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InContext / An inside look at the business of digital content

Will “out-stream” video ad performance last?

June 23, 2016 | By Mark Glaser, Founder and Publisher – MediaShift @mediatwit

We’ve seen it so many times before: A new ad format catches people’s eyes, they pay attention and wonder what it is. Then they go back to ignoring it. It’s happened before with rich media ads, interstitials and so many others. Now it’s time for “out-stream” video ads that show up on web or mobile pages, within text, and just start playing.

The format sells itself as less invasive than pre-roll or mid-roll video ads, guarantees 100% viewability, and promises to be much more scalable than existing offerings. They only play when the user scrolls to the portion of the website where the advertising is embedded and lingers on that area for a specific amount of time. It seems like the ads work better than other video ads for now, but how long will that last?

Teads and Virool lead the charge
With the demand for online video ads rising, yet a dearth inventory available with most publishers, ad-tech startups Virool and Teads have established themselves as pioneers in out-stream advertising. “Both companies have similar sales models,” the Wall Street Journal’s Mike Shields reported. “They sell ads to marketers directly and share revenue with publishers, or they allow publishers to sell the ads themselves, collecting a few dollars for each ad that gets delivered. Ad buyers can also buy these ads via automated software.”

Teads has raised $50 million in venture capital since it was founded in 2011 and reported 2015 revenue of $150 million. Virool raised $6.62 million in seed funding, and $12 million in its recent Series A financing. Collectively, their clients include top web publishers such as the Washington Post, Le Monde, USA Today and Mashable.

“Traditional publishers still have massive audiences flocking to their articles,” Sonja Kristiansen, Virool’s head of publisher development, told the Journal. “So what we are doing is unlocking video real estate on those pages.” She said that publishers are selling these out-stream ads at rates similar to in-stream ads on YouTube and Hulu — “$20 to $45 per thousand consumers reached.”

Beating other mobile ads
Virool ads are also reportedly garnering ad rates “four times higher than typical mobile ads and 10 times higher than desktop ads,” Shields reported.

In-stream advertising on social media has already conditioned users to expect these sorts of ads, its proponents say, though out-stream advertising is not the same thing. “What I do not consider to be out-stream are placements within a feed—so Facebook, Instagram and BuzzFeed,” said Mark Book, VP of Digitas Studios. “I would consider this to be pure native in-feed advertising.”

And users engage with out-stream ads differently than they do ads on social streams, according to a recent study by Teads. Among its findings? Fifty percent of users surveyed scroll more on social media feeds and take in more content, but engage less with ads. Yet “23% of users were more likely to read content within premium articles than in social feeds,” as Adweek’s Marty Swant reported. Furthermore, “users spent 24% more time watching video ads within premium content on websites than they did watching video ads in social feeds.”

A problem fitting in
But all is not rosy with out-stream advertising. Making these ads fit organically with its surrounding content is a challenge. Ensuring consumers don’t find these ads annoying is also an issue — no one likes video ads that take up a lot of bandwith, for instance. And since these ads play without sound at first, it’ll also take some convincing to gauge their value compared to other video ads.

Although certain alliances in the past year point to the growth of out-stream advertising — Rubicon Project has partnered with Virool, for example, and AppNexus has connected with Teads — some suspect that programmatic scaling will lead to bundles that include banner and pre-roll advertising anyway.

Still, both agencies and publishing professionals are optimistic. Seventy-seven percent of agencies worldwide, 70% of advertisers and 69% of media and publishing professionals have said that out-stream video ads will be important to the future of their advertising portfolios, according to a 2015 report from eMarketer.

Teads has also announced a new accreditation program for media buyers so they know the ins and outs of out-stream advertising. If marketers and publishers make sure they’re following their own insights and not just those of companies looking to champion out-stream, it’s safe to say it has a prominent place in the business — for now.

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