Ad Buyers Are Poised To Shift 10% Of Their TV Budgets To Digital Video: Report

Ad Buyers Are Poised To Shift 10% Of Their TV Budgets To Digital Video: Report

There’s worrisome news for TV networks this morning from AOL, one of the companies trying to eat their lunch.

Ad buyers are shifting about 10% of their TV budgets to digital video platforms, the Verizon-owned digital company says in its latest State of the Video Industry report, which is based on a survey of 300 brands, agencies and publishers.

Digital video ad spending in in the U.S. grew 42% over the last year to $7.46 billion, and is expected to rise to more than $13 billion by 2019.

“That’s a phenomenal stat,” AOL President Bob Lord said at presentation to unveil the report. But it’s “uncharted territory for advertisers…We have a challenge as an industry to catch up with that.”

Among the problems: Advertisers still don’t have common metrics to measure digital audiences. And there’s too much junky dgital programming that they don’t want to associate with, and not enough so-called premium content.

Still, about half of the buyers in the survey who increased their spending on digital took dollars away from traditional broadcast and cable TV.

“Brands and agencies are looking to digital to address the need for device-agnostic video consumption, as well as explore alternatives to the cost of TV advertising, which has increased 29% since 2012,” the report says.

Mobile devices are the hottest targets at a time when 67% of millennials live in households that don’t have a telephone landline. AOL saw 18% growth in mobile video budgets this year, and “we expect that number to rise significantly over the next couple of years,” says SVP-Client Services & Operations JoAnna Foyle.

AOL also is optimistic about one of its favorite opportunities, unfortunately known as “programmatic” — a jargon term for ads that are bought and sold by computers in instant automated auctions.

About 42% of digital video inventory is currently sold programatically. Indeed, 91% of the buyers surveyed have bought digital video that way, up from 53% three years ago — and 67% say that they’ll increase their programmatic video buying over the next 12 months.

What does that mean for television’s annual upfront sale season, which is where networks typically sell the bulk of their inventory?

“The upfronts will always exist in some form,” says Amplifi Managing Director Michael Law. But advertisers are less willing to be stampeded into making year-long commitments. “This year’s upfront was 12 months long, 365 days.” And while as much as 80% of his sales used to be done between May 15 and Memorial Day, this year “we closed the majority of our deals in August.”

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