Is 2016 the year OTT takes center stage?

With demand for premium video advertising at an all-time high how can so much prime inventory go unsold?

The answer is simple: It won’t for much longer. This year, powerful factors are coalescing to give ad buyers the reach they crave, and publishers the revenue they deserve. That revenue will come from currently underutilized spots in video programming on devices and services known as “OTT.”

The Shift to OTT

Viewers are fast shifting to over-the-top (OTT) consumption for TV programming via Smart TVs, devices like Roku, Google Chromecast, Apple TV, gaming consoles, and services such as Sony Vue, TV network apps, and, of course, Hulu, Amazon Prime, and Netflix.

OTT’s share of digital video viewing time has increased to about 70 percent while desktop viewing has declined. Average weekly OTT viewing time is expected to grow 38 percent this year to 9.5 hours, and another 38 percent in 2017.

New OTT offerings are constantly being announced, along with new content from OTT services and from publishers like VICE, YouTube Red and Crackle.

OTT streaming devices saw the strongest growth of any platform in 2015, up 157 percent over 2014. Despite that growth, OTT streaming devices still account for only 13 percent of video advertising views, according to a sponsored IAB study. It’s common while watching OTT programming to see ad spots unfilled or the same ad play over and over again.

Safe, Viewable, and Plentiful

For major advertisers, long-form OTT programming should be perfect. It’s engaging, well-produced and increasingly shown on large, high-resolution screens in the home.

At a minimum, ads can be targeted to zip codes. Often that targeting data can be matched to household buying and media consumption patterns across other devices.

Furthermore, these ads are 100 percent viewable. Fraud is virtually non-existent in the OTT ecosystem. When an ad impression is counted advertisers can be confident that there was an actual human being watching it.

Ads can easily be made unskippable. Ad blocking is both difficult to implement and often fruitless even if successful since they can’t shift programming to start earlier, leaving consumers with the choice of an ad or 15-30 seconds of dead air. Ads can also be stitched directly into the stream rendering them an unblockable part of the content.

The demographics are desirable, too. Millennial viewers, typically hard to reach, account for a larger share of OTT consumption than any other demographic group. Households with OTT streaming devices tend to be tech-savvy with higher levels of income and education.

An estimated 60 million Americans consume ad-supported OTT video, said Andre Swanston, CEO of Tru Optik, and believes the actual number to be much higher. Even excluding ad-free Netflix and Amazon Prime, that is a huge and growing potential market.

Tech Challenges Solved

Currently, OTT is seen to occupy an in-between place, not quite linear television, but also not completely in the digital world.

In a town hall I hosted at the recent IAB Programmatic Marketplace conference, an executive for a major broadcast network said he would sell more via OTT if his organization were “set up to do it programmatically.”

Digital media buyers in the room said they wanted the spots but indicated the industry first needs to find a common currency and further its segmentation and targeting capabilities.

The good news is that our industry has risen to meet the OTT challenge. It is now possible to serve OTT ads that use IAB technology standards such as VAST and, soon, VPAID. These ads can be placed in stream with delivery and targeting similar to other digital video ads. This will enable scalable planning and integrated targeting across large, diverse cross-platform media buys.

Pressing Demand

There’s one other factor that should make 2016 the tipping point for ad-supported OTT video: Advertising demand is going to be huge.

Hotly contested political primaries have already caused surging demand for geo-targeted inventory. That type of demand is likely to increase throughout the 2016 presidential election. Scarcity in targeted premium video has already driven up CPMs to as much as $40.

The Rio Olympics — in a U.S.-friendly time zone — will add more pressure in Q3 as will Copa America soccer, coming to the U.S. for the first time just a few weeks earlier. The competition is expected to inspire ad spots aimed at reaching viewers who follow the games via OTT.

Meanwhile, the OTT industry itself is spending ever more on advertising as publishers and tech companies compete for viewers, app downloads and sales. This holiday season we’ll see advertising for OTT-capable devices, another spike in OTT device sales, and then more OTT viewing brought on by the increased number of connected screens.

We may even see comScore, Nielsen and other measurement firms deliver on promised OTT measurement and attribution modeling. If so, this will help assure buyers that they can get the segmentation they need, potentially causing another flood of money to OTT.

The technology is in place. For this year to be the tipping point for OTT, the only thing that needs to happen is for buyers to become a little more comfortable and sellers to invest the time to activate their inventory. Then we’ll see a deluge of dollars as the available inventory brings much greater value to all sides.