Tuesday August 2nd || by John Reyes

To satisfy advertiser demand for video ad inventory and compensate for limited pre-roll inventory, more publishers are offering out-stream units, which are video ads served outside of video content. Yoav Naveh, co-founder and CEO of ConvertMedia (now VP of Video at Taboola), spoke to eMarketer’s Cathy Boyle about the growing supply and demand for out-stream video ads and the factors that influence out-stream video CPMs.

eMarketer: How would you describe the state of out-stream video?

Y. Naveh: A lot of the demand for video in Q1 2015 was not necessarily advertisers looking specifically for outstream, but the demand for video in general is making its way through to outstream units. However, there isn’t enough traditional pre-roll inventory available for advertisers to run their ads. They’re also looking for a cheaper solution that performs for them. That’s the promise of out-stream. It’s a solution that scales.

eMarketer: What factors will influence the price of out-stream video units over the next year?

Y. Naveh: Multiple things are happening. Demand-side platforms (DSPs) are starting to recognize and adopt outstream formats. We expect the demand coming through DSPs to increase. This year is also a special year due to the Olympics and the (US presidential) election. We expect those events to contribute to CPMs and to fill rates.
Outstream prices will likely be positioned somewhere between in-banner video and pre-roll. They won’t beat the price of pre-roll in most cases, but prices will be higher than what in-banner video is sold for today.

eMarketer: What advice do you give publishers that are considering adding out-stream video to their ad offerings?

Y. Naveh: We encourage all publishers to focus on high CPMs for out-stream units. In other words, show fewer ads but make more money for these ads. The biggest problem for publishers is moving from the mindset of having fixed real estate with fixed ad spots that they have to fill. Out-stream allows publishers to control the ad volume. They decide when to expand it and whether to expand by offering a high-impact video interstitial or a video at the top or bottom of an article. They should be strategic about how they control this inventory—that’s how they can control pricing. They should not start selling their most impactful out-stream units at any price just because there’s volume of out-stream inventory in the market.

eMarketer: What other factors should publishers consider when adding and setting the pricing floor for out-stream video units?

Y. Naveh: If a publisher decides they’re willing to embed video on a non-video page that’ll breakthrough the content and run in front of the user, they have a lot of options in how to do that. There are a lot of different formats to consider and within each format, a lot of different experiences to offer. These parameters are important for pricing.

Pricing has always been dictated by what the advertiser is willing to pay, but it also has to be dictated by the effect that these ads will have on the user experience. Publishers should have and analyze that user experience data. When platforms show publishers data about ad revenue and CPMs, they typically look at the last seven days by vendor.

Nobody’s showing a publisher how ads affect their bounce rate or how much the type of ad affects the time users spent on site or the load time. Publishers should look at those metrics as well. They might be willing to show a high-impact intrusive ad, but they’ll have to cap the frequency and therefore charge a high CPM for it. The user experience must be a parameter that publishers look at when they’re deciding the price of running out-stream video ads.

Interview conducted by Catherine Boyle on May 13, 2016.

John Reyes