A (Nearly) Complete Guide to Video Advertising
As an advertising medium, video is a grab-bag of some of the digital advertising industry’s most promising technology and its worst tendencies. Understanding how to navigate the turbulent video advertising landscape is no small task.
Rising stars like Connected TV promise an upcoming golden age of advertising, combining the massive reach of television with the personalization of programmatic technology. Others, like outstream video, are ground zero for fraud and wasted ad spend.
While we can’t cover every nuance, here’s what we think you need to know about running a modern video advertising campaign and how to adapt to what’s coming up on the horizon.
What is video advertising?
Seems like a simple question, but it’s important to get the definitions down first before we continue.
Video advertising is the use of video in advertisements across the spectrum mass communication media. In other words, it’s the use of video to advertise (big surprise, I know).
But how does this actually work in the modern advertising industry? By our estimation, video advertising can be broken up into six buckets: traditional TV, advanced TV, social media video, YouTube TrueView and programmatic video.
Let’s dive into each bucket and explore how marketers and advertisers can utilize them to drive brand awareness, fill out their marketing strategy and create momentum.
Think of traditional TV (also sometimes called Linear TV) as the dinosaur in the room, both in the sense that it’s old and that it looms over all the other categories of video advertising.
Traditional TV advertising appears on broadcast, satellite and cable television. It’s how television advertising has worked for decades.
It remains an incredibly important tool for marketers looking to drive large-scale brand awareness and still has the ability to create moments that shift culture, from “Dilly, dilly” to Allstate’s “Mayhem.”
How does traditional TV advertising work?
Traditional TV ads are bought through people.
You have one person representing an ad agency and brand saying “Hey, we’ve got this ad for this client. Can you run it during that new primetime hit of yours?” to a person representing a TV network. They work out a deal and get the ad up.
Media planners and buyers representing the agency and brand will determine what programming to place ads within using Gross Rating Point (GRP) and Target Rating Point (TRP). These two acronyms form the foundation for how much of the modern video advertising is planned, measured and executed.
How is traditional TV advertising measured?
GRP is the calculation of how many people watch a certain program. TRP is the calculation of how many of those people are in your target audience as potential customers.
If you’re looking to target women ages 25-40, you can use GRP and TRP to determine which shows and networks you should focus on and to measure the impact of your ad.
If 50% of households saw your traditional TV ad once, you would have a GRP of 50 (50 x 1). Say your target audience makes up half of that 50% that saw your ad once, then your TRP would be 25.
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How is GRP Calculated?
Say you’re targeting men between the ages of 18 and 35, and you know that demographic makes up 50% of night-time Comedy Central viewers. So, you decide to run three commercials in the evening on Comedy Central. In this case your GRP is 150.
Here’s the formula:
50 x 3 = 150
Pretty simple stuff once you break it down. But how do you know what percentage of the general viewership is your chosen demographic? That’s where Nielsen comes in.
Let’s pause for one second to reflect on what using GRP and TRP as a foundation means for the measurement of video advertising.
GRP is the quantity metric. It answers the question of “how many people saw may ad?” TRP a quality metric that attempts to answer the question of “how many people I want to see my ad actually saw it?”
But how do you tie the answers to these questions about your ad campaign to bottom line metrics like increased sales? You don’t really. It’s mostly an educated guess.
How important is traditional TV?
Still very important. Traditional TV is still a $70 billion industry. But that’s down 2.9% from 2018, while programmatic TV increased by a staggering 58.4%.
Traditional TV is still incredibly important to the industry. It’s the best option for massive ad campaigns looking to drive national (and international) awareness. And with events like the Super Bowl, the Olympics, and the World Cup, it still holds the crown for reach and cultural impact.
That said, its days are numbered. New technology has yet to take over traditional TV, but it won’t be long. Once all the kinks are worked out, traditional TV as we know it will cease to exist. So, what’s replacing it?
What’s next after traditional TV? Advanced TV of course! We already have an in-depth article about Advanced TV here, which we encourage you to read, but here’s a high-level overview.
Advanced TV is any television content that is not delivered using traditional linear models (i.e., broadcast, cable and satellite). It uses programmatic technology to do so, which is why some call it programmatic TV. It’s an umbrella term encompassing three separate types of TV advertising: Programmatic Linear TV, Addressable TV and Connected TV.
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One thing to keep in mind is that Advanced TV is an emerging, very lucrative technology in the world of digital marketing. The result is that the vocabulary the industry uses is all over the place. Standards haven’t quite settled in yet.
