Content partners face an increase in YouTube's ad share

This post originally appeared as an insight for Outsell’s customers. Republished with permission.
YouTube has increased the share of revenue it takes form its content parters from 30% to 45%. This may still be cheaper than going independent.
Important details
YouTube is changing the way it shares revenue with its content partners. It’s moving from taking as little as 30% from the ad revenues of (preferred, high-profile) partners to taking 45% of the ad revenue from (nearly) all partners.
The carrot attached to this stick is that partners will be able to keep 100% of revenue above the rate card. So, if a content partner can sell its ads at 150% of YouTube’s rate card, they can equal their current net revenue from ad sales.
YouTube is increasing its share of advertising revenues because…well, because it can. YouTube channels and multi-channel networks need YouTube more than YouTube needs them.
YouTube provides its partners with a reliable, low-maintenance platform for publishing their videos, an opportunity to offload ad sales, an existing social network within which to promote their videos, and a familiar interface for their audience. All of this has tremendous value for channel partners, so it’s not surprising they’re being called upon to share nearly half their ad revenue with YouTube.
YouTube’s revenue split may be a good deal for channels that can charge premium prices for advertising, or sell sponsorships inside their shows. Those channels are the ones that already have strong brands, great relationships with potential sponsors, strong influence with their audiences, and quality dedicated sales forces.
But they’ll need their own video distribution platform if they want a future beyond YouTube. Some MCNs have moved in that direction.
Maker Studios, one of the largest YouTube multi-channel networks, acquired its own distribution platform last summer when it bought Blip, for likely less than $10 million.
Revision3, owned by Discovery Communications, already carries its channels on its own site, in addition to YouTube.
YouTube’s new revenue split is going to split the market further into big channels with strong market presence (Maker, Revision3) and little guys who aren’t ready to cover the overhead of serving their own videos, let alone pay a decent sales force.
There are lessons for everyone in this turn of events:

  • Brands matter: A YouTube celebrity may not be the same thing as real celebrity.
  • Advertising doesn’t sell itself: Even in a programmatic ad buying world, someone has to make the cold calls, and they’ll want to be compensated.
  • Breaking free of ad networks is a key to success: Ad networks can fill gaps in a schedule, but they commoditize advertising.
  • Distributors will get their beaks wet: And they’re going to make long-term planning nearly impossible.

Tremor Video's IPO betrays issues in ad tech value chain

This post originally appeared as an insight for Outsell’s customers. Republished with permission.
Tremor Video’s lackluster IPO is evidence that there are still issues to be resolved in the ad technology market, which creates a short-term opportunity for media.
Important details
Tremor Video has gotten off to a slow start as public company. After Tremor’s investment bankers said they expected “The initial public offering price of the common stock is expected to be between $11.00 and $13.00 per share”, they priced the company’s shares at $10 on Thursday. The stock was selling for $9.00 by the end of the day on Friday.
Other ad technology competitors are waiting for their turn in the market, but few seem to be excited.
The advertising technology business is fragmented (with dozens of named competitors) and multilayered. Trading desks, optimizers, demand-site platforms, sell-side platforms, exchanges, all flavors of networks, yield tools, and other technologies are all attempting to insert themselves into the value chain and keep a share of the value they create.
Outsell’s 2013 B2C Advertising and Marketing Study finds that business-to-consumer advertisers overwhelmingly describe advertising networks and exchanges as their lowest priority investments. Advertisers are more focused on their own sites, events, direct marketing, and social marketing. They are 66% more likely to cite plain-Jane SEO and SEM as an investment priority.
Advertising is still more about Don Draper and Roger Sterling than Wernher von Braun. While technology can create value by incrementally lowering cost-per-whatever, it isn’t delivering breakthroughs. The human touch in marketing and sales still matters.
In Outsell’s opinion, Agencies will continue to control a solid (changed from sold – think it was a typo) share of ad buying, as advertisers focus on what they do best. Agencies, as volume buyers, are in the best position to efficiently aggregate the marginal gains of ad tech’s improved targeting and buying efficiency.
Ad technology companies undoubtedly add value, but it’s marginal and surprisingly difficult to measure. This is especially true in the real world, where variations in product, creative, media, and context defy A/B and multivariate testing.
Consolidation continues to loom as the fate of the ad tech industry. Fragmentation and difficulty in differentiation call for integration. Recent acquisitions, as well as Google’s continued domination, suggest that vertical and horizontal integration will simplify the ad buying process in the long run. But the long run has been surprisingly long in coming.
Media have gotten a reprieve, not a pardon. Despite these complications, ad networks and network-driven metrics continue to influence the ad-buying process. Meanwhile, media sites deliver more third-party trackers than ads. This moment of confusion is an opportunity and a warning to increase the value of media beyond their ability to serve ad networks before it’s too late.
Successful strategies are likely to include some combination of products — sponsorships, subscriptions, mobile, memberships, events, vertical networks, digital products — tailored to a media property’s audience and market. Rapid product development and delivery are essential to getting off the ad network treadmill.

Why Google's radio play is an improvement

I’ve been skeptically bored by Google’s dabbling in brokering print advertising. There are too many reasons why it seemed like a poor fit. The lead times on print are excruciatingly long by Twenty-first Century standards, publishers hate brokered advertising, publishers who don’t have enough ads can print a smaller product to maintain their ad/edit ratio, and most publishers don’t want advertisers to know what a small percentage of the rate card most of their competitors are paying. Ad rates could collapse like a house of cards if they were exposed the way that Google exposes its own rates.
Radio (and TV) advertising presents few of these problems. The biggest advantage to Google-style ad sales for broadcasters is that a minute of airtime that goes unmonetized will never be monetized. That’s why unsold airtime is already brokered. This will be a watershed year in local advertising for Google, Yahoo, MSN, and host of smaller players. Broadcasters are an important element in local advertising. And, while publishers are still handcrafting their products, broadcasting is an increasingly automated business.
There are a million ways in which Google could fail. But the upside, both in inherent potential and in the potential to outflank their competitors, is enormous. That’s reflected in the way the deal is structured, with a billion dollar payoff for dMarc if they pull it off.
Originally published on my blog at JupiterResearch.