US ad spend on digital video will see double-digit growth annually through 2020 while TV ad spend is projected to grow much more modestly, between 2.0% and 2.5%.
In our recent study on Video, we noted a strong trend towards brands deploying video assets broadly: As of Q1 2017, just over 50% of brands in L2’s study deployed video on all four of the major platforms analyzed–Facebook, YouTube, Instagram, and Snapchat–while another 47.5% deployed on all but Snapchat.
Although brands seem to agree on a general deployment strategy, approaches to content diverge significantly. This divergence is driven mostly by cost and complexity issues, as brands and their various partners (agencies, publishers, and various software platforms) struggle to maximize ROI while control the cost inherent in creating synergistic (but increasingly distinct) digital videos assets for deployment online.
In this context, the recent $100 million Snapchat/Time Warner content creation deal is an interesting example of a content owner and social platform attempting to partner for success in content development and audience targeting. The two year deal itself will focus on both the developing “original” shows for exclusive deployment on Snapchat, as well as a committed by Time Warner to buy ads for Turner, HBO, and Warner Bros. on Snapchat. The deal comes as Time Warner awaits time to be acquired by AT&T, whose chief executive, Randall Stephenson, has said the company will lead the evolution of video and shape the future of the industry.
The shows will be produced specifically for Snapchat’s vertical format (for mobile viewing) and span a wide range of genres, including comedy, scripted drama, daily news shows, and documentaries Snap will take half of the ad revenue generated by these shows and the content partners will keep the other half, according to the WSJ. Lastly, this isn’t Snapchat’s 1st rodeo, having previously inked deals with traditional media companies like MGM, ABC, NBC, ESPN, the NFL, Turner, the BBC, Vice Media, A+E Networks, and Discovery Communications.
While only time will tell if these deals are savvy or misguided for the media companies involved, they offers potential learnings and solutions to three key problems such enterprises are are currently facing. For one, they allow these companies access to millennials that are aren’t watching less and less content via traditional methods.
Secondly, it will allow for experimentation and iteration to discover what types of ads and content work best in digital environments. Lastly, it’s a potential home run for holding on and expanding their traditional advertising base, who have demonstrated a strong interest in reaching audiences across platforms; more than one in three advertisers will buy cross-platform ads in 2017, an increase of 23% over 2016.