For example, some people may use OTT and Connected TV interchangeably. Some may not bucket addressable TV under advanced TV. Just know that it can be confusing and that we’re all in the same boat. What we have in this article, as of writing it, is what we use to navigate this part of the industry.
Alright, we’re throwing a lot of terms at you. Let’s break it down.
How does Advanced TV advertising work?
Advanced TV takes all the strengths of traditional TV and combines it with the personalization powers of programmatic technology.
The three categories of Advanced TV use programmatic technology to varying degrees.
Programmatic Linear TV is traditional (i.e., linear) TV advertising bought using automated programmatic processes. For the viewer there is no difference between traditional TV and Programmatic Linear TV.
Addressable TV takes it a step further by providing the opportunity to programmatically buy audiences, not content. In other words, you don’t go out and say “I would like to buy ad space during the latest primetime hit.” You say, “I would like to buy ad space that women ages 25-40 watch.” Your ad will appear on any show and network that audience is likely to watch. This means that neighbors could watch the same show but receive different ads.
Connected TV is the most programmatic category of Advanced TV (we wrote a whole article about it here). Essentially, Connected TV is any TV content delivered via the internet, usually using over-the-top (OTT) devices. This makes most of the Connected TV inventory available to programmatic technology.
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What Is OTT?
IAB definces OTT devices as anything that’s used to stream video content via the internet. This includes Smart TVs, Chromecasts, Rokus, video game consoles, etc.
Right now, actually buying Advanced TV inventory can be a mixed bag. Hulu, for instance is walled off. If you want to buy their inventory, you have to work directly with them. Roku, with its acquisition of dataxu, is more open to exchanges, but general sentiment reveals this may not last for long.
Despite all this, GRP and TRP are still the foundation of television advertising. Anyone buying television inventory needs to take them into account. It’s just that now, you know who you’re targeting, you can use metrics like CPMs (cost per thousand impressions) and CPPs (cost per point), and, with technology like LumenAd, you can see how they work in tandem with other channels like Display and Social.
How is Advanced TV advertising measured?
Read our article on Advanced TV KPIs for a deeper dive than what we have here.
This means marketers gain brand building benefits of traditional TV and tie it to bottom line metrics like increased sales, foot traffic, etc.
How important is Advanced TV?
Advanced TV is the future of television advertising. At this point, everyone is waiting for the technology and supply to catch up with demand.
As we mention in the traditional TV section, fairly soon, what we consider traditional or linear TV advertising will cease to exist. It will all be folded into the larger Advanced TV bucket.
We’re making the distinction here because that’s how much of the industry talks about advertising. But, as we’ll explore in the upcoming section about the future of video advertising, there will be no distinction.
Isn’t YouTube a social media platform? Shouldn’t this be bucketed in the larger social media bucket?
Well, technically that’s right. But what makes TrueView different (and why we’re bucketing it differently) from social media video and programmatic video is its pricing model.
YouTube TrueView ads allow users to interact with and control the ads they see (i.e., use the “Skip Ad” button). You only pay when video viewers watch your ad or if they interact with it.
This can be a very effective tactic with the right strategy and creative, allowing you to drive a ton of awareness and engagement without spending a massive amount of money.
How do YouTube Trueview ads work?
With YouTube TrueView ads, you only pay when the user interacts with your ad or watches at least 30 seconds of it.
Many other pricing models, including social media video and programmatic video, are focused on buying impressions, making video an effective awareness tactic.
To learn more about what makes YouTube TrueView ads unique, read our full guide here: YouTube TrueView Ad Specs & Everything Else You Need To Know.
How are YouTube TrueView ads measured?
Again, I encourage you to read our previous article on YouTube TrueView for all the nuances, but we’ll do a quick summary here.
Because of its pricing model, YouTube TrueView ads work well as mid-funnel engagement and low-funnel conversion tactics. In our article, we link out to and go over all the possible reporting metrics possible with TrueView ads.
But, the gist is to keep an eye on two metrics: completion rate, which measures how long people are watching your ad, and view-through rate, which is a percentage of people choosing to watch your ad.
These two combined will give you an idea of how effective your video ad is and how invested your audience is in your message.
Also look out for reach, click-through rate, ad recall, brand awareness and brand lift. Altogether they allow TrueView ads to help you drive awareness without breaking the bank.
How important are YouTube TrueView ads?
