OTT content is now viewed more on TV screens (connected TVs or CTVs) than smartphones. From an advertising perspective, that means larger and more valuable video. Large digital video (greater than 400 pixels wide) has always translated to higher value. However, the biggest determining factor of worth is determined by how its sold: direct or programmatic.

By and large, connected TV (CTV) inventory is sold at a higher value than digital video. In the world of video advertising, the television screen represents the pinnacle of value. With it comes the notion of a captivated audience in their living room, and true scarcity of time and inventory.

Like Cable TV, the OTT video landscape viewed on CTV and other connected devices is highly concentrated across the “Big 4.”  The largest amount of monetizable minutes reside on Hulu and YouTube, along with Netflix (which remains ad free together with Amazon Prime Video—for now). The remaining three out of ten minutes in OTT are spent with high quality publishers and broadcasters, such as TV network brands. These create a direct sale value of twenty-something CPMs. These prices are in close proximity to traditional/linear TV rates.

The price of programmatic

As of now, publishers and virtual Multichannel Video Programming Distributor (vMVPDs), including established providers like Dish and startup vMVPDs, sell a predominate amount of OTT ad inventory programmatically, most often through private marketplaces (PMPs). Here, the average price point is in the teens, with CPMs maxing out in the mid-range of around $15.

There are a few reasons media brands are leaning toward programmatic rather than direct sales. For starters, many organizations lack direct sales teams. Furthermore, OTT is nascent. Thus, the industry needs to contend with tracking on a household level where it is getting harder to obtain IP addresses to map out connected devices. Then there’s the international reality of GDPR, which classifies IP addresses as personally-identifiable information (PII).

All in all, it’s harder to correlate traffic from OTT ads. It is also difficult to measure viewability with server-side ad insertion (SSAI), which stitches ads into content streams, especially when sold programmatically. And then there’s the issue of fraud. A quarter of all CTV impressions this year were fraudulent (never seen) according to Pixalate.

The contentious issue of fraud among broader tracking issues are keeping programmatic pricing weighed down. Where, with the employment of programmatic monetization the most a publisher can expect to optimize CPM rates is by 10-15% above the current average programmatic video price point keeping overall value in the teens CPM.

Direct sales proposition

However, by selling directly, a publisher can more than double ROI to 30-40% or higher price points above $20 CPM. These price points are well above the possible rate optimization that can be made accessible through programmatic means.

So, looking ahead to 2019 with the continuing expansion of OTT traffic and monetization opportunity, it is a good time to reconsider selling directly. This means assembling or training existing digital sales teams to sell your emerging OTT inventory, which is worth its weight in video gold. In a premium video medium with true scarcity, the future will be directly sold.