LAS VEGAS--It's happening: Online video companies are beginning to think about the day when revenue from digital video ads surpasses that of traditional television advertising. And while the sheer amount of money being spent on traditional TV--more than $68.5 billion in 2014 compared to about $6 billion for online video--makes that seem a long way off, some believe it's closer than many think.
Panelists at an OTT-focused session here at the National Association of Broadcasters trade show felt that the revenue graph would cross paths in five to seven years.
The question was asked by moderator Colin Dixon of nScreenMedia during "The Evolution of OTT's Hybrid Monetization Models," which looked at how online video providers, content creators and others are generating revenues from their content.
Shay David, co-founder and CRO at Kaltura, set the bar when the question on ad revenues was put to him. "If we're going to go with both ad and subscription I'd say, by 2020," David said, though he admitted it was something of a guess.
TV4 Entertainment founder Jon Cody felt that OTT ad revenue would surpass broadcast within about five to seven years, "at best." He explained that the television industry's upfronts in a few weeks will bring in at least $9 billion in pre-committed ad spend, "and that's before you get to the cable side."
Tom Morgan, founder and CEO of Net2TV, pointed out that that definition of OTT will have completely changed by the time that revenue shift happens. "By the time that occurs, the definition of OTT will disappear. Because Netflix and Hulu will be on cable and cable networks will be on OTT."
Something to which Frank Besteiro, VP of business development and partnerships for AOL On, agreed. "What OTT is going to look like five years from now will be quite different from what we see today. I think everyone knows that traditional players tend to stick with what they know from the past and they're hesitant to take on (new things). ... However some players like HBO have done some amazing things with OTT and are starting to change the landscape."
Brian Dutt, director of advisory services at FreeWheel, felt the television ad hurdle was a pretty big leap. Chatting with FierceOnlineVideo after the panel session, he noted that television ad spend was still a sheer behemoth, while digital video ads see nowhere near as much revenue. They're also still plagued by issues like click fraud and poor or fraudulent placement.
What will it take to jump-start the kind of spending climb needed to pass TV ad revenues? Besides solving fraud issues, key areas include more standardized audience measurement, and frankly, a bigger audience. "Online video doesn't come near television when it comes to audience size," he said.
And while firms like Nielsen are beginning to develop what they hope will be reliable cross-platform measurement, tracking online audiences in a standard way just hasn't yet happened. Dutt said that advertisers won't be confident enough to invest significant money into online video ads until the measurement situation improves.
"I think the landscape is changing fast," AOL's Besteiro told FierceOnlineVideo following the panel. "Also, there's traditional content providers who don't realize that they have a direct line of sight to the consumer. I think that's going to really push the way we actually view OTT. ...The discoverability issue that we see right now is going to be forced to change because, I think we all know the traditional studios are not going to pay millions of dollars to get content on something that somebody is maybe going to look at. Certainly there's a change coming, but the question is when."
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