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Summary

YouTube has announced that, as of 2018, it will no longer serve 30-second unskippable ads on its platform. This is a smart move, as competition for video ad dollars and consumer engagement will intensify over the coming years, especially on mobile devices, and as players seek to monetize viewers in emerging markets.

Shorter video ads will increase mobile engagement and monetization potential, especially in emerging markets

YouTube's TV-style unskippable 30-second ads have drawn the collective ire of viewers since they were first introduced. Their departure will be unlamented by viewers. YouTube's decision to axe the format comes as it increasingly becomes a mobile-first service. The majority of views now occur on mobile devices, where such long-form ad formats are especially jarring. However, it also comes as socially geared competitors Twitter and Facebook are making video central to their strategy, and moving toward a more TV-like ad environment in an attempt to poach TV ad dollars.

However, Ovum believes that mobile and social media platforms are not a good fit for TV-style advertising, which can detract from the viewing experience. The increased levels of interactivity and direct consumer engagement on mobile apps and services means that new ad formats, tailored to both the core user's experience and their mobile devices (such as Snapchat's Sponsored Lenses and Geofilters), have the potential to drive much greater engagement and reach, and will more effectively circumvent ad-blocking behavior. Other innovations, such as integrating commerce into video ads – which YouTube has already done with its "Shoppable Ads" – offer further opportunities to increase consumer engagement and revenues.

YouTube will continue to push video ad formats to advertisers. However, the emphasis will be on shorter formats – such as the six-second unskippable "Bumper" ad, which YouTube introduced in 2016. This, coupled with longer – yet skippable – TrueView in-stream ad formats, should make the platform more appealing to viewers, particularly on mobile screens. These are only billable if a user clicks through on an in-ad element, or views the entire ad (or 30 seconds, whichever comes first), offering advertisers greater cost efficiencies and, theoretically, more valuable engagement.

The lower ad loads associated with such formats should also help YouTube to better monetize emerging markets, where barriers to video consumption and delivery, particularly over mobile networks, remain high. Ovum expects such markets to deliver the majority of YouTube's user growth over the next five years. Tailoring its ad strategy to better serve the emerging markets will likely offset the revenue lost from dropping its most reviled ad format.

Appendix

Further reading

Digital Content and Services: Video Internet Advertising Forecast, 2016–21, ME0002-000730 (December 2016)

"Why Twitter is wrong about the future of mobile video advertising," TE0021-000002 (February 2017)

Author

Matthew Bailey, Analyst, Digital Media

matthew.bailey@ovum.com

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