Approximately 11.6 million Australian internet users aged 15 to 65 have watched online video in the last six months. This represents a percentage of 83% in 2014; an increase over 68% in 2012.
Frost & Sullivan's latest report, Australian Online Video Market 2014 reveals that Australians aged 15 to 65 that watch video at least once a month on a smartphone has increased from 34% in 2013 to 51% in 2014, whereas on tablets the percentage has increased from 29% to 47%. News is the most popular type of content viewed on mobile devices. 21% of consumers watch it on most days, and a further 24% watch it at least once a month on average. There is gaining popularity in live broadcast programs such as sports and news.
As online video consumption grows, so does online video advertising. Growth of online video advertising outperformed all other major online general advertising segments, including online display advertising. For the 12 months to June 2014, the online video advertising market grew by 60%, accelerating over the growth of 55% in the year prior. The online video advertising market is predicted to grow from $198 million in 2014 to $780 million in 2019, with growth rates tapering off as the market matures. Expenditure on mobile video ads has increased strongly over the past 12 months; a trend that's expected to continue over the next few years.
Phil Harpur, Senior Research Manager, Australia & New Zealand ICT Practice, Frost & Sullivan said, "Several factors are stimulating consumption of online video in Australia. There is a higher and growing proportion of longer form content of all online video content watched, and a growing proportion is premium content such as movies or TV shows. Viewing patterns are being aided by improving data allowances from internet service providers, and a greater range of content availability from subscription video-on-demand (SVOD) providers."
Uptake for local over-the-top (OTT) subscription video on demand (SVOD) services from providers such as Quickflix is modest, and global players such as Netflix have yet to formally enter the Australian market. However, more local and international providers are expected to enter the OTT SVOD market in 2015, and competition will increase. Foxtel recently launched its Foxtel Go and Foxtel Presto services, whilst Google recently launched its OTT Chromecast device in Australia.
"Online video content is now a core part of the strategy of many online publishers from both a content and advertising perspective. Local online news sites are incorporating more online video content and those produced by online publishers such as Fairfax Media and Yahoo!7 continues to evolve. However, there is still a lack of locally produced ad funded content; a key reason Australians view the majority of popular video content like music, gaming, sports, and movies from overseas websites," Harpur notes.
Due to a scarcity of video ad spots, video ad pricing for premium inventory, especially long form content, has increased significantly. However, non-premium ad rates are declining due to growing over-supply of ad spots in the market.
Brands and ad agencies see video as an important part of the overall video and TV ad buying process, and as a way to extend the reach of FTA TV campaigns. The market is moving towards a complete solution for buying video across traditional TV broadcasting and online video channels.
The video ad exchange ecosystem has evolved significantly over the last two years, with less distinction now between the traditional roles of a video ad platform provider and a video ad network. Key providers in the market include Google Ad exchange, The Video Network (TVN), TubeMogul, SpotXchange, Adconion, Adap.TV and VeNA.
The proportion of online video ads traded programmatically in Australia as a proportion of the total ads traded has increased strongly during the last 12 months. However, the majority of this trading is for non-premium inventory. Increasingly, ad agencies and brands are placing their online video inventory directly through ad exchanges, and some are building their own trading desks.
Frost & Sullivan's Australian Online Video Market 2014 report forms part of the Frost & Sullivan Australian Digital Media program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. Interviews with the media are welcome.