Digital Video Ads Series #1: A Brief History of Digital Video Advertising

As video becomes the undeniable king of content, the digital video advertising industry is booming. Americans now spend more time consuming digital media than TV, radio and print media combined. In 2017, OTT video ad spend grew 18-fold, and this growth is expected to continue. According to a recent survey, 80% of marketers plan to increase their video advertising budget this year. Indeed, video is the format of choice for many advertisers, who can finally harness what’s considered to be the best medium for storytelling, to help their brands reach new heights of audience engagement across all devices.

Video advertising is not a digital age innovation. It dates back to 1941, when the first video ad was displayed on a billboard during a baseball game in New York. It has, however, come a long way since. To understand how video ads have conquered the internet, we need to step back to understand how online advertising works.

Digital Advertising: A New Hope

Digital advertising has rapidly developed in the past few decades. What many consider as the the first banner ad, by AT&T, was displayed on HotWired, the first commercial web magazine (which you may know as Wired today) back in 1994:

Back then advertisers paid publishers directly to place ads on their websites. These were static ads that were coded directly into the publisher’s webpage. Similarly to real world advertising, advertisers would pay for the space and time their ad would occupy on the publisher’s website, or, at a later point, according to the number of times users viewed the ad – per 1000 impressions (“CPM”). Publishers would therefore display the same ad creative and message to all website visitors. AT&T paid HotWired $30,000 for a three-month banner placement, during which the ad enjoyed an unimaginable click-through-rate of 44%.

This basic model of online advertising was simple but slow, inefficient and unscalable – to replace or make changes in one ad required making changes to the website HTML files. This pushed publishers to come up with a dynamic ad placement solution, realizing that standardizing ad sizes and spaces would allow them to dynamically deliver ads. Instead of placing actual ad images directly on their websites, web pages save a predefined standard-sized area, pulling the ad media as they load from the publisher’s 1st party ad server. The need to further scale across multiple sites drove advertisers to create their own 3rd party ad servers, from which they could run ads on multiple publishers platforms at once, providing more creative control to advertisers throughout the campaign, and better, direct insight into their ads’ performance.

The next evolutionary step in dynamic online advertising was the ability to target website viewers; with time, publishers began to enrich their web page ad requests with more information about the page, and more importantly –  about the user accessing it. This enabled the ad server to deliver targeted ads, allowing publishers to customize ad packages to advertisers according to their targeting needs. Another significant milestone in this aspect of online advertising was the launch of Google AdWords and the rise of social media during the early 2000s. Launched in 2000, Google Adwords added another layer of sophistication to targeting, by allowing advertising based on users’ browsing habits and their search history. Starting in 2004 Facebook enabled the collection of unfathomable amounts of user data, which brought advertisers unprecedented targeting granularity.

As the internet grew with abundant amounts of content, publishers’ ad space inventory increased tremendously. To get rid of extra inventory, Ad Networks came into play, buying unsold inventory from publishers, packaging it according to various targeting criteria, and selling it to advertisers. The inefficiencies brought about by the numerous Ad Networks available on the market gave birth to the Ad Exchange, which allows publishers to offer inventory, and advertisers to place real-time bids on the audience they’d like to target. Major Ad Exchanges today include  AppNexus, Oath and OpenX, which was one of the first to launch in 1998.

Video ads: the force awakens

While the business aspect of digital advertising was becoming increasingly sophisticated, technology advances allowed advertisers to improve ad creatives and experiment with more types of media, but it wasn’t until the mid-2000s when video advertising really started to gain serious traction.

In the early 2000s, subscription-based business models were thought to be the future of digital video content, rather than ad-supported models. Blue-chip companies did start experimenting with video advertising, however inventories were low and CPM was quite expensive. It was the 2005 launch of YouTube that changed the picture. Thanks to faster, widespread adoption of high-speed internet as well as improvements in video compression technology, content providers and users started generating a plethora of video content. Prominent ad agencies began promoting the sale of digital video ad inventory, and major brands realized they needed to include digital video ads in their annual marketing budgets. The YouTube sale to Google for $1.65 billion in 2006 provided a powerful seal of approval for the industry, and assured its predominant place in the future of the internet and media.

It was in the same year that the began laying the groundwork for what would be crucial for the evolution of video advertising – standardization. Founded in 1996, IAB represents major global media and technology companies and is set to research and promote interactive advertising.

In 2006 IAB defined a video ad as a “commercial that may appear before, during, or after a variety of content including streaming video, animation, gaming, and music video content in a player environment.”  To complement this broad definition of a video commercial, IAB categorized video ads into three sub categories: In-Stream Video, In-Banner and In-Text formats.

When we talk about video ads today, we usually refer to In-Stream Video ads. In-Stream Video Advertising includes two core video ad product categories: linear and non-linear video ads. Linear video ads are presented before (pre-rolls), in the middle of (mid-rolls), or after the video content is consumed by the viewer (post-rolls), replacing the video content and taking over the full view of the video. Non-linear video ads are text, graphic elements or video overlays that run in parallel to the video –  viewers see the ad while viewing the main content.



Before the standardization of video ad insertion, each ad had to be custom programmed to the specifications of different video players, forcing advertisers to invest heavily in numerous ad versions that fit each player on the market. For this reason, standards played a significant role in the rise of digital video advertising. Throughout its evolution, the main organisation to supply standards for the digital advertising industry was IAB.

In 2008, IAB first introduced VAST – the Digital Video Ad Serving Template in response to the growing trend of online video advertising. VAST was the first specification created by IAB, with the goal of enabling advertisers to scale their ads across multiple publishers by offering a structured method for ad servers and video players to communicate. VAST provided a common protocol that provided for a single ad response format across devices and publishers, performing well across different screen resolutions, internet speeds, video players and ad servers.

In practice, VAST is an XML script that tells video players which ad to play and how long to play it. It contains information like the type of ad and the URL of the actual media file (flv, mp4, swf, etc.) to be loaded and played by the publisher player. Each VAST version released since has expanded possibilities and included additional features. In 2009, IAB published VAST 2.0, which further standardized some of the ad formats and added support for interactive media files. In 2012, VAST 3.0 was released, introducing skippable ads, ad pods, in-ad privacy notices, and better tracking. The latest version, VAST 4.0, was released in 2016, and includes support for server-side ad stitching, ad verification, category, high-quality mezzanine files and international creative ID programs.

In addition to VAST, IAB rolled out other standards such as VPAID and VMAP, which are referred to together with VAST as the VAST Suite. VAST alone does not provide support for rich, interactive formats that allow advertisers to measure audience engagement. VPAID, or Video Player Ad Interface Definition, is a type of mediafile that VAST points to, and that can be read by playeras that have implemented the VPAID API, establishing communication between video players and the VPAID ad units. This communication facilitates rich interactive in-stream experiences, such as overlays with an interactive call to action. VMAP, or Video Multi Ad Playlist, enables content owners to specify an exact placement of ad breaks.

These specifications simplified video ad-insertion and enabled the digital video advertising industry to thrive. Nevertheless, video ad-insertion still introduces quite a few technical issues and complexities. This series of articles is dedicated to digital video ads: we’ll cover the what, the how and the why of client-side and server-side ad insertion. In our next article, we’ll dig in further, discussing the ins and outs of client-side video ad-insertion workflow. Stay tuned!

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