Analysis: Are ad dollars streaming in to OTT platforms in Asia?

The over-the-top (OTT) video market is no doubt growing, with services such as Viu, iQIYI, meWATCH and Disney+ all fighting to get a piece of the OTT pie in Asia Pacific. Last April, Magna predicted that OTT ad spending will hit US$5 billion this year, and despite the COVID-19 pandemic, Magna's global advertising update released earlier this year said that home entertainment such as OTT and subscription video on demand will still see a positive business outlook and advertising on a full year basis.

Meanwhile, global tech market advisory firm ABI Research said that the OTT video market will surpass US$200 billion by 2024, with 90% of that value fueled by subscription and advertising revenue. According to the study, new services such as Disney+ and Apple TV+, coupled with aggressive pricing and packaging, and continued expansion by incumbents are pushing the subscription video on demand market to new heights. The report added that subscriptions in the Asia Pacific region have grown significantly, driven by key services such as iQIYI/Baidu, Tencent, Youku Tudou/Alibaba Group in China, and increasing opportunities in India.

Havas Group's chairman and CEO, India and Southeast Asia, Vishnu Mohan, told Marketing that there is both a bigger growth potential and need for OTT in Asia than other geographies, especially from an advertising perspective for marketers. The ability of OTT platforms to drive significant subscription revenue in third world economies is a challenge, he explained, and hence most of them would be ad supported for their survival and growth.

"This coupled with the large mobile base which would remain as the primary entertainment media for many would definitely make this one of the most potent medium for the forseeable future," he added. Barring very mass market products where efficiency trumps any other metrics, Mohan said OTT is already relevant for all other brands, adding:

The preferred method to trial the platform would involve a small scale test with highly targeted, bespoke communication and a measurement plan priced into the test, for greater understanding and benchmarking.

On the other hand, while it might be true that Asia does have a bigger potential when it comes to OTT, Omnicom Media Group Asia Pacific's chief investment officer Paul Shepherd said the content and content remuneration will need to be customised to each market. Regardless of which country, it boils down to what the user behaviour and where the scale of viewership lives. In some markets this could be traditional TV and in many other markets, it will be mobile-enhanced viewership, he explained.

Regionally, excluding search and traditional social, Shepherd said he foresees OTT forming less than 5% of the digital pie in 2020 but the industry will certainly see OTT rise to about 20% in the next four to five years. He added that a question he is sometimes asked is whether OTT in Asia Pacific will catch up to the growth the industry has witnessed in the US.

According to Shepherd, it is really hard to compare OTT in Asia Pacific to markets such as the US simply because they are very different ad markets. In the US, linear and cable today command major share. While, YouTube in the US is growing, it does not enjoy the same share as YouTube does in Asia Pacific.

"At the same time, YouTube in Asia Pacific will continue to enjoy strong growth and we are now seeing the likes of Facebook, LINE and TikTok growing their video business. These are all very strong considerations for Asia Pacific clients in conjunction with OTT," he said.

Are the ad dollars flowing in?

The OTT industry hit a slight bump in the road when Singtel's OTT service, HOOQ, filed for liquidation in March this year. The closure was driven by structural changes in the OTT video market and its competitive landscape, its spokesperson previously told Marketing. "Global and local content providers are increasingly going direct, the cost of content remains high, and emerging market consumers’ willingness to pay has increased only gradually amidst an increasing array of choices," the spokesperson added.

Nonetheless, despite the demise of HOOQ and the COVID-19 headwinds faced by several industries, it is safe to say that ad dollars are still rolling in for OTT. 

Singapore-based Mediacorp's VP, digital sales and solutions, Jennifer Chase, told Marketing that it has seen "strong growth" in OTT ad dollars across different sections. While Chase did not specify the sectors, she added that there has been a "strong increase in its OTT media consumption at 46% year-on-year on meWATCH, its OTT platform for local content.

Formerly known as Toggle, the OTT service was rebranded to meWATCH last November. According to Chase, reach and its audience segment are usually the clients' top priority. In addition to that, viewability and the ability to track these two aspects are also important and Chase explained that the company has integrated the open measurement SDK into its apps. This means that clients can track viewability with accredited vendors.

"This is particularly important given 54% of our inventory is in-app. Completion rates are also a consideration – we offer a cost per completed view buying model which ensures over 80% completion rates. Given that our content adheres to censorship guidelines in Singapore, we can assure brand-safe inventory to our clients which they can access through a direct buy or programmatically," she added.

Meanwhile, another competitor in the market, Viu Singapore, adopts an advertiser video on demand (AVOD) and subscription video on demand (SVOD) dual-tier monetisation model which its GM, new media Anson Tan, said is "sustainable and robust" and has worked well for the company. While he declined to provide specific figures on whether the company has witnessed a rise in ad dollars, Tan said that over the years, the overall market growth of online video consumption, coupled with a strong product and content proposition, has led to "strong and steady" growth of Viu's subscription and advertisng revenue growth.

"Our expanding user base and increased engagement have supported growth in our video segment revenue, which increased by 32% in 2019," Tan said. According to him, brands today are not only looking for new advertising opportunities, but also new ways to engage with consumers in a brand safe environment. Tan added that Viu allows advertisers to reach a wider audience and offers them more than just ad placements. It also works closely with brands to devise overall marketing solutions that meet their business needs, including online-to-offline campaigns to increase consumer engagement with their brands via Viu.

