Google announced that by the end of 2015, brands will no longer be able to buy YouTube ad through various DSP (as well as via Google) from DoubleClick Ad Exchange (AdX) platform, Google’s programmatic network.
Instead, advertisers will have to buy YouTube ads either directly through Google’s sales force, or through Google’s automated ad buying software, DoubleClick Bid Manager, and Google AdWords, through which all search advertising is sold.
On the Google’s DoubleClick Advertiser Blog, Neal Mohan, vice president of Display & Video Advertising, explains the move is to focus development efforts on the formats and channels used by most of their partners, which are TrueView (skippable video ad) and the Google Preferred programme (a way that connects advertisers to the top 5 percent of all YouTube channels). In the same post, Mohan said YouTube buying via DoubleClick Ad Exchange is a ‘small amount’, which justify the decision.
Revenue growth: Google has so far struggled to monetise YouTube with TrueView (the skippable ad format) and standard online video advertising. The company also launched a subscription service in 2014 to add a new revenue stream to the video platform, but the uptake has been sluggish to date Centralising its advertising offering on YouTube on the demand and supply-side is another step for Google to increase its control over YouTube inventory and increase its proprietary revenue from video advertising.
Cutting out the middlemen: IHS estimates that Google generates 5.0% of its YouTube revenue via DoubleClick. In 2014, most advertisers and agencies used other demand-side players like Videology, TubeMogul, AOL and agency trading desks to purchase YouTube adverts. The latest announcement aims to cut out those demand-side companies and redirect advertisers directly to Google’s technology. Instead of using the programmatic and data capabilities of external ad tech intermediaries, brands will now be required to work exclusively with Google.
Improving data efficiencies: By centralising the sale of YouTube advertising, Google will improve the data that it gathers on advertising metrics and audience viewing, which will in turn enhance its targeting capabilities, with the hope to increase CPMs. Data will become more holistic and probably more accurate, however also less transparent as Google will be the unitary holder of this data and the method used to collect it.
Creating end-to-end operating systems: This is a wider trend in the online advertising ecosystem. Tech giants like Google, Facebook, Amazon, Yahoo and AOL (now Verizon) are investing in tools across the value chain and creating “walled gardens” whereby advertisers must employ all their advertising services to gain access to their inventory. Through acquisition and organic growth, Google has been building up its capability for each sector of the ad market ecosystem. In terms of ad tech platform, Google has DoubleClick, it has YouTube as a gateway to video, its YouTube MNCs produces content, its Google+ profile data collects massive audience data, and it has Adometry and Google Analytics to do data analysis. Facebook, Yahoo, Amazon and AOL also have similar tools to support functions across the advertising value chain and IHS expects to see further announcements from these technology companies on the creation of new “walled gardens”, as they aim to capture an increasing part of advertising revenue from both the demand and supply-side.