As Advertisers Pivot to Out-Stream, What's the Incentive for Publishers?

Adoption of the updated IAB guidelines for video ads has been alarmingly slow

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Last summer, the IAB Tech Lab released new guidelines that effectively declared out-stream the primary path for web video inventory moving forward. Those of us who have been around awhile—and associate the term “out-stream” with glacial page speed and scammy ad units—are doing a double take. Historically, out-stream ads have not been favored by publishers or users, but in recent years, they’ve become a go-to strategy in the world of programmatic advertising solutions. So how did out-stream evolve from a niche, oft-maligned ad offering to one of the biggest money-makers?

Out-stream describes advertising shown outside of the traditional video environment—for example, while you’re reading an article or browsing through a feed. In-stream, by contrast, is a video ad before, during or after video content that readers are watching (often referred to as pre-, mid- or post-roll). Out-stream ads are designed to autoplay as users scroll and then either collapse or pause when a user continues scrolling. In an era where consumers scroll all day every day, out-stream is inching its way to a best practice in programmatic advertising.

Years ago, out-stream video ran as 300×250 ad units that were overtaken by bad actors in the industry, causing a revolt from internet users, publishers and marketers alike. Low fill rates and low-quality ads followed as a result of this race to the bottom, and soon publishers were reluctant to run out-stream ads at all.

Out-stream has come a long way, though, and will soon be everywhere online—and that’s a good thing. Video ads, of course, generate more revenue than traditional display. They always have, and publishers have always been drawn to the revenue potential. Now, however, that revenue can be generated with a nondisruptive user experience—and without publishers having to produce video on their own.

In an ideal world, a seamless adoption and implementation of the IAB guidelines on both sides of the advertising ecosystem would happen. Out-stream would be the default web video option, CPMs would briefly fluctuate but return to equilibrium and advertisers would finally be able to properly differentiate between high-quality in-stream and properly labeled out-stream.

A more transparent buying and selling experience for video inventory that aids both supply and demand and ushers in more advancements in ad tech should be a win for all parties. So why haven’t the guidelines been applied, and why hasn’t inventory been properly labeled as out-stream in 2023? Other than the fact that we all know it’s next to impossible to get any changes of significance made in Q4, it all comes down to money.

Currently, there’s no incentive for publishers to change. It’s a classic prisoner’s dilemma. Why be the first to properly declare your inventory and experience short-term revenue loss while your competitors continue to cheat? Until advertisers demand proper declaration, no one is inclined to take the leap. However, as 2023 is still getting started, we’ve still got some Q1, “new year, new you” energy in the air. Revenue is always low this time of year, so it’s perfect for cleaning house (and that hall closet you’ve been putting off).

What are the IAB changes, and why were they made?

In pursuit of the almighty video dollar, publishers have long pursued any strategy by which they could declare their video as in-stream. An entire industry of “video discovery platforms” was created. These platforms would scan site content and, from that, generate a video on the fly—video content that would be considered relevant on that page, at least at first glance. These videos would automatically play when readers arrived on that page, but not before charging advertisers a premium for the pre-roll ads that preceded them. As readers scrolled past the video, which would still be showing the ad at this point, the player would then follow the reader as they read the rest of the article.

The problem? The reader likely never watched the video itself.

How many pages have you been to where a video you never clicked “play” on began playing just the same? How many of those videos have you actually watched? Thousands, or zero? Chances are, the video content was barely related to the article you read, and you would never have clicked play to begin with.

As a marketer, if you were creating a video commercial or pre-roll ad, how do you envision the user experience with that pre-roll advertisement running in front of a video that the target audience is watching? Chances are, it wasn’t the experience I described. You probably imagined a user who was about to watch a video on YouTube that they really wanted to see and were happy to watch your ad first in exchange. That’s what you paid the premium for. Instead, you got duped.

Advertisers grew increasingly upset by this pattern and it’s what ultimately led to the IAB changes. According to the new guidelines, any video ad experience without audio is now considered out-stream. Why does that matter? Well, in order to have videos autoplay when a user arrives on a page, browsers require such videos to start off muted or they will be blocked. Long story short, this means 99% of videos currently shown by these video discovery platforms are now supposed to be labeled as out-stream.

What will in-stream become?

Going forward, in-stream will only be defined as videos where someone actually clicked the play button—videos that people have elected to watch—which will be what marketers thought they were buying to begin with. This makes logical sense from the advertiser side, but what will happen to publishers? This is where the prisoner’s dilemma comes into play, as the first inventory to switch from in-stream to out-stream will likely see a drop in CPM.

But once we all do it, the industry will notice. Budgets will shift to out-stream. In-stream will go back to being the premium it was always meant to be, and CPMs will skyrocket. Marketers will still look to out-stream for many of their KPIs, but at a price that reflects this new reality, raising out-stream CPMs as well—just not as much as in-stream. If publishers can focus on the big picture, they’ll see that this means more video opportunities (and revenue) in the long run.

There’s a world in which we can go back to creating original, high-quality content our readers want to watch and be paid the premium we deserve. For everything else, we can run out-stream and still see improved video revenue. We can see the destination we need to get to, but we’re stuck in neutral. For this dream world to come true for both sides, something has to give.

How do we start this change?

IAB guidelines are one thing, adoption is another. Currently, the industry is the Spider-Man pointing meme, and that’s not a good look. We need to stop the blame game and work together to enact change, which will need to come from industry leaders willing to put action (and money) behind their words. Major buy-side partners should declare they’re only working with publishers who have properly labeled inventory.

Until that moment, publishers who are misdeclaring their inventory also need to consider their reputation. You may not like to think of it in these terms, but every impression you’ve been sending out since this announcement is a form of fraud. Your reputation as a publisher is on the line. You can only have the excuse of working to make this change for so long.

Out-stream video is a viable and lucrative part of the future for programmatic. It’s time the industry realizes this is a change for good. Let’s combine our considerable forces to not only adopt the IAB guidelines but put them into practice and improve the transparency and consistency in this ecosystem.