YouTube TrueView is important in certain contexts. There are other types of video ad content YouTube supports, like unskippable bumper ads and homepage banner ads.
As a whole, TrueView ads show one possible future for all video ads. What if every video ad was bought based on this basis? Its importance is mainly tied up in the viability of its pricing model, which is proving to be fairly viable.
Programmatic VideoProgrammatic video can be considered the “catch-all” bucket of video advertising. Most everything not discussed so far falls into this category.
Programmatic video is video advertising bought via automated processes. This includes native, outstream, pre roll, post roll, in-app, mobile video ads and more.
Because this part of the video advertising landscape is less walled off, there is a greater chance of fraud, bad inventory and just general low performance. That said, it can also prove to be incredibly effective in certain contexts.
How does programmatic video work?
Without a beginner’s knowledge of programmatic advertising, you may find some of what’s here kind of confusing.
Programmatic video is bought using DSPs and ad exchanges.
Buying programmatic video is not very different from buying display advertising programmatically. You can use DSPs and exchanges to find the inventory you’re looking for, book it at the rate your budget demands and launch.
This process is pretty involved and carries a lot of caveats and nuances that we can’t dive into deeply here. If you want to discuss in-depth, drop us a line.
How are programmatic video ads measured?
The bread and butter of programmatic video ads are two metrics:
- Completion Rate — tracks how many people watch your ad all the way through.
- Viewability — tracks the impressions users can see.
If you haven’t already, read our article on 3 Viewability Benchmarks & Why It’s Important. The summary is that viewability is a great benchmark for ensuring you’re serving your ad within good inventory (i.e., your ad is somewhere users can see).
Completion rate is pretty self-explanatory in its importance, but it can’t be overstated. It provides fantastic insight into how your ad is being interacted with and how well users resonate with its message.
How important are programmatic video ads?
Very important because they’re the “wild west” of the video advertising landscape. There are some dangers out there, but there is also gold to be found.
The innovations pioneered within this bucket will get adopted by the others. So, programmatic video may not always make it into your media plan, but its technology will at some point.
Of course, there are other types of video advertising. Out of home (OOH) is one that has driven some recent interest along with influencer marketing.
LumenAd has run a campaign or two on those gas pump TVs. But most of these types of video advertising platforms are fringey and require specialized knowledge that doesn’t fit within a generalized video guide like this one. Let us know if there are any that you’d like us to cover that’s not covered here.
Why should I use video advertising?
If a picture’s worth a thousand words, how many words is a thirty-second video spot worth? The video format is a dense medium of communication. Within a few seconds you can tell a story that would take much more effort and time to tell in other mediums.
This is online video’s main strength, and when combined with the robust programmatic technology of today, it’s a strong medium for advertising and marketing campaigns.
Here are a few stats to back up our claims:
- ⅓ of all online activity is spent watching video.
- 80% of digital video viewers accept free content as a value exchange for watching advertising.
- In an MIT study, 91% of all video content watched was on YouTube.
- According to Google, 15% of viewers stick around for a full 2:17 ad, which is 2x the typical benchmark.
Overall, video’s greatest strength is as an awareness medium. As Jackson Ottman, LumenAd campaign analyst, says, “Video has this mass appeal that other mediums don’t. That’s why I first think awareness when I think video.”
Video makes for a great first touch in your campaigns, but it can also shine as mid-funnel engagement tactic by utilizing retargeting/remarketing. Retargeted video ads are an engaging reminder of your service or product that can serve as one of the final touches that brings the user across the conversion finish line.
Speaking of conversion, in channels like YouTube TrueView, you can also use video for lower funnel initiatives, like driving website visits, lead generation, gaining subscriptions or even creating a poll.
Overall, video makes for an undeniably compelling and versatile medium that can help you achieve just about any desired outcome. That said, there are a few things to keep an eye out for.
What should I keep in mind when using video advertising?
Video is a lot of work and money to produce at a level your users will enjoy. Poorly produced video ads can do much more damage than good. So don’t skimp when you create video ads.
BUT, don’t skimp on the media plan either. As we mentioned in one of our earliest articles, Why Agencies Can’t Innovate When It Comes to Media, media plans can all too often be an afterthought. Why put all this money into your creative if you aren’t going to spend any money getting it out there in front of your target audience?
