niche publishers. Advertisers looking for OTT inventory might not be familiar with your offer, and your current advertisers might not be ready for video at all. To reach advertisers and close deals a publisher needs to employ a sales team, the services of agencies, and potentially invest more in ad operation costs. All this overhead is just one of the reasons publishers turn to programmatic with OTT with their unsold excess inventory through exchanges or video-specialized SSPs or end up building a private programmatic marketplace. But it’s not as easy or simple as we’d all like.

Hurdles & Challenges

Assume for a moment you already have a dedicated audience for your long-form content, and they’d like an app on their OTT device or smart TV to view your content. That’s already good, because it means you won’t have to work as hard to get users to download and use your streaming app, which is often one of the main reasons publishers avoid investing in OTT altogether and use more traditional (though less lucrative) video monetization tools. Even then, monetizing that app and audience is hard.

Production ROI – Long Form Costs

Long and engaging content viewed by a highly targeted audience will always yield higher ad CPMs than low quality content. High quality usually means higher production (and/or licensing) costs, which one should take into account before even considering investment in OTT monetization. It gets even more complicated when you try to ensure you only get ad-friendly content.

Ad-friendly Content – “And Now, a Word From Our Sponsor”

Back in the olden days of traditional TV advertising, most content was produced with advertising in mind. Be it live news broadcasts or TV shows segmented to include ad breaks, the content produced was made to cater to the needs of advertisers, at least in some ways. Introducing ad breaks into existing content can be hard, as it is not always possible to break up a video in a way that ad insertion is not intrusive. Especially if you’re trying to do so automatically. Doing it manually, which may be unavoidable with content like live feeds, can be an expensive ordeal.

Measuring & Tracking

As a publisher you know that knowledge isn’t only power, it’s also money. User data and accurate performance reports are crucial components of digital advertising in 2019, so one would think OTT is already there, allowing for cross-device targeting and accurate viewability tracking. Currently, things aren’t as great since the technology isn’t quite there yet. Lack of standard adoption across the ecosystem still leaves much to be desired. Currently, the methodologies used are applicable to online video where skipping and clicking are indicators of impact. OTT is a whole different animal and when it comes to measuring results, its ecosystem is still maturing.

Regulations & Fraud

Since OTT advertising is still finding its footing in the adtech world, there is still a lack of tools for regulation and fraud prevention. While there are plenty of tools to detect invalid traffic and prevent fraudulent clicks on display ads and even video ads on the web, regulating and validating ad views on OTT is still a challenge for publishers. Advertisers, on the other hand, still remember the botnet attack last year that generated a 40% spike in fraudulent impression traffic on CTV/OTT platforms. Knowing that, they expect the publishers to come up with solutions and assurances.

The Advantage and Future of Niche Publishers in OTT Advertising

Many niche publishers look at all those challenges and hurdles and shy away from the opportunity. They should not. The popularity of OTT devices in younger households and the demand for OTT advertising inventory are just rising. Advertisers are eager to win back the attention of banner-blind viewers and OTT promises just that. However, with the measurement and targeting capabilities of the market as it is, niche publishers have a huge advantage over the giants – a highly targeted audience.

For example, let’s take a health and beauty magazine looking to introduce an OTT app with exclusive long-form video content. When it comes to advertising, the magazine ad ops experts already have the data and demographics of their user base from their other digital assets (website, social media pages). When reaching out for a direct sale, they can offer much more in terms of targeting accuracy than a content provider with a very versatile target audience (like Netflix, for example).

With programmatic, niche publishers have an advantage yet again. Knowing how it works and having the processes and tools in place for their display and native inventory is an obvious edge over traditional broadcasters making their move to digital through OTT.

As the ecosystem matures, having the experience with the intricacies of the programmatic biz and owning a unique niche of engaged users will put the niche publishers and their OTT apps in a perfect position to compete with the broadcasting giants of the world.

This post was written for and published on the Pangeo blog. Pangeo by GeoEdge is a VPN Geo-Testing Suite for Digital Professionals.