Digital Video Advertising

Sections in Chapter 1:


The history of video advertising inventory.

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How it Works

An explanation of programmatic ad buying technology.

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The Process

Descriptions of the different actors in the programmatic buying sequence.

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The Funnel

An explanation of the digital marketing funnel and how to use it successfully.

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Understanding Video Advertising

The History of Advertising Inventory

Advertising is the practice of calling attention to a product by using publicly visible inventory to promote that product to consumers. At the most basic level, advertising has not changed in centuries — advertising has always been a way for vendors to find consumers to purchase products by increasing their visibility.

Advertising today, however, looks very different than advertising did centuries ago. The reason that modern advertising looks so different is not that the end goal of advertising — to reach consumers by promoting a product — has changed, but that the means to that end — the inventory that is publicly visible to consumers — has changed drastically.

Before the internet, advertisers used physical inventory sources to reach consumers. Early examples of physical inventory include signs, posters and public notices. As technology opened up new forms of inventory, advertisers developed new ways to promote products to public audiences. When printing presses made newspapers and periodicals visible to huge numbers of consumers, newspaper advertising developed to take advantage of this new inventory source. When mass transportation networks made billboards visible to huge numbers of consumers, billboard advertising developed to take advantage of this new inventory source. When radio brought programming into millions of homes, radio advertising developed to take advantage of this new inventory source.

Every time that technology shifts the attention of consumers towards a new medium, advertising adapts to make new inventory sources available. This link between technological innovation, consumer attention and advertising sets the stage for one of the most recent developments in the world of advertising: digital advertising.

The Challenge of Digital Inventory

The rise of digital communication altered the advertising landscape in several ways that many other technological developments did not. First, it made it possible to track the success of advertising campaigns. Unlike billboards and radio ads, digital ads can provide advertisers with direct metrics about consumer engagement. Second, it exponentially increased the amount of advertising inventory available. As consumers browsed millions of websites all across the web, it became impossible for advertisers to manually buy advertising inventory. This dilemma led to the creation of a new way buying and selling ads called programmatic advertising.

The Emergence of Video Inventory

Initially, programmatic advertising was used to buy and sell static ads on publishers’ websites across the web. Even when videos first became popular, it was difficult to run video ads due to the prohibitively large files sizes required to store and embed videos online.

When technological barriers to video embedding fell, video quickly became the dominant form of digital advertising — and for good reason. Even videos as short as ten or fifteen seconds in duration can impart many times as much information as static images and create a lasting brand impression. Marketers favor the medium of video for its unique ability to engage and educate consumers at every step of the purchase decision. Video advertising units are not only more engaging than static advertising units, but they are also infinitely more memorable — and profitable. Consumers who see videos for products online are far more likely to make a purchase than those who do not.

As technology improved, advertising formats continued to proliferate. Many of the new advertising formats not only welcomed video, but prioritized video inventory over display inventory. As consumers began to spend increasing amounts of time on mobile devices, in social media environments and in front of smart televisions, they began to watch more video than ever before. Increases in technology have made it increasingly easy for consumers to block or disregard traditional static advertisements, making video ad formats — which adapt more fluidly to native environments than static advertisements and are even more difficult to ignore — even more important for advertisers.

How Programmatic Works

An Overview of Programmatic Technology

Programmatic ad buying is simply automated ad buying. As the amount and variety of ad inventory continues to increase, automated ad buying makes it possible to buy ad invenotry of different varieties all across the internet in just milliseconds. Real-time bidding (RTB) is a type of ad buying technology that is often used in programmatic advertising, but programmatic and RTB are NOT the same. Real-time bidding is just one type of programmatic ad buying, and programmatic buying does not always occur in online auctions. The graphic below explains how different digital ad marketplaces work by highlighting different buying technologies and buying methods.

This chart highlights the differences between programmatic and real time bidding technologies and how they operate in digital advertising marketplaces.

Programmatic Ad Buying

Programmatic advertising is an automated ad buying process that is controlled by machines, usually bidding on an advertising inventory sources in real time for the opportunity to show one specific ad to one consumer in one specific context. Programmatic advertising enables marketers to access millions of pieces of inventory across the internet and use them to deliver targeted messaging.

