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Video Supply-Side Platforms Hurt By Q2'20 Fall In Video Ads, Rebounding In 2021

COVID-19 caused advertisers in many segments to pull back in the second quarter of 2020, which resulted in less revenue flowing through video supply-side platforms, or SSPs. Kagan is therefore expecting video SSP vendor revenue to show only a slight increase in 2020 of 4% to reach $1.1 billion. Vendors reported that ad spend picked up toward the end of the second quarter of 2020.

The growth in video streaming monetized via advertising is propelling an increase in the number of video ad impressions and therefore the amount of ad spend through SSPs. Since SSPs often receive a percentage of the ad revenue that comes through their platforms, their growth is dependent on ad revenue increases. However, not all video ad inventory is sold programmatically, especially that from premium suppliers such as broadcasters and cable programmers. According to Kagan's July 2020 survey of 90 U.S. connected TV, or CTV, advertisers on their preferences, respondents reported spending less of their 2020 ad spend programmatically than through a direct deal with the inventory supplier.

Some vendors have both demand side platforms, or DSPs, and SSPs, such as Alphabet Inc.'s Google, AT&T Inc.'s Xandr and Verizon Communications Inc.'s Verizon Media, and they may eliminate the SSP fee for buyers that use their DSPs. Several video publishers, such as Amazon and Google, use internal SSP solutions, which also reduces the total available market for video SSPs.

Though video streaming audiences increased in the second quarter, CPMs reportedly fell on some platforms and many impressions went unfilled. Programmatic spending in particular was easy to stop and then start again once lockdown orders expired. The connected TV, or CTV, segment of the market saw a larger than expected increase in available ad impressions as more people were home in front of their TVs streaming greater hours of content.

CTV is a small portion of overall digital video ad revenue, but it is growing quickly. Although streaming via CTV may be on subscription platforms, the free ad-supported streaming TV, or FAST, services began to pick up steam in 2019 and have continued their growth in 2020. For example, Tubi has seen total view time rise to more than 200 million hours per month since April, more than double the monthly average in 2019. Therefore, many video SSPs are investing in that segment to win CTV providers as customers.

There currently is no industry-wide agreement on how the SSP will evolve in the future. Some expect to move to a single programmatic layer in the middle that would reduce intermediaries who each receive a revenue share; this would be a true single platform not just the same vendor with both products in one portfolio. However, the buy-side and sell-side are at odds with different jobs each serving a side in the transaction, as the sell-side wants the highest price possible while the buy-side wants the lowest price possible. Two issues that are having an impact today are transparency and supply path optimization, or SPO. As part of SPO, publishers have been cutting down the number of SSPs they work with since more SSPs are serving all advertising channels. There is less need for specialized partners, so we could see more SSP consolidation.

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