Riding this balance is tough. As an advertising medium, we often see video leaning too far on the creative spend side without putting as much money as needed into the media side. Here are a few tweets from Everard Hunder (@everardhunder) and Faris Yakob (@faris) that provide good examples:
We highly recommend you follow both Everard and Faris if you haven’t already! We should also mention that by no means is the 20/80 rule Everard mentions standard, but you might find it useful.
Users care about relevance in their advertising, particularly when it comes to video content. In a recent study by IAB (PDF), 56% of respondents prefer ads related to the content they’re watching.
In other words, users will be more receptive to a supermarket ad if it’s shown before a video on “the greatest salsa recipe ever.” And it’s not just that. IAB reports later on in the report that relevancy increases ad receptivity as a whole among users.
So, when it comes time to hone your targeting strategies, content relevancy needed to be at the top of our considerations.
Avoid Bad Inventory
On that note, when honing your targeting strategies, avoid bad inventory. One of the most consistent bad actors outstream video.
Outstream video ads are video ads shown on the web page as standalone ads. They aren’t a part of an existing video stream of content the user is expecting. If you’re reading an article and a video starts playing in the sidebar, it’s incredibly distracting and can damage user experience — something ads should never do.
In addition to all these issues, Jackson says, “Outstream is very expensive. Stay away.” So, outstream can damage user experience, is expensive and can drain your ad spend away from more effective strategies.
Another set of inventory to avoid is postroll, which are ads that run after the video content is over. Think about it, how often do you stick around after the video is done to see what the ad has to say? Probably not often.
“Postroll can ruin completion rate and waste impressions. It’s something I’m always looking out for.” says Jackson.
All this is to say, use your best judgement and prioritize inventory that is conducive to your overall campaign goal. It’s unlikely that outstream and postroll inventory will help you achieve it.
How do I report on video advertising?
When it comes time to report on video campaign performance there are a few metrics you should watch out for, no matter where your ads are shown.
Completion rate is a percentage of the number of times your ad was played all the way to the end without being interrupted. It’s the measurement of how engaging and well placed your ad is.
Anthony Boyer, account manager at LumenAd, says, “We aim for a completion rate of at least above 50%.”
Viewability tracks the number of impressions users can see. Not all impressions are necessarily visible, so you need to keep a constant eye of viewability to ensure your ad is actually seen.
We have a full post on viewability and three good benchmarks for it which we recommend you take time to read.
Anthony says a viewability of 70% is good for video campaigns. This ensures your ad is seen while avoiding fraudulent inventory and bots.
CPCV and CPM
Cost per completed view (CPCV) and CPM together provide a decent picture of your video campaign’s health. Jackson says, “I use CPCV as a benchmark. A lot of what I focus on revolves around that metric. Then I’ll also keep an eye on CPM.”
These two acronyms give you insight into what you’re spending per completed view and what you’re spending for every set of eyeballs that see your ad. Together, this can provide a fairly nuanced look into what you’re getting for every dollar spent on your video ad campaigns.
Of course, there’s a whole library of metrics you take into account when building a video advertising report. These are just a few we thought we’d call out here. To see the full extent of what your video campaign reports can look like, check out LumenAd’s reporting capabilities and schedule a demo.
What makes an effective video ad?
This whole section requires a very strong “From what we’ve seen…” disclaimer. Don’t take this as gospel. This is what, from our not insignificant experience, we see makes for an effective video campaign.
A good starting place is to keep videos within 15 to 30 seconds. Or, at least be sure to grab the viewer’s attention within that time frame.
Anthony says, “The average person’s attention span is about 9 seconds. And it’s likely getting shorter each year.”
To account for shortened attention spans, he gives two fairly specific suggestions:
- Get your core brand message across in the first 3 to 5 seconds.
- Mention your brand name within those first 3 to 5 seconds if you can.
So, if you hit these checkmarks (or get close), how do you determine if your video campaign is successful?
What are video campaign benchmarks?
This is still within the “From what we’ve seen…” disclaimer. So, we’ll give you, from what we’ve seen, are few benchmarks to work towards along with some more nuanced information to give you the tools to determine for yourself.
Viewability: At Least 70%
As mentioned above, viewability measures viewable impressions. A rate of around 70% will ensure you’re using good inventory without exposing yourself to fraud.
One important caveat is that some platforms, by necessity, have 100% viewability all the time. For instance, Hulu can guarantee 100% viewability on their ads because the user is sitting down to watch Hulu’s content and can’t do so until the ad has played.