Real-Time Bidding (RTB)

Real-time bidding (RTB) is the name of the automated auction format where ads are bought and sold by computers in an online marketplace. Most, but not all, of programmatic ad buying and selling is done by real time bidding. Real-time bidding allows advertisers to compete for inventory and serve advertisements to consumers in milliseconds.

The Programmatic Advertising Process

The Programmatic Sequence

Programmatic advertising is a complex process that involves numerous actors. The sequence by which a video advertisements are delivered from advertisers to consumers involves several different actors. To understand how programmatic video advertising works, it is important to understand the role of all of the different organizations that contribute to the programmatic distribution of advertising videos. The descriptions below highlight the primary actors in the programmatic sequence and describe their respective functions.

This image describes the major players involved in the programmatic advertising process.

Learn more about the individual organizations involved in the programmatic advertising process below.

Brands are companies that sell goods or services to consumers. To find consumers to buy their goods or services, brands produce advertisements (sometimes with the help of agencies or consultants).

Demand Side Platforms (DSPs)
Demand-side platforms are the brokers that buy advertising inventory on behalf of brands. Advertising inventory is any area of space on a webpage where an advertisement can be shown. Demand-side platforms use automated programmatic technology (explained below) to find inventory that will be seen by a brand’s desired target audience.

Ad Exchanges
Ad exchanges are the marketplaces where advertising inventory is bought and sold automatically by machines. The largest and most widely used ad exchanges are Google Ad Exchange, OpenX, Rubicon and Facebook Ad Exchange.

Supply Side Platforms (SSPs)
Supply-side platforms are the brokers that sell advertising inventory on behalf of online publishers. Supply-side platforms use automated programmatic technology to sell publishers’ inventory in an ad exchange.

Publishers are producers of content that receives consistent online traffic from consumers who choose to sell a portion of their webpage as advertising inventory to generate revenue. There are many different kinds of publishers, ranging from professional news websites to amateur blogs.

Consumers are people who people who browse the internet and visit publishers’ websites. Consumers are the ultimate targets of brands when they launch online advertisement campaigns.

Other Providers

Data management platforms (DMPs) are data warehouses that store, organize and analyze data about consumer interactions. Data managements can be ‘plugged into’ either DSPs or SSPs and feed them data.

Digital advertising agencies provide creative and strategic consultation resources for brands. Different agencies provide different levels of technical support.

Third party tracking verifiers confirm the accuracy of data about advertising campaign results, usually by recording clicks and impressions.

Understanding the Marketing Funnel

The Marketing Funnel

The ‘marketing funnel’ is a diagram that is used to visually represent the different stages of engagement that consumers pass through before making a purchase online. While the funnel shape is an oversimplification of the complex process of marketing, it can also be a helpful model for complex marketing programs that target multiple interest-based cohorts. This model uses the shape of a funnel to describe the impact of advertising on a pool of consumers. The top of the funnel represents a consumer’s first exposure to a brand or product and the bottom of the funnel represents the consumer’s final conversion and purchase.

The movement from the top of the funnel to the bottom of the funnel is one way of conceptualizing the consumer’s journey. The top is the widest part of the funnel and shows that the largest number of consumers will be engaged by initial advertising outreach. The funnel becomes increasingly narrow towards the bottom, showing that a smaller and smaller pool of consumers will remain engaged by advertising efforts to the point of conversion. When applying this model to discussions of digital marketing, ‘top-funnel’ advertising solutions refer to advertising campaigns that are specifically directed at consumers early in their journey while ‘bottom-funnel’ advertising solutions refer to advertising campaigns that are specifically directed at consumers late in their journey. ‘Full-funnel’ advertising solutions are designed to follow consumers throughout the entire length of the marketing funnel.

This graphic shows the digital video advertising marketing funnel and describes top funnel, bottom funnel and full funnel digital video advertising campaign strategies.

Funnel-Segmented Advertising

Brand vs Performance Marketing

Some advertising strategies target consumers at specific stages in the consumer journey. Brand marketing campaigns can be used specifically to generate brand awareness without driving conversions. Performance marketing campaigns can also be created to drive conversions without making an effort to generate brand awareness. Both of these cases represent funnel-segmented advertising campaigns that are aimed at specific sections of the funnel.