"Our partners, investors, advertisers, and content creators can tap on a multitude of premium ad tiering and ad options. For example, we offer targeting options that can be catered to specific demographics and personalised with machine learning video intelligence to create highly relevant advertising opportunities," Tan explained. He added that this ensures a strong match between the ad content and audience profile, effectively addressing a common concern among its clients.

Unlike traditional TV ad placements, OTT advertising is also not dependent on a specific time slot. As such, Tan said this allows ads to reach a specific audience based on their viewing preferences, instead of just anyone watching the programme. Non-skippable ad formats, combined with ad targeting, also ensure advertisers’ messages are delivered to their desired audience. Ads are also placed into a less cluttered environment, which helps them stand out.

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The holy grail of a TV-like experience

Besides OTT players, agencies have also witnessed a growing interest in OTT from their clients. PubMatic's chief revenue officer, Asia Pacific, Jason Barnes said globally advertisers are allocating "a higher proportion of their media spend to OTT". He attributed the acceleration of OTT"s rapid growth to the COVID-19 lockdowns globally, offering the platform "more scale than ever before".

"Some estimates have global brands now allocating up to 10% of their advertising budgets to OTT platforms. That percentage will vary as some brands are ahead of others in terms of their journey into the OTT and connected TV (CTV) market. There are a ton of AVOD platforms in Asia, so the supply of premium video ad inventory is rising dramatically every quarter," he said. 

Increasingly, digital video consumption is moving away from desktop and onto CTV and mobile OTT apps, and Barnes added that where consumers go, ad dollars follow.

"Further, a unique COVID related reason is that marketers did not want to commit large upfront sums to linear TV and they could gain access to similar audiences in similar environments by doing spot buys on OTT platforms. They tried it and liked it, and we are seeing an inflection point as a result," he explained. Besides cost and evolving consumer interest, Barnes pointed out that the application of programmatic technology for OTT offers a unique opportunity for advertisers, adding:

It is the holy grail of a TV-like experience for consumers, with all the benefits of digital, like audience addressability and automation efficiency.

Sharing the same sentiment was GroupM Asia Pacific's regional director, insights, Chris Myers, who said that in addition to COVID-19 driving the shift to more OTT viewing, clients are also coming to realise that the quality of the video advertising environment matters and OTT is able to provide this quality environment they seek for. Citing GroupM's addressable TV business Finecast as an example, Myers also said there has been an increase in addressable options. "All of these factors have served to increase demand for advertising on OTT and provided clients with the confidence that it provides strong return on investment," he added.

On a similar note about offering TV-like experiences, Omnicom Media Group's Shepherd said that in the US, there are more OTT providers growing the pie and more options to consumer content with cable cutting growing at a higher rate. According to him, the content distribution model has now become more fragmented because it presents more opportunities for a smart consumer to find a piece of content that they love at a more cost effective way.

"As consumers continue to cut the cable, they are still desiring experiences that they find on cable. As such, consumers will start to look for cable-like experiences that can be delivered by OTT solutions. That competition is driving more consideration from US consumers. In Asia Pacific, we do not see that competition just yet but that could be the next opportunity," he said.

In addition to consumers searching for OTT-like experiences, another value proposition of OTT is that the platform has surrounded itself with premium produced content with "linear-like" content ratings, Shepherd said. This helps many of its clients to match their brand adjacency rules to digital content. However, while it feels like premium, from an advertiser's point of view, this delivers more fragmentation as OTT today does not have the scale of other digital-like solutions or even traditional TV.

He also said that the definition for the term "premium produced content" changes all the time from a user's point of view. The word "premium" means different things for different people - whether the content needs to be produced by a traditional production or shot with the latest 100k camera, for example. 

"Do consumers really care about these labels? Their view of premium as a user is what makes them happy and what improves their experience. This is something the content providers are really grappling with today. In my view, OTT’s biggest competition for success will be the platforms, and I see a world where platforms and OTT work closer together," Shepherd said.

While the adoption of OTT was accelerated by the pandemic due to consumers moving to video-on-demand models, the adoption rate of OTT platforms on the consumer front has relatively been higher than the option of OTT platforms as vehicles to reach consumers, Hemant Menon, associate director, programmatic, Dentsu Aegis Network Singapore said.

He explained that YouTube still remains a large portion of video advertising budgets with OTTs forming a small share of the pie. However, with the rising brand safety and supply chain transparency concerns in the region and hence media quality drawing attention, OTT certainly will become a big consideration given their controlled content environments.

Is there a robust measurement?

Measurement is key in today's digital world and like other digital channels, Shepherd said OTT's measurement framework is improving but it still has some way to go. Another layer of complexity that OTT is navigating in the measurement space is whether OTT should follow TV or digital. Viewership will continue to fragment and will only increase as users continue to enjoy the control of their curated viewership, he said.

A measurement advantage for many OTT providers is the fact that their inventory is improved by user sign on and this is even more important as the digital measurement moves further away from the 'cookie'.

From a programmatic point of view, Shepherd explained that OTT has more headwinds compared to other formats because of the way that many of the demand-side platforms (DSPs) communicate and understand the bidstream. Most DSPs can buy general display well but only a few DSPs can deliver OTT to a level agencies expect for their clients.

"Our DSP framework is enhanced because our inventory strategies are powered by one-on-one relationships with the core OTT providers which helps us navigate some of these market deficiencies, and that in turn, helps us improve the OTT measurement challenges," he said.

Meanwhile, Havas Group's Mohan stressed that OTT in most markets has reached critical mass and hence needs to be accounted for in the budgeting strategies as a standalone medium.

The core metrics of reach, recency and frequency still apply and should be used in benchmarking the medium against other platforms like linear TV and online video.

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