Let’s talk about money.  Insight from a recent McKinsey study suggests digital ad-spend will rise to nearly USD$250,000 million by 2018 – matching that of ad-spend in television. What’s more, spend in online video within this number continues to grow steadily.

On the face of it, this is good news for those broadcasters who have already launched or are planning to launch online video services. Tapping into the growing online video advertising market could be viewed as a way of hedging towards the risk of decline in linear television advertising and viewership.

However, Ericsson research into the online video chain estimates that only 25% of an advertiser’s budget actually reaches broadcasters. Only 25%!

So while we all (Ericsson included) talk about creating great content to attract audiences, advertising effectiveness, and more focused, personalized approaches to advertising, there appears to be one more way of increasing advertising profitability – addressing the inefficiencies in the value chain.  The point here is that you shouldn’t stop what you are doing with regards to attracting new revenue streams, but probably you should fix the leaks in your pipeline as well.

Let’s have a look at the numbers once again. Our research showed that 35% of ad spend goes to campaign management; 10% goes to the demand side platforms (responsible for aggregated media buying); 15% is paid to ad networks; 10% to supply side platforms (responsible for ad inventory aggregation); and 5% to yield optimization. And these are rough estimates that exclude the various niche players responsible for analytics, creative optimization, audience analysis etc. In each of these groups, there are tens, if not hundreds of companies biting chunks out of the advertising pie. Obviously, there’s a place under the sun for everyone but consider this: who has the best insights about who is viewing what video content, when and on what device – which is really valuable to advertisers? And why is this knowledge not used to deliver benefit to the advertisers in a more efficient (and profitable for almost everyone) way?

First of all, to really show the value of your viewership to advertisers, there needs to be an analytics platform in place, which allows data to be sliced in the most useful ways, showing granular detail for each particular viewer, while presenting joined up insights coherently. And while many broadcasters are active in the analytics area, few have been able to reap the benefits of the insights across the whole organization.

Moreover, many of the processes in the advertising value chain can benefit from automation and optimization. A programmatic advertising platform allows broadcasters to ensure that top brand advertisers are filling their premium advertising inventory. Such a platform gives advertisers direct access to data at a very granular level and enables them to bid and set prices in real time for the viewers they want. So, with a single platform that aggregates media buying, inventory and provides yield optimization and analytics, broadcasters can capture roughly at least 20% more of advertisers’ spend. And that’s not counting the increased value of the ads. Not bad. Not bad at all.

Of course, adding yet another platform to your organization won’t solve all your problems, especially if it is not well integrated with other systems. But it will leave you more room to focus on what is important for you – creating great content and greater viewer engagement.

Stan Dimitrov, Product Marketing Manager, Online Video Services