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In late January, inside a sunny conference room at the JW Marriott in Marco Island, Fla., a working group of advertising technology executives gathered to discuss a contentious new update to a pair of terms—in-stream and out-stream advertising—whose precise definition would determine the fate of billions of dollars in digital video advertising.
The overhaul, which the Interactive Advertising Bureau Tech Lab had unveiled in August, redefined the meaning of in-stream and out-stream advertising, a technical binary the advertising industry had long used to classify its digital video inventory. In 2022, digital video generated $59 billion in ad spend, according to a November analysis from ReportLinker.
Marketers had welcomed the change, which promised to give them more visibility into what types of video inventory they were buying, a practice dogged by opacity, said Mike Fisher, vp of advanced television and audio at Essence.
Historically, in-stream advertising referred to any video ad that accompanied editorial video content, while out-stream described digital video ads that played on their own, unattached to editorial video.
Previously, when buying programmatically, advertisers could distinguish between in-stream and out-stream, but in-stream served only as an umbrella term for a wide variety of video products. As a result, marketers who thought they were buying a polished video package were often, in reality, buying sticky auto-play slideshows.
“Any standard set by the industry to make sure that what we are buying is what we think we are buying is welcome,” Fisher said. “We are bullish on anything that the IAB does to make things more targetable.”
The reclassification sought to solve the problem by stipulating a new, far narrower set of criteria for what kind of inventory would qualify as in-stream. But in doing so, the new definitions threatened to upend the economy of digital video advertising.
In-stream ads, which theoretically reach viewers as they wait for their requested video to start, fetch CPMs 15% to 20% higher than their out-stream counterparts, according to Scott Messer, an ad tech expert and industry consultant.
Under the August specifications, more than 90% of what once constituted in-stream inventory would now be considered out-stream, according to Eric Hochberger, the chief executive of Mediavine. The development posed serious concerns for publishers, many of whom rely on the revenue generated by in-stream advertising.
A third class of inventory
As January rolled around, the programmatic ecosystem had yet to adopt the August specifications, a common occurrence in an industry in which implementation often lags months behind updates, said Shailley Singh, evp of product and chief operating officer at the IAB Tech Lab.
For the ad-tech executives in Florida, brought together by an annual IAB conference, the delay offered an opportunity to refine the definitions before they became marketplace realities. Building on an idea first proposed in a larger IAB working group, by the end of the week the team had agreed on a tentative solution: adding a third tier to the taxonomy, a middle class called accompanying in-stream, separating digital inventory into the categories of primary in-stream, accompanying in-stream and out-stream, according to people present during the conversations.
- Primary in-stream, which requires the viewer to initiate the video and play it with the sound on, will represent between 5% and 10% of total video inventory and garner CPMs equivalent to those of connected TV.
- Accompanying in-stream, which will account for roughly 40% of total video inventory, can start automatically and play without sound, but the ads must accompany editorial video.
- And out-stream, the most performance-oriented option of the bunch, will refer to the remaining 50% of video inventory. Absent any editorial video content, these ads offer marketers the most affordable vehicle for exposure.
The new specifications, as well as the hand-wringing that surround their semantics, underscore the lucrative future of the medium and the battle lines being drawn over who will control it. The proposed solutions must now await official adoption.
Marketers gain transparency, while publishers shoulder workload
These new guidelines will enable marketers to purchase video inventory with greater precision, granting them more control over how they allocate their video budgets.
The accompanying in-stream tier will also help the industry mitigate the disruptive realignment publishers feared would come as a result of the August update, which maintained the binary while reducing the volume of in-stream inventory.
The new tripartite system will spur some shift in buying behavior, as in-stream will grow more expensive as its supply dwindles. But ad buyers, so long as their budgets and KPIs remain unchanged, are unlikely to drastically alter their strategies, said Ana Milicevic, the principal and co-founder of Sparrow Advisers.
Publishers, on the other hand, will have to respond to the shift by updating their programmatic pipelines and reevaluating their strategies in light of the reclassification—moves that will require time and money, said Rebeca Solórzano, svp of programmatic operations and strategy at Forbes.
Ultimately, though, the new standards aim to bring more transparency to the digital advertising ecosystem, a boon for all parties invested in producing or supporting quality video.
“The ways people consume content on the web continue to change, so there will always be updates,” Solórzano said. “We look at this as an opportunity to innovate.”
This story is part of Adweek’s Advertising Redefined digital package, which spotlights all the ways that the industry is evolving as brands face greater challenges than ever in reaching consumers.
