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The mobile video monetization challenge: the technology barriers are (almost) gone, so when will mobile video delivery be profitable?

Monetization is a term we throw around the industry almost as frequently as adaptive bitrate, any screen, or streaming itself. As one respondent on a recent Streaming Media survey put it, the definition of success when it comes to monetization is "revenue greater than CDN costs."

Nowhere is the terminology of monetization more prevalent than in the world of mobile video and mobile advertising delivery.

Or as another respondent to the same survey put it, the hope in mobile delivery of premium content is to move beyond "afford[ing] to deliver the content, and at least break even with ad revenue generated."

But are we aiming at the right target? And is our target, as an industry, even on the radar of those who make the hard choices about how to spend their advertising dollars--or their clients' dollars--when it comes to mobile delivery?

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The purpose of this article is to expand beyond the technical discussions common in the streaming industry and move toward a conversation in the language advertisers and advertising agencies use to discuss how they view mobile video advertising and monetization.

CPMs Down, but Trending Back Up

CPM is a view-based measurement that stands for cost per thousand impressions (the initialism stands for "cost per mille"), and CPM rates for video advertising have fluctuated widely through the years. In the economic heyday of 2008, CPMs were $45 or higher, versus $15 for standard web banners, whereas more recently video CPMs have dropped down into the high single-digit range.

"The average CPM for preroll on mobile is around $12.50," says Irfon Watkins, founder and CEO of Coull. "CPM is the dominant model but buyers are increasingly looking to more specific performance metrics to guide their campaign decisions."

Matt Smith, chief evangelist at Anvato, addressed the key challenges facing mobile advertisers in a recent IP&TV News article on monetization (go2sm.com/smith).

In an interview with Streaming Media, Smith provided insight into CPMs for mobile-based video advertising, saying that the CPM rates are climbing now that technological barriers are being removed.

"I've seen customers with CPMs as high as $25, even on local station content," Smith says.

Smith adds that these rates are "the result of investment in the technology that powers their brand" for both broadcasters and advertisers. For a broadcaster, the technology is important but secondary to the ongoing concern: compelling content.

"In order for an entity to recognize revenue from their content, they need the audience [size] to support a CPM model," Smith says. "This means offering compelling, consistent con-tent--like a newscast or entertainment-based programming--that is of high quality and is delivered well and without incident."

One of Anvato's customers that fits this mold is Hearst Television, and Smith says it "[does] this exceedingly well." In addition, he says there's a model that broadcasters and other entities that might be building an audience need to consider.

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"For those still in the process of building audience, I see them implement a sponsored model to cover the cost of investment," Smith says. A sponsorship model, he says, isn't the end game but a means to an end, and can itself often drive a profit.

Smith's $25 high-end CPM rate is in line with a rate guide published by MonetizePros (go2sm.com/videocpm) that splits out direct sales versus ad network averages. According to the mid-2014 guide, ad networks range in CPM from less than $1 to around $5, with an average of about $3. Direct sales, the kind of model Smith is referring to, ranges from $18 to $30, with an average of $24.

In the network model too the ad network itself takes a cut of the CPM rate, often around half, although that percentage is trending downwards.

But Watkins warns on the performance aspect of CPM pricing these days. "Performance doesn't mean sales, as mobile video is still really a brand advertising channel, but metrics like completion rates are becoming increasingly important in determining audience engagement."

Paul Verna, an analyst for eMarketer, expands on the topic of the impact of mobile video in a recent study focused on tablet and smartphone video viewing (go2sm.com/emarketer).

Verna argues that video viewers using smartphones and tablets are "poised to continue increasing at a faster rate than the adoption curve of those devices." In other words, we are headed--again, some might say, citing past desktop video growth--toward a model with more viewers than devices.

Verna cites the ability to roundtrip, or switch between screens for on-demand content, as a primary driver in the trend toward mobile viewing. Yet, he also says "screen availability" might be a byproduct of ease of access, and a potential driving factor for advertising.

"As viewing becomes more individualized, people customize their experiences according to whatever screen is available at the moment," Verna says, adding later in the report that a "major takeaway of this report is less about tailoring content to a specific target group than about broadening one's existing audience base via mobile devices."

Smartphone or Tablet? Or Both?

When it comes to content consumption, Smith says the delivery platform is critical to the overall decision about whether smartphones or tablets are in the lead.

For ad agencies and advertisers, one question being asked is the level of granularity one can expect from an ad-insertion solution.

"This depends on delivery platform," Smith says. "For iOS, Android, and desktop, we know where the user is and what platform they are on. Further, each user maintains a unique connection with the cloud, enabling content and advertising delivery on a peruser basis."

In other words, Smith notes, the framework for this level of granularity is "ready and working today" but has yet to see strong adoption.

