2012 was a watershed moment for mobile video. For the first time ever, mobile web traffic exceeded desktop web traffic. This was driven by mobile video, which by the end of 2012, represented 51% of all mobile web traffic. Cisco forecast these trends to ramp up over the next 4 years.
Cisco isn’t very good at names but they do have interesting insights. On the 6th of February Cisco published the snappily titled ‘Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2012–2017’. It makes for fascinating reading.
Their numbers for future mobile web traffic growth are huge. Mobile network connection speeds will increase 7-fold by 2017 and corresponding global mobile data traffic will increase 13-fold between 2012 and 2017, from 1.6 EB to 11.2 EB per month. Tellingly, by 2017 two-thirds of the world’s mobile data traffic will be video (see fig 1).
Fig 1. Mobile web traffic by data type
Smartphones and tablets are the devices through which all this traffic will flow (see fig 2) aided by the increased availability and speed of 4G. Cisco predicts that by 2017 4G will be 10 percent of connections, but 45 percent of total traffic.
Fig 2. Mobile web traffic by device type
Online video is already the engine of growth for digital media companies like Google. Youtube, through their investment in content producers both amateur and professional, and through their skippable ad formats, have managed to push up their video ad CPMs.
Nikesh Arora, Chief Business Officer at Google, said Youtube moves the needle with regards to ad revenue, and that the company’s ad revenue growth in the Americas was driven by “mobile and Youtube.” Already a staggering 25% of their global video views come from mobile.
Christian Schmalzl, Global Investment Officer at Mediacom Worldwide writes, ‘The online video market has adopted a clear structure in the US but remains less developed in EMEA. IN the US, three clear tiers have emerged: first the TV broadcaster/catch up sites, second the video aggregators like Hulu and YouTube, and finally the video ad networks.’
A fourth tier that’s starting to develop is social video, which took another step forward in 2013 when Twitter launched Vine to take on Viddy and Social Cam. It’s an exciting sector yet to be monetised or adopted by advertisers.
All these companies are taking advantage of the big gap between the amount of time people spend on mobile devices and the amount of advertiser dollars/pounds spent on those platforms targeting them.
According to the IAB, digital video advertising increased 43% in the UK to £69.8 million from £49.0 million, accounting for 12% of online and mobile display in the first six months of 2012; the equivalent share was 9% in the same period in 2011. Informa is forecasting a global US$37 billion OTT-video market in 2017, made up of three key video-revenue streams, advertising, subscriptions and transactions.
The ecosystem around online video will expand massively too. Video streaming optimisation companies like Rightster and Conviva are growing as they help brands quickly distribute and monetise their video content, with a good end-user experience in mind.
As the quality of online video increases and the trend of audiences turning to live streaming/watching on demand through mobile develops, it’s likely we’ll see increased parity between online mobile video ad CPMs and TV ad CPMs. They’ll start to meet in the middle.
This isn’t bad for traditional broadcasters, as technology has so far served to incrementally add to the amount of audio-visual content being consumed rather than substituting it. However, there will come a tipping point when linear broadcast TV will start to wane. Ofcom’s 2012 Communications Marketing Report shows how 16-34 broadcast viewing is starting to taper off (see Fig 3)
Fig 3. Average hours viewed per day by age group
One last thing to consider: how consumers will navigate through the ever-increasing supply of video content? Content discovery is an area I’ve discussed before on this blog but it will become ever more important. The future seems bright for the mobile video industry.