Video advertising – Panacea for the mobile-operator-as-dumb-pipe dilemma?

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this piece Mark Davis, senior director product marketing, Telco and Service Provider Platforms at Citrix, looks at the potential revenue opportunities afforded by mobile video advertising, if only we can get streaming up to broadcast standard.

Video advertising on mobile devices is a lucrative business for social networking sites and other OTT players, and it is a revenue stream that will continue to grow. Make no mistake, this is not something that is about to happen, it is something that is already happening. The number of smartphone users receiving adverts increased from 30 percent in 2013 to 50 percent in 2014 (According to the Q1 2014 Citrix Mobile Analytics Report), and we expect that figure to keep rising, with video playing an increasingly significant role.

YouTube is the most widely known ad-supported content provider on mobile. From our own operator deployments, we know that YouTube accounts for over 80 percent of mobile video traffic. We also know that five percent of all mobile ads are video ads. Thus far, the operators enabling this ad delivery are seeing no direct payback from, for example, YouTube itself. They’re unlikely to either, since ad-supported online mobile services like YouTube have zero incentive to share any of the revenue. Events unfolding up the road from YouTube in Menlo Park, California, have the potential to redress the balance of power on incentives, however.

Facebook is launching automatically streamed video advertising. The social network is making the move in an attempt to attract big-spending television marketers. For all the gains made by redirecting marketing budgets from ‘traditional’ channels to the web, TV is still the king of ad-supported content. Researcher Zenith Optimedia estimates internet adverts in the US are projected to reach $43 billion this year, with TV advertising raising $66.8 billion.  Mark Zuckerberg wants in on the action.

Television has proven reach if you want a message to spread quickly and effectively to as many people as possible in one go. The Super Bowl, for example, is the goose that lays the golden egg in advertising. This year’s event reached 111 million TV viewers in the US according to Nielsen. Super Bowl commercials have become an entertainment form in and of themselves – people go to YouTube to watch Super Bowl adverts.  Microsoft’s 2014 Super Bowl commercial ‘Empowering’ has been viewed 3.7 million times on YouTube, while Satya Nadella’s first interview as CEO of Microsoft – also posted two months ago on YouTube – has been viewed a mere 685,000 times. So, in short, five times as many people would rather watch a Microsoft Super Bowl advert on YouTube than hear what the new CEO has to say.

Mark Zuckerberg clearly wants to tap into the pool of dollars currently associated with television advertisement market and he has a strong case for thinking he’ll be able to do so. Facebook has well over one billion registered accounts and over 550 million people access the site every day on their smartphones and tablets. That’s five Super Bowls every day globally on mobile devices alone.

There is, however, one slight hitch. While Facebook aspires to compete with TV by offering a high-quality targeted alternative for broadcast advertisers, it needs to offer a comparable viewing experience. However, we know that on 3G networks across our own global operator base, mobile videos stall for an average of 47 seconds for every minute of video consumed. Over LTE we see stalling improve to 15 seconds per 60 seconds of video, but that’s still a far cry from broadcast quality. We also know that the level of stalling increases as resolution increases, with 10.5 percent of videos stalling at 240p resolution, rising to 47 percent for video resolution greater than 720p.

If you’re a marketer deciding where to spend your millions, and you’re uncertain whether mobile video quality will do justice to your ads, then proven ‘traditional’ channels with guaranteed quality of service will continue to look more attractive. If Facebook wants to generate television-style revenue from advertising via mobile channels then it needs to provide its viewers with a certain, more consistent, level of service. At present there is no incentive for mobile operators to offer Facebook anything like the level of service it will need to tempt major advertisers away from television.

Technology is not a hurdle. Video optimization reduces mobile video stalling by 54 percent, on average, as measured by Citrix across its global operator deployments. To be frank, the only way Facebook or anyone else that wants to deliver high quality adverts over mobile, can hope to compete with television is by offering broadcast-style delivery to its customers and the only way it will be able to better ensure high delivery quality is by paying operators to make it happen.

About Mark Davis

Mark Davis is the Sr. Director of Product Marketing for Service Provider Platforms within the Citrix Cloud Networking Group, where he leads Citrix Telco marketing for brands such as ByteMobile and NetScaler. Mark has more than fifteen years of wireless and telecommunications industry experience, beginning with stints at AT&T Network Systems and Lucent Technologies, where he played an instrumental role in winning over $700M in network infrastructure awards. From there, he took on senior marketing roles at Repeater Technologies, a radio access network supplier; Pico Communications, an enterprise Bluetooth vendor; Space Data, a narrowband data services provider; Venturi Wireless, a data optimization vendor; and Exalt Communications, a microwave backhaul supplier.