"The ad world needs to embrace and utilize this capability," Smith says. "We can target users much more effectively and intimately on today's platforms, providing a much more unique ad experience than ever before."

Watkins agrees that it's about the technology, but adds that it's also about the data underlying the decision process.

"Different demand-side platforms (DSPs) use different data sources to model campaigns," Watkins says. "Some are more transparent about how they've arrived at your target audience than others.

"Then you've got other technology vendors in the advertising chain who are all adding layers of data to the mix: contextual data about the content the advert is being placed against, brand safety, etc.," Watkins adds. "There's an abundance of data to target against."

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Those increasingly detailed, or perhaps complex, levels of data can be beneficial if used correctly.

"An advertiser's first-party data is the most valuable of all," Watkins says. "So in terms of guarantees it's about finding technology partners that can deliver against clearly defined advertiser goals."

On the premium content front, especially when it comes to OTT content delivery, companies such as Netflix understood this trend a few years ago. Once Netflix added profiles, which allow as many as five different users on a single account to maintain their own viewing histories--and allow Netflix to better recommend content to disparate users on a single viewing device, such as an Apple TV or Roku OTT box--the amount of video consumption grew dramatically.

We're not there yet in the tablet viewing pattern, as on most tablets video delivery follows the pattern of smartphone video consumption, which assumes one user per device. But, let's say we actually get to that level of granularity. What are the implications?

One implication, which Verna highlighted in the eMarketer study, is a radical shift of not just advertising but actual content consumption--be it live linear or on-demand content--to mobile devices.

Parks Associates has also noticed this trend. "Forty-four percent of U.S. tablet owners increased their time spent watching video on this device over the past year," Brett Sappington, director of research at Parks Associates said in early 2013, explaining why there's interest in moving the TV anywhere needle toward live-linear mobile viewing, among service providers and content owners alike.

That mobile viewing trend continued to grow throughout 2013 and 2014. The advent of new carriage agreements that broaden the scope of where live-linear television content can be consumed--TV Everywhere or TV Anywhere--should have a significant impact in 2015.

eMarketer's findings show that smartphone viewers lag behind tablet viewers in terms of the amount of content they consume, though the study also cites a Consumer Electronics Association report from June 2014 that shows the opposite.

Another recent study, this one from the Interactive Advertising Bureau, also shows that smartphone viewing (46%) outpaces tablet viewing (41%) when it comes to self-reported responses to a question about which devices are used to view original digital video (go2sm.com/iab).

"[Our] metrics show tablets ahead of smartphones with regard to video usage," Verna says, comparing these reports to eMarketer's findings. "The disparity could stem from different methodologies, survey samples, frequencies of use and interpretations of terms such as 'digital video.'"

At Home or on the Road?

Regardless of which mobile platform is used, one trend is clear: We are in an era in which mobile viewing is outpacing desktop viewing, at least in terms of growth, and it might soon eclipse the desktop in terms of actual video consumption. However, a curious parallel pattern is emerging, in that we're not necessarily leaving home to use our mobile devices to consume content.

For instance, a broadcast media executive notes in the eMarketer study that almost 90% of mobile streams from his company's content are viewed on Wi-Fi rather than through cellular data.

While it's true that newer 4G LTE networks are quite capable of similar quality to Wi-Fi connections, the cost of media consumption on a mobile device could enter in to the equation. Or it may just be that the device at hand, whether at home or on the road, is the one that captures the eyeballs.

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The day we wrapped up this article--a week after the iPhone 6 and its "phablet" big brother, the iPhone 6 Plus, launched--one of the major 4G service providers in the United States opted not to throttle its unlimited customers.

"At a time of ever-increasing mobile broadband data usage, we not only take pride in the way we manage our network resources, but also take seriously our responsibility to deliver exceptional mobile service to every customer," Verizon Wireless said in a statement in which it used the term "network optimization" to refer to its plans to throttle unlimited data customers at peak demand hours.

"We've decided not to move forward with the planned implementation of network optimization for 4G LTE customers on unlimited plans," Verizon Wireless said. "Exceptional network service will always be our priority and we re-main committed to working closely with industry stakeholders to manage broadband issues."

The industry stakeholder in this case is most likely the FCC, whose chairman sent a letter to Verizon Wireless after it announced its intent to enforce "network optimization" on customers whose contracts stated they were granted unlimited data consumption for a premium price.

All that brings us back around to the mobile media delivery explosion. If mobile content consumption is fair game on any device, which device will consumers choose?

During our second-screen application survey in mid-2014, we found that most respondents varied their decision based on the type of content, sometimes bypassing the most accessible screen.

In the eMarketer report, one executive told Verna that ads will continue to be delivered across as many platforms as viewers can access for two primary reasons: Not only have consumption habits changed, but users have also become more comfortable with using a variety of mobile devices.

