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Ooyala White Paper: the different factors affecting programmatic video growth in the USA and Europe

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A new White Paper released by ad-tech company Ooyala last month reveals wide disparities between the growth of ‘programmatic’ video – defined as automated, data-driven video ad trading – in different territories.

Ooyala points out that according to data from the Internet Advertising Bureau (IAB), programmatic will take a 41% share of US digital video ad spending in 2016 – while in the UK (Europe’s top programmatic market), programmatic digital video currently makes up 32% of digital video net ad revenues, according to research firm IHS.

This figure contrasts with Germany, which despite being the largest advertising market in Europe overall, is seeing only 13% of it digital video net ad revenues going to programmatic.

Using survey information from global strategy and research consultancy MTM, which interviewed hundreds of ad industry executives across the USA, UK, Germany, France and Sweden, Ooyala identified four separate factors affecting programmatic growth in different markets: shifts in video consumption; broadband availability; data and privacy regulation; and TV/video ad market convergence.

With respect to video consumption, executives pointed out that consumers in France and Germany were shifting to multi-screen and on-demand viewing more slowly than in other territories, putting a brake on programmatic video development. These two countries, as well as Sweden, all lag in overall daily online hours compared to the UK and the USA, MTM found.

Local factors are also likely to affect programmatic growth. In the case of Sweden, for instance, MTM found that millennials were shifting away from linear TV viewing faster than in all the other markets, so Ooyala expects this territory to catch up with the UK and USA more rapidly when it comes to programmatic.

Germany, by contrast, features a small number of broadcasters who dominate the video ad market through powerful ad sales houses able to maintain direct ad sales, slowing down programmatic growth.

Fast Internet access was the second major factor Ooyala identified as influencing programmatic growth.

For instance, Germany exhibits low broadband penetration, which exerts a negative influence, since it prevents consumer experimentation with and adoption of digital video – inhibiting the growth of multiscreen viewing.

France’s position on broadband is slightly better than Germany’s, and it also enjoys high IPTV penetration, which should benefit programmatic growth – but Ooyala cites McKinsey research which shows a high level of cultural resistance to digital services: only 65% of French companies have a website, versus 89% of Swedish companies.

This contrasts with Sweden’s situation, which enjoys the highest penetration of smartphones and fixed broadband across all the five territories MTM surveyed, as well as the highest growth-rate in its online video market – thus demonstrating the highest growth-potential for programmatic.

Ooyala notes that its own data from May 2016 shows that its customer base in Sweden experienced a 500%+ growth-rate in programmatic revenues between January and May.

The third factor Ooyala identifies is data, privacy and regulation – which the MTM survey showed were regarded as potential barriers to growth by executives interviewed. Ooyala notes that consumers are increasingly concerned about misuse of personal data through more personalised ads – noting that in May 2016 its Unlock technology platform unlocked over 46m blocked ad impressions in Germany alone.

Germany has particularly strict privacy laws, which hamper how personal data can be used, something that has a direct impact on growth of programmatic video. Ooyala believes the situation there could be exacerbated by the passage of the European Commission’s new General Data Protection Regulation (GDPR), which will become law in the EU in 2018.

The fourth factor affecting programmatic video growth – TV and video ad market convergence – is particularly evidenced in the UK and US market, Ooyala says, driven by the need to track and measure audiences moving to digital platforms, a phenomenon which. is boosting demand for data-driven approaches.

The growth of addressable TV ad delivery in both territories is another factor that should trigger advances in programmatic video there, says Ooyala.

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