Completion Rate: 65% or Above
Completion rate can be dependent on the length of a video. For instance, a 60% completion rate on a 3 minute video is worth a lot more than a 60% completion rate on a 15 second video.
One outlier is pre roll video ads, which we normally see achieve an 85% completion rate and up. But in other cases, as Jackson says, “85% completion rates can imply invalid traffic or bots.”
Other outliers are platforms like Hulu, mentioned above. Because the users have to watch the ads to view Hulu’s content, they can all but guarantee 100% completion rate.
These are the two most solid benchmarks we can get you. As anyone steeped in this industry knows, much of what determines success depends on each individual campaign, so it can be difficult to provide solid benchmarks that don’t require entire pages of caveats and nuances.
What is the future of video advertising?
Alright, now we get into the future. Here are the video advertising trends we see coming down the pipe.
The Convergence of Traditional and Digital
As the capabilities of online video ads improve, all video media planning will be done as one channel or line item. In the past, it wasn’t uncommon for agencies to split budgets among traditional TV and online video. Nowadays it’s becoming more and more common to see it as one united front.
Anthony describes it like this, “I think it will all just become one thing. In other words, video will bie one line item split out into Advanced TV, Traditional, pre roll, etc.”
Jackson adds, “Right now, we’ll oftentimes split them up just because of the sheer amount of inventory disparity. Also, digital and online video gives you insight into frequency and which devices you’re hitting, which traditional can’t.”
That said, traditional TV will eventually be eclipsed by advanced TV, allowing for such metrics across the video advertising landscape. This is demonstrated by the drastic increase in cord cutters in recent years.
In 2018 there was a total of 33 million cord cutters (mostly lead by millenials and gen z), which is an increase of 32.8%. All indications show that percentage only increasing.
You may have heard about Facebook’s inflation of video metrics. If not, read up on it to understand the dangers of walled gardens run amok.
Not only did this scam advertisers out of tons of money, it decimated an entire content industry, as pointed out by Adam Conover.
When you look up stats on video consumption, as I did when writing this article, keep in mind that much of the statistics parroted about Facebook video consumption come from this time where Facebook lied to advertisers and publishers alike. These stats may not be the most trustworthy.
This sort of shady practice is all too common in this complicated industry ruled by a duopoly. Outside of the duopoly, expect more shady stuff as the new frontiers of CTV expand. For instance, last year, Roku found themselves in some hot water with some allegations of suspicious traffic.
Unfortunately there isn’t a whole lot you can do about this, just keep an eye out and be smart with your ad spend (which is something LumenAd is really good at helping you do).
It’s no secret that mobile devices are the future of how we consume content. Whether we’re using our phones to cast content onto screens, killing time on YouTube during your commute on the train or reading the latest Medium article.
This mobile-first world is already here for video content. According to eMarketer, “more than 75% of worldwide video viewing is on mobile.”
The takeaway here is to keep the mobile responsiveness of your creative top of mind. This means vertical video and captions when you can (because mobile users won’t always have headphones in).
There are larger implications as well. For instance, because people now have state-of-the-art cameras in their pockets at all times, high quality user-generated content is gaining prominence.
Also, in-app advertising lends itself well to interactive video ad formats, such as shoppable videos.
Nate Christiansen, campaign analyst at LumenAd, provides great insight into what it takes to adapt to a mobile-first world by focusing on Facebook’s recent updates: Mobile-First Creative: How to Match Consumer Behavior on Facebook.
Jeff Green, CEO of The Trade Desk, lays out a compelling case for Netflix adopting a ad-based pricing model in a recent YouTube video.
Readers of Ratko Vidakovic’s newsletter (subscribe here) are inclined to agree:
If this comes to pass, more inventory will be available across all streaming services.
Video Spending Will Increase
This is a pretty safe bet anyways, but as outlined in our 2019 trends recap, the promise of what CTV and Advanced TV has to offer advertisers is heating up passions.
In the first half of 2019, video spending went up 36% year over year. We expect that to only speed up in 2020.
Unfortunately, this increase in spending may be in large part to how expensive it is to buy this newly available Advanced TV inventory. In the UK, Digiday reports that the cheapest CPM for addressable TV ads were more than twice as expensive as traditional TV ads, depending on the time of day.
This has been our take on online video advertising as it stands in Q4 2019. We’ll be revisiting this article frequently to update it according to the latest trends and insights.
Subscribe below for more guides like this and schedule a demo to see how LumenAd can power more effective video campaigns.
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