A survey of 300 advertisers and agencies commissioned by video ad platform BrightRoll and Canada's IAB suggests that 2013 is the "breakout year" for that country's video marketplace. Spending on digital video is up 42% from 2012, and 41% of Canadian agencies expect to spend "half or more of their video-related ad budgets on programmatic buying over the course of this year."
"The Canadian video ad market is catching up to the US market more quickly than we had thought," said BrightRoll CEO Tod Sacerdoti in an interview with AdExchanger. "The reason is twofold: we finally got over the hurdle of 'effectiveness.' Secondly, there's the acceptance of programmatic, which reflects what's already been happening in the US."
In Canada, BrightRoll said advertisers spent $125 million (in US figures) on video advertising in 2012 – a 75% increase from 2011 – and will spend $177 million in 2013.
BrightRoll wants to get marketers comfortable with the idea of programmatic video for brand awareness campaigns, not just direct response and real-time bidding. Sacerdoti makes a point about BrightRoll "always being 100% focused on branding." The six-year-old San Francisco company entered the programmatic space three years ago with the BrightRoll Exchange.
"The folks who are heavily invested in the programmatic side of the system have been growing 100%-plus for the last year," Sacerdoti said. "Meanwhile, the ones who are still on the ad network side have been growing more slowly."
The company is still primarily focused on the US programmatic video market, but as other markets like Canada and western Europe mature, BrightRoll plans to double down there as well over the course of the year. The company's global headcount is now 250, twice what it was last year and more than three times what it was when it started its video ad exchange business in 2010.
As a private company, BrightRoll doesn't release revenue figures, but Sacerdoti did say that the company was seeing spending increases higher than the roughly 40% rise in video ad spending projected this year by eMarketer, ZenithOptimedia, Magna and others. He said much of the demand comes from TV buyers.
"It's rare to see a $1 million opportunity come across our desk without someone from TV involved," he said. "That's not to say the growth is all coming from TV budgets. Far from it. We see a healthy amount of budgets shifting to online video from general display, print, radio and outdoor. I'm hesitant to say that TV is losing a vast amount of money to online. Chunks of dollars are not falling from the TV iceberg, but that doesn't have to happen for us to be successful anyway."
So if TV is not the big driver, what is? Sacerdoti points to the wide adoption of Nielsen's Online Campaign Ratings and comScore's validated Campaign Essentials (vCE) for Video product, both of which gather gross ratings points, demographics and behavioral profiles of audiences.
BrightRoll takes a margin of client ad spend for clients who buy using OCR and vCE. That margin varies on the technology solution and/or service-level being offered to the client. For example, BrightRoll charges on a fixed CPM basis for its "fully-managed" clients, a fixed margin with programmatic clients and a blend of the two for its managed technology solution.
Just nine months after it embraced OCR and vCE as a buying currency, 25% of BrightRoll's revenue is tied to those standards. "We are getting paid on their measurements. The moving from 'delivered impressions' to 'delivered audiences' is pretty seismic," Sacerdoti said.
That "seismic" growth of online video spending has generated more interest from Wall Street analysts. In particular, the financing activities of companies in the space like last month's Tremor Video's S-1 filing to go public and Videology's $60 million funding have raised the profile of a number of other players, with speculation whether Adap.tv, YuMe and BrightRoll will join the IPO track as well. For others, a shakeout may be on the way.
"Consolidation is certainly inevitable in all the online ad categories," Sacerdoti said. "Some of the companies rushing for public markets probably don't perceive private consolidation opportunities that are compelling on their investment structures."