Long-Form Video Advertising: Facing the Sunset of Traffic Dividends, How Can Platforms Break Out?

Long-Form Video Advertising: Facing the Sunset of Traffic Dividends, How Can Platforms Break Out?In the advertising market, the appeal of long-form video websites is gradually waning, and this trend is intensifying. QuestMobile data predicts that the market share of online video advertising will continue to decline over the next five years, with an expected share of less than 3% next year

Long-Form Video Advertising: Facing the Sunset of Traffic Dividends, How Can Platforms Break Out?

In the advertising market, the appeal of long-form video websites is gradually waning, and this trend is intensifying. QuestMobile data predicts that the market share of online video advertising will continue to decline over the next five years, with an expected share of less than 3% next year. Financial reports also confirm this trend: iQiyi and Mango TV both saw a decline in online advertising revenue, while only Tencent Videos advertising business saw growth, but it was unable to reverse the overall decline in the long-form video advertising market.

01 Retreating Advertising Business: CTR Dilemma and Imbalance in Traffic Allocation

The retreat of the long-form video advertising business, apart from the constraints of the membership business, stems from advertisers changing metrics for measuring advertising effectiveness. In recent years, brand advertisers have increasingly emphasized CTR (Click-Through Rate) over exposure indicators such as CPM (Cost Per Mille). CTR is a crucial metric for measuring the attractiveness of advertising, reflecting user interest. A high CTR indicates that the advertising content is more likely to capture the interest and attention of the target audience, while also predicting the user's conversion potential. However, long-form video platforms face a CTR dilemma:

• Low Reach of Non-Membership Users: Long-form video advertising can only reach non-membership users, missing out on a user group with potentially high spending power.

• "Convergence" of Advertising Strategies: To preserve the user experience for members, video websites have adopted a more conservative approach to advertising placement, resulting in a significant discount for advertisers CTR.

• Imbalance in Traffic Allocation: The distribution of traffic on video platforms is extremely uneven. Top IP resources are limited, while mid-tier and lower-tier resources are not favored by advertisers.

• Differences in Purchasing Methods: Top-tier content typically uses a CPM-contract advertising method, allowing for bargaining power but at a high price. Ordinary resources are purchased through ADX (AdExchange advertising trading platform) at CPM/CPV/CPC bidding, resulting in lower prices.

This imbalance in traffic allocation and differences in purchasing methods make it difficult for brand advertisers to find cost-effective advertising placements, ultimately leading them to transfer a portion of their budget to other platforms.

02 Industry Demand Diversification: Top Brands Place More Emphasis on IP Value

Different industries have varying needs for long-form video advertisement placement. For example, the food and beverage industry has a wider range of options for content integration and emphasizes audience coverage, while beauty brands prefer vertical content integration, focusing on the intent and quality of content IP.

When choosing their advertising targets, top brands pay more attention to the content differentiation and user audience coverage of IP, not only focusing on platform users but also considering the user profile of drama and variety show IP audiences. These brands primarily choose long-form video website advertising to achieve large-scale exposure, reach target users for product promotion and seeding, and thus generally opt for a model that combines "content integration + pre-roll advertising."

However, the competition for top-tier resources is intense, leading to a shortage of high-quality options and high prices. To maintain customer relationships, video platforms may offer certain exposure bonuses to annual contract customers, further exacerbating the scarcity of top-tier resources. Meanwhile, a large inventory of ordinary resources remains unsold, leading to only low-price sales through ADX, which cannot generate significant revenue.

03 Advertising Budget Flow: The Rise of Short-Form Video Platforms and Influencer Marketing

To find more effective advertising solutions, brand advertisers have shifted part of their budget to short-form video platforms and influencer marketing.

• Short-Form Video Platforms: Short-form video platforms have a clear advantage in conversion efficiency and monetization pathways, with Topview ads offering a better CTR compared to pre-roll ads on long-form video platforms. Take the dairy industry as an example, where the proportion of advertising budget allocated to long-form video platforms has been declining year after year, while the proportion allocated to short-form video platforms has been steadily increasing.

• Influencer Marketing: As brands place more emphasis on influencing user perception, influencer marketing is increasingly becoming a crucial component of brand marketing. Influencer marketing is more effective than traditional brand advertising in driving sales while having a greater impact on user perception than performance advertising. The cost of soft advertising placement on influencer platforms like Douyin and Xiaohongshu is continuously increasing, and their share in marketing investment is also growing.

04 Exploring Long-Form Video Advertising Models: Breakthroughs in Innovative Advertising Models Are Imperative

Long-form video platforms have yet to find better advertising models to increase revenue, primarily relying on good content as the driving force to attract members and advertising revenue. However, the production of top-tier content is uncertain, and the number of blockbuster dramas and variety shows in the market is limited.

To increase advertising inventory, long-form video platforms have made numerous attempts:

• Membership-Based Viewing with Ads: Pre-roll, mid-roll ads are already commonplace.

• Innovative Advertising Formats: More dazzling and impactful ad formats like break-screen, splash screen, and full-screen ads aim to grab user attention.

• Commodification of Soft Ads: Selling some soft ads as hard ads (similar to pre-roll ads), such as pre-roll advertising before the main film.

• Interactive Advertising: Interactive formats like barrage advertising and comments section advertising aim to enhance user CTR.

However, these attempts are either difficult to standardize and require customization, expensive to implement and not easily accessible, or overly aggressive, negatively impacting the user experience and failing to significantly improve advertising revenue.

Growth Potential of Television Big Screens: The Domestic Market Has Yet to Fully Explode

Platforms like YouTube and Amazon Prime are making strides in CTV (connected television) and achieving impressive results. However, the development of the domestic CTV market is more complex and influenced by factors such as policy regulation and effect monitoring, preventing it from exploding like in overseas markets and making it unlikely to become a second growth point for video platforms in the short term.

Conclusion: Long-Form Video Advertising Monetization Faces Challenges, and Platforms Must Actively Seek Breakthroughs

Long-form video website advertising monetization faces the challenge of having fierce competition both ahead and behind. Netflix is also seriously considering advertising, and iQiyi, Youku, Tencent Video, and Mango TV need to think about how to earn more advertising revenue. In the future, long-form video platforms must actively explore new advertising models and enhance the advertising value of their platforms to secure new growth points in the fiercely competitive advertising market.

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