Cracking the Duopoly in Video Advertising

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Internet Video is exploding. Facebook Live. YouTube. Instagram. Hulu. Netflix. Amazon Video. Snapchat. ESPN. Vevo. Consumers have more choice (and more control) over media consumption than at any other time in history.

But for marketers, during this significant time of innovation and fragmentation, there really are just two major channels that consume a majority of the video advertising dollars: Facebook and Google. The reality is that there is a duopoly in video advertising today.

The Video Landscape is More Concentrated than You Think

Why is it the case that two services are absorbing as much as 85% of an advertiser’s digital video ad spend? It helps to look at the context: There is a spectrum in video services – subscription models are on one end and ad-supported video on the other. By considering this spectrum, one can see that the video landscape is more concentrated than one may have initially suspected.

Netflix and Amazon (along with Hulu Plus) are the most popular subscription players.

YouTube and Facebook are a Duopoly

When talking about ad supported services, the two juggernauts in the space are YouTube and Facebook/Instagram. YouTube gets the most overall traffic in terms of total video views and overall viewing time. Facebook has demonstrated tremendous growth both in terms of consumer attention as well as marketer spend. For example, in January 2015 Facebook generated on average less than 5% of a marketers’ video viewership. Fast forward to June 2016, and with the right type of campaign execution, Facebook routinely represent more than 40% of a campaign’s total digital video viewership.

Choice is good for the consumer, but what about for marketers? It certainly takes less time to manage fewer vendors and channels, however by concentrating spend with just two properties, are you reaching your audience? Are you engaging them in the right way, at the right time?

The Big Two Fulfill Unique Roles

The “big two” each fill a unique role for consumers: YouTube is really the world’s video archive; it’s where you go when you are searching for a particular video or category of videos. Facebook, on the other hand, has become the way you discover videos that are trending among your friends or the world.

YouTube is better for building up a library of video content about a subject, brand or product. Facebook is better for generating initial momentum about your video in a timely fashion.

The Need for a #3

As useful as these services are, as much as 65% of your audience could be off YouTube and/or Facebook at any given time. Marketers and advertising agencies are looking for an alternative.

Having a clear #3 player in video would benefit marketers, as competition could lead to increased ad innovation, better negotiating leverage and the ability to reach more consumers in new, unique ways.

The Contenders

Many companies are vying to become the third  member of the big three: Twitter, Snapchat, AOL, Yahoo, and others. To be a contender, one must have:

  1. A “captive audience”,
  2. Strong access to an ever-growing trove of video content and
  3. A compelling user experience that drives time in your application.

Additionally, you will need the type of tools that marketers and agencies need to effectively drive returns on your platform.

Based on that criteria, Snapchat and Twitter should be considered leading potential contenders. They both have a tremendous amount of content flowing through the system. Snapchat’s advantage is that the video content is more often being created in-platform. However, while Twitter has traditionally been used mostly as a distribution engine for content, its big push into video and live will help them increase the amount of content published directly on the platform.

In a lot of ways, becoming “#3” is a big driver behind Verizon/AOL pursuing Yahoo. Yahoo brings more audience, content, and advertising technology to AOL. The issue for a combined AOL/Yahoo is that their user experience will be fragmented across many different applications and audiences, using them for multiple purposes.

The battle to become the next leader in video is well underway. It’s not just a battle for the hearts and time of consumers, but for the dollars of marketers as well. Many of the strategic moves in the coming months will be directed at this goal. We can’t wait to see what happens next.

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