TV Advertising. We all enjoy it. Think about your favorite Super Bowl ad. Which one was it? Over the years, TV advertising has graced us with many great commercials and moments.
However, TV advertising dollars are rapidly going Digital. This year, for the first time ever, US Digital spend will exceed TV spending. By the end of the year, this digital spend will reach $72 Billion, while TV spend will grow to only $71 Billion . And this gap will continue to get exponentially wider and wider in the future.
There are many reasons for Digital’s success in capturing advertising market share (the growth of Mobile, the ability to bid on ads in real time, etc..), but today I instead want to focus on the biggest challenge facing online video Advertising, and how Google overcame it – to become the dominant player in online advertising.
The Online Advertising Challenge: Premium Inventory
Close your eyes and imagine you are the marketing executive for a large Retail Brand. I’m serious, close your eyes and play along.
How are you planning on spending your marketing budget? TV advertising probably comes to mind. But why TV? Well, there’s the benefit of reach – you want people to actually see your ads, right? But “reach” isn’t the reason, if it was the reason, you’d be quick to spend all your advertising dollars on YouTube, where almost 5 billion videos are watched on every single day, by nearly 1.3 Billion people .
I’ll cut to the chase: Advertisers have historically loved spending on TV because of their ability to show their ads on premium inventory. Remember that Super Bowl ad I asked you about earlier? Well, Super Bowl advertising is the cream of the crop of premium inventory.
Up until 2014, there was no large scale way to get this kind of premium inventory online. And, up until 2014, TV advertising was still bigger than Digital…but not for long.
Enter Google Preferred
In true Willy Shih fashion, I’ll summarize “Google Preferred” in 25 words: Google Preferred allows advertisers to place their ads on the top 5% of YouTube inventory, for a slightly higher cost. That was 20 words, not bad.
With the launch of Google Preferred in 2014, advertisers now had the ability to show their ads exclusively on YouTube’s most popular channels, along-side the hottest or viral videos of the time, and narrowly target their audience .
While previously, if you wanted to run your ad on premium US inventory, your only option was to write a not-so-little $5M check for a 30-second Super Bowl ad , and hope that your target audience was watching. Now advertisers have more flexibility and control. They can divert that $5M check to YouTube, and hyper-target the most premium inventory in the digital space.
- You want to target those 18 year-old gamers, watching those viral Video Game videos on YouTube? You Got it!
- You want to target those 20 year-old females that love watching YouTube Beauty and Fashion blogs? You got it!
The beauty of Google Preferred was simple: offer advertisers the one thing TV executives used as their main selling point– premium inventory.
“Google Preferred” Success
Advertisers and agencies flocked to Google Preferred in high numbers, so much so that Google Preferred inventory sold out in a few short months. And to this day, advertiser Demand continues to far exceed Supply of inventory, with many agencies committing upwards of $250 Million on Google Preferred . That’s the equivalent of 50 Super Bowl ads cost!
Yes, you can now run your ad on the most popular YouTube Videos. However, there’s still some work to be done: Not all advertisers are able to buy Google Preferred – there’s a very long waiting line. Yes, it is a good problem to have when Demand exceeds Supply, but you’re also leaving money on the table (if you’re Google).
Google needs to get more premium content to satisfy this demand. How do they get more premium inventory – by having more YouTube producers. There’s a strong demand for viral YouTube videos, and if Google can convince more artists and producers to create this content on their platform, then their future looks even brighter.
Excuse me as I now log into YouTube to watch a cat use a toilet.