Differences Between Digital and Non-Digital Advertising

While some advertising campaigns are intentionally aimed at specific segments of the marketing funnel for strategic purposes, other campaigns are confined to certain parts of the funnel by structural or technical limitations. Often the fault line between intentionally and necessarily segmented campaigns mirrors the divide between digital and non-digital advertising. Historically, many non-digital advertising efforts were nearly impossible or extremely difficult to quantify and were therefore used exclusively for branding purposes (e.g advertisements on billboards at a baseball game that yield negligible conversion data). In the past, video advertisements often fell into the branding category by nature of the limited metrics available to gauge their impact. When video advertisements first became available, video ad inventory was confined to movies and television screens, and neither medium offered opportunities for direct-response or significant consumer data collection.

Performance Video

Since video advertisements had a long legacy of successful use in brand marketing campaigns, the perception of video as a performance marketing tool did not develop even when all of the limitations to follow-up and data collection disappeared. Video advertisements can now be tracked and incorporated into consistent full-funnel campaigns and used as a powerful performance marketing tool that can drive direct-response conversion.

Full Funnel Video Prospecting

Prospecting vs. Retargeting

Digital video advertising offers a high degree of control over advertising campaigns. Unlike outdated marketing campaigns that functioned in isolation and failed to produce consumer behavioral data, modern digital advertising platforms offer advertisers massive amounts of data about consumer behavior. Modern digital marketers can use consumer data to accomplish branding objectives and performance objectives simultaneously. Advertisers can launch prospecting campaigns to reach new consumers with no product awareness by serving video ads to consumers who fit a certain general profile. Advertisers can also launch retargeting campaigns to reach consumers who have demonstrated product awareness/interest by visiting a particular webpage.

Connecting the Funnel

Full-funnel video prospecting is a type of advertising campaign that actively targets new consumers at the top of the funnel and serves them video advertisements throughout their consumer journey until they ultimately convert at the bottom of the funnel. These prospecting campaigns combine prospecting profiling technology with retargeting tracking technology to strategically serve videos to consumers from the first impression to the final conversion. Full-funnel prospecting increases the yield of normal prospecting campaigns by guiding consumers all the way to conversion. These campaigns increase the efficiency of pre-existing bottom-funnel advertising solutions and also provide immensely valuable insights into the entire buyer journey.

High Intent Prospecting

Prospecting campaigns use manually defined targeting parameters to target audiences. High intent prospecting campaigns are specific types of prospecting campaigns that don’t only use manually defined targeting parameters but rather extensively incorporate machine learning optimization to target audiences.

High Intent Retargeting

Retargeting campaigns target all consumers who have visited a client’s website in a particular window of time. High intent retargeting campaigns are more specific types of retargeting campaigns that only target consumers that have exhibited certain behaviors on the website (e.g. viewing a defined number of pages or spending a defined length of time on the website).

Coordinating Full Funnel Prospecting and Retargeting Campaigns

Advertisers can run retargeting campaigns in addition to full-funnel prospecting campaigns. In some cases, consumers may be targeted by both campaign types simultaneously, in which case the default attribution usually falls to the prospecting campaign.

Balancing Multiple Campaign Types

Even within full-funnel prospecting campaigns that eliminate much of the data siloing problems associated with an overly segmented marketing strategy, it is still difficult and important to allocate budget properly between prospecting efforts and retargeting efforts. The decision on how to divide budget between finding new customers and retargeting old ones should be made in conjunction with a detailed knowledge of all other marketing efforts and how long the average conversion cycle takes. Generally speaking, prospecting works to open up the top of the funnel and establish a user base, so spending money on retargeting without first establishing an audience tends to be inefficient (retargeting efficiency is a function of budget, time to convert and user base and user base is directly contingent upon prospecting). Retargeting campaigns, however, are necessary to engage consumers and drive efficient conversions. Given this complex reciprocity between prospecting and retargeting, there is no consistently optimal budgetary ratio, and machine learning technology often offers the most accurate model to balance retargeting and prospecting campaigns to maximize performance for a given budget.