The Future of Digital Video: Why Brands Need to Follow the Consumer

On Monday, June 8, 2015, I attended the IAB Digital Video Marketplace in New York. Over the next couple of weeks, I’ll be sharing strategic insights, critical data, tactical advice, and trends in the digital video marketing business that I spotted at the day-long event. But let me kick things off with an interview with Ashu Garg, a General Partner at Foundation Capital, who spoke about “Defining Video by Following the Money: Where We Are and What the Future Holds.”

Who is Garg and why was he one of the featured speakers? Well, in 2010, a company that specialized in analytics wanted to get into the media buying platform business. Garg helped them reach the growing number of brands that were migrating their television advertising to the web. TubeMogul soon became one of the leading video advertising platforms for brand advertisers and went public in 2014.

brand advertising needs to be more like video advertising

The Future of Digital Video: 2015 and Beyond

Greg Jarboe (GJ): During your presentation, you said that 2015 was as significant to the future of digital video as Procter and Gamble’s invention of the “Soap Opera” in 1933. Can you elaborate?

Ashu Garg (AG): The core idea is very simple. The seminal moment in the broadcast era came in the 1930s when P&G started sponsoring a series of soap operas on radio for brands like Duz and Oxydol. In the 1950s, P&G took this innovation to television and started producing award-winning soap operas, including As The World Turns and Guiding Light.

The growth in TV was fueled by the explosive growth in brand advertising. And marketers couldn’t imagine building a big nation brand without TV advertising. But in 2015, the world of TV is being turned upside down. And in the internet era, there is now universal agreement that you can’t build the next new brand without digital video across the myriad of connected devices. That’s where the eyeballs are going, and ad dollars are falling in-line with consumer usage.

before and after of consumer behavior

Consumer Behavior - Now and Then (Data via foundationcapital.com)

GJ: During your presentation, you also said that brand advertising needs to become more like search advertising. Can you explain?

AG: So, the question is what is going to change in the current video landscape. For starters, brand advertising is going to become a lot more like search advertising. It’s going to become contextual. It’s going to become more real-time. And it’s going to become more engaging from a consumer standpoint. The best advertising has always been as engaging as content.

Within a decade, all advertising will be content and the world would resemble Minority Report, where the ads follow you around providing personalized information in real-time. Also, the traditional 30-second ad format is dying. As Snapchat, Vine, and Periscope continue to explode, these new formats will unleash new creativity and new formats. And marketers will increasingly promote user-generated content instead of professionally produced ads.

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GJ: You laid out a roadmap for marketers in your presentation. And you talked about the shift from placement to programmatic. Can you give us more details?

AG: All media buying in my opinion over the next decade will move to programmatic media. You can see this shift in dollars from traditional TV into digital video. This will fundamentally change the industry structure across media. And as this happens, placement will diminish in importance and advertising – all advertising – will be bought in programmatically.

If you’re a brand advertiser, I would say the first thing you need to think about is making a bet on an independent programmatic media buying solution. You’ve got to find a way to begin to buy video across all channels, all content types or formats – irrespective of who’s watching it, where it’s being watched, or in what format.

GJ: You also talked about the shift from open loop to closed loop. What critical data will be needed to accomplish this?

AG: That first bet will enable you to then begin to build on it by going from what we call open-loop advertising to close loop. All advertising – including video advertising – needs to make that transition. And with digital for the first time it’s possible. Advertisers actually have the opportunity to connect engagement data with purchase data and close that loop. But, that’s hard. The data exists, but for almost all of these data pieces exist in different silos and in different formats. And what advertisers have to begin to do is to bring them together in a way that respects consumer privacy.

You have to begin to connect big data you have from the media you buy to the various datasets you have within the corporation – whether it’s CRM data or third-party customer data. As you begin to bring those datasets together, you can begin to build and test attribution models that will enable you to link your brand advertising to revenue. And once you do that, you can then begin to make the shift from using a shotgun approach to media buying – which is what most media buying frankly is – to a much more rifled and targeted approach.

GJ: You also spoke about the shift from mass broadcast to personal playlist. Can you elaborate?

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AG: The third piece really is this: traditional marketing has always assumed a linear purchase path. We all grew up in marketing thinking that the funnel was the model. In this new era, consumers make purchase decisions very differently. Ten years ago, if I were going to buy a car, I started that process by watching ads on TV. I maybe even checked out ads in the newspaper for deals. Then, at some point in the process, I would have gone to a dealer. I bought a car recently and I did none of that. I started my process on Facebook. I asked questions on Quora. At some point in that process, I did actually check out Kelly’s Blue Book and a couple of websites. But I eventually ended up buying a car on Beepi, which is an online marketplace for cars, entirely without ever engaging with the brand or with any of the dealers.

That purchase process is increasingly going to become the norm with consumers making more and more decisions without ever engaging with the brand itself. And as consumers have these infinite paths to purchase, all of us as advertisers need to think about how we create personalized customer journeys at an individual level that combine the video advertising that you offer with content and other ad formats across this journey. Instead of mass broadcasts, you need to think about creating personal playlists for the tens of millions of consumers you attempt to reach.

GJ: Finally, you talked about new platforms and new creative rules. Do you have any tactical advice for video marketers?

AG: With these new platforms will come new creative rules. In the new world, advertisers need to think about creating amazing content, not just great advertising. This content needs to be personalized and then made available through the myriad of distribution channels that we’ve talked about here. This means that advertisers – all of us – need to begin to think about not thousands, but hundreds of thousands of pieces of video content.

And then over time even begin to experiment with personalizing those pieces of content to individual experiences. Traditional production approaches to creating content just don't scale. Advertisers need to embrace user-generated content and also need to figure out how to work with social media influencers. We’ve got to integrate them both in the content creation process as well as in the distribution process.

If you are interested in reading more strategic insights from Ashu Garg, check out “MarTech and the Decade of the CMO,” which is on the Foundation Capital website.