As opposed to TV’s channel-surfing-friendly programming presentation, online and mobile video has always been seen as more of a foraging experience when it comes to content discovery. As in, users generally need to be knowledgeable about what content they want to watch and where they could find it. But new user interfaces and personalization initiatives are evolving digital distribution from a “lean forward” experience into more of a traditional TV look and feel. As a result, viewer engagement is growing exponentially in the mobile environment, opening up fresh video monetization opportunities.

The latest Global Video Index from Ooyala points out that discovery and recommendation technology has been evolving to allow service providers to introduce a more passive experience across all devices. This is akin to traditional television viewing, where people are offered a steady stream of the programming that they prefer, as well as access to navigation elements that help them find more of that programming. This ease of navigation makes for a stickier experience, and creates opportunities for providers to maximize revenue by prolonging viewer engagement.

Further, the report found that when offered content by a discovery engine that recommends videos on a personalized basis, consumers will view the new content as often as 50 percent of the time. Among news broadcasters, that figure was 33 percent to 44 percent; for sports broadcasters, it was 40 percent to 53 percent; and for consumer publishers, it was at least 33 percent and as high as 58 percent.

And not only do consumers see more videos thanks to personalization — increasing the number of potential ad impressions — but they spend more time on site as well, deepening loyalty and engagement.

The Case for a Mobile-First Strategy

Screen size is becoming democratized as viewers no longer consider the television the only outlet for long-form content. The success of digital content initiatives like HBO Go and TV everywhere means that whichever screen is closest to you, whether it’s a phone, tablet or laptop, becomes your TV with one click. And this has profound implications on how programmers create and package content—and how it can be monetized.

“How do you create content that connects in a world of total choice?” asked ABC Entertainment Group president Paul Lee at this year’s TV Upfronts.

Comcast Cable’s EVP and GM of video services Matt Strauss put a finer point on it: “You won’t see us define a TV in any of our agreements, because, how do you define a TV? You can’t define a TV by a screen size… it’s any device that can render video securely.”

Screen size is the latest factor to become a non-issue for TV viewers, alongside other non-issues like location (not just the living room) and scheduling, the Ooyala report points out. More content is available, and consumed, in an on-demand, a-la-carte fashion than ever before.

“The erratic schedules of the past just don’t work anymore,” Fox TV Group Chair Dana Walden said at the Upfronts. She and co-chairman Gary Fox have vowed to create programming that will “break through and captivate viewers across every platform.”

This trend is particularly playing out for tablets.

Nearly 60 percent of the time that people spent watching video on tablets is for video 10 minutes or longer. For comparison’s sake, on connected TVs, that percentage is just 43 percent, slightly greater than mobile phones (37 percent) and PC (35 percent).

When it comes to the types of content that people want to watch, access to premium fare from TV broadcasters seems to be of great interest to mobile users. TV broadcasters saw more than half (53 percent) of their content play on mobile devices, compared with 31 percent for publishers and 31 percent for brands. This showcases the potential for programmers to build content strategies around mobile as it continues to grow more rapidly than any other viewing option.

Overall, plays on tablets and smartphones together increased more than 24 percent in Q1, quarter-on-quarter, and rose a stunning 100 percent year-on-year. That growth trajectory suggests more than 50 percent of all online video plays will be on mobile devices before the end of the year.

Going forward, the report noted that smartphones remain the engine of mobile growth (taking into account both short- and long-form content), with four times as many plays as tablets.

Digital Video Advertising Spends on the Rise

Looking to take advantage of the market conditions, advertisers are indeed shifting their dollars to mobile and online video ad units. And it’s paying off: In-stream video ads, including ads that play at the start, during, and after video content, yielded click-through rates (CTRs) that were 18 times higher than HTML5 banner ad units in February 2015, according to Google's Rich Media Gallery.  

Further, Ooyala found that when an ad starts on a tablet for broadcasters the viewer completes the ad 89 percent of the time, while smartphone users complete ads 79 percent of the time. Combined with emerging trends in programmatic trading between premium content providers and advertisers, and the market is shaping up for a perfect storm of digital video monetization.

"Our data is indicative of the rapid pace of change in consumer viewing behavior, which creates new challenges and opportunities for content producers, service providers and advertisers," said Ooyala CEO Jay Fulcher. "We're seeing a confluence of major trends that are reshaping audiences on a massive scale – in particular, ubiquitous TV-capable mobile devices, and a major influx of premium content streaming to, and in many cases produced for, over-the-top services. A mobile-first mentality with a keen eye on personalization has never been more important."

So, according to BI Intelligence, mobile will be the biggest driver of digital-video ad spend over the next few years: Mobile video ad revenue will grow more than three times faster than desktop through 2020. More concretely, video will account for 41 percent of total desktop display-related spending in 2020, up from a 26 percent share this year.

“Advertisers are rushing to snap up video ad spots as video viewership increases on mobile devices,” the firm noted, adding that social networking is contributing much to the inventory. “Digital video is gaining traction quickly on social-media sites. Facebook was an early backer of the format with the introduction of autoplay video ads in 2013, but recently other social networks, including Twitter, have launched digital-video ad units.”

Social video offers several major advantages from an advertiser perspective, including huge built-in mobile audiences, advanced targeting and native-style ad units.

Overall, BI Intelligence expects that U.S. digital-video advertising revenue from PC- and mobile-based video ads will top nearly $5 billion this year, and grow at a five-year compound annual growth rate (CAGR) of 21.9 percent.

Total revenue will reach $13.3 billion by year-end 2020, according to BI Intelligence estimates based on historical data from the Interactive Advertising Bureau (IAB). Part of what’s driving that figure is the fact that video's premium status within digital is reflected in the format's high prices. Video ads tend to cost significantly more (e.g., two or three times more) than non-video ad units on premium publishers like Vice and Instagram.

“Publishers, broadcasters and service providers should view this as a critical juncture, the point where a majority — rather than a plurality — of online video views occur on mobile devices,” the Ooyala report concluded. “Some operators have taken tactical steps to address the broad consumer trends that are growing mobile video — like pushing more content over the top, creating better user interfaces and improving mobile monetization. But with many providers still waiting on the sidelines of the OTT game, it’s become increasingly obvious that in large part, the industry is lagging in execution of mobile initiatives. As our data shows, the audience is clearly ready and waiting for more.”