There's another aspect to this home or away question: contractual ability to move beyond the confines of a home to take your TV viewing anywhere. Another recent Verizon announcement highlights this point.

Verizon offers FiOS, a fiber-to-the-home triple-play service for television, internet, and telephone. Under Verizon's carriage agreement with Viacom, FiOS customers were allowed to view Viacom content on a mobile device, using the FiOS app, provided the mobile device was on the same network as the FiOS internet/television service.

As of early October though, Verizon had inked a new carriage deal with Viacom, allowing FiOS app users to not only view the live and on-demand Viacom content in their homes but wherever they are in the United States.

"Disruption in the TV marketplace is happening," says Ben Grad, Verizon's director of content strategy and acquisition, noting that consumers have requested the ability to watch TV anywhere. "Verizon wants to reach agreements with content providers like Viacom that reflect that reality and give people what they want."

What's most interesting for the mobile video advertiser is the inclusion of this line in the Verizon press release: "Verizon FiOS will enable dynamic ad insertion in all Viacom TV Everywhere and VOD content."

Sudden Breaks and Breakdowns

One final area I asked Smith and Watkins about was the potential rise of ad blocking, if server-side ad stitching is not implemented and we continue to rely on client-side ad insertion.

Watkins says that, while the trend is there in static ad blocking, it may not appear in the form of video-advertising ad blocking.

"Ad blocking is a big concern for the ad industry in general," says Watkins. "Around half of male millennials in the U.S. have an ad blocker installed, and this suggests complete disengagement from advertising, which let's face it, is the lifeblood of the internet."

"If these savvy young users have rejected desktop advertising, the likelihood of them embracing it on mobile devices, which are far more personal, is slim," Watkins says. "The pressure is on the advertising industry to start delivering advertising that's relevant to modern consumers and their online experiences."

As part of his answer, Smith moved the conversation beyond ad blocking and into one of the areas that vexes even broadcasters: how to handle ad breaks in live events, such as sporting events.

"I'm not sure we will see 'ad blockers' per se," Smith says, "but rather experiences where users access content in a variety of ways where the content is 'paid for,' be it ad supported, subscription or otherwise. We don't provide for ad blocking on television, so why would we do that here? That said, I think models will emerge where the viewer can access content and have it monetized in a few different ways."

Think about it in the context of a major sports event, Smith says. "When server-side ad insertion is done properly, you're placing discontinuity tags in the playlist and starting new segments," he says, "[meaning that] duration doesn't necessarily have to be passed, and the splice could happen without uniformity. Think March Madness with sudden breaks."

This kind of scenario is a challenge even for traditional broadcasters, but mobile advertising for these types of high-profile live events will be set apart by the amount of engagement that mobile video advertisements can drive.

Looking Back to Look Forward

One mantra we heard from several executives is that content is much more screenagnostic now than it was in the past, as recently as 2012.

To get a better sense of how things have changed, we delved into a few interviews from that time period. One point made then, as it is now, is that mobile video advertising has a much broader mission than just brand awareness.

"Traditional TV advertising is limited to pure branding, while interactive mobile video ads can deliver branding, consumer engagement and sales," an executive from Rhythm NewMedia said in a Mobile Marketer interview.

Another good reminder came from a 2012 interview with Michael Burke, a co-founder of New York-based AppsSavvy.

"With mobile it is key that video is not interrupting the experience, but rather complementing it," Burke said. "The call-to-action is [possible if] presented at the time that someone is in the mindset to complete such an activity."

Burke emphasized that point again this past October: "The functions around tracking views, measuring interactions, and offering a variety of calls to action are all table stakes at this point," Burke said. "As a mobile advertising business, if you're not offering this at this point, you're behind in the game."

Burke went on to say that the key to success is ensuring the video is delivered at a time that people are going to be receptive to it. "In other words, it's about offering video that compliments the experience rather than detracting from it and aligning the content with the audience and the context of the site in which it's delivered."

The next year will present a number of significant opportunities for mobile video advertising, from the new carriage agreements to advances in technologies surrounding the ease of distribution, such as "one URL, any device" technologies.

Yet the key to monetizing via mobile video ads is to do precisely what Burke advises: Engage the viewer, in the proper context, rather than shoving yet another advertisement at her in hopes of building brand awareness. Successful ad networks will find ways to measure this, offering savvy marketers a chance to further engage at a highly granular level, resulting in even higher CPMs.

Tim Siglin (writer@braintrustdigital.com) writes and consults on digital media business models and go-to market strategies. He is chairman of Braintrust Digital, a digital media production company, and co-founder of consulting firm Transitions, Inc.

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Author:Siglin, Tim
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Date:Jan 1, 2015
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