The decline of long video platforms in the advertising market is becoming increasingly apparent, supported by various statistics and trendsAs digital behavior shifts, advertisers are reassessing their strategies, leading to an exodus from traditional long-form video advertisingRecent data from QuestMobile illustrates this downward trend, predicting that online video advertising will fall to an estimated 2.9% market share next year, marking a significant decrease over five years.

This decline is echoed in the financial reports of major players in the industry. iQIYI, for instance, reported online advertising revenues of 1.5 billion yuan for the second quarter of this year, reflecting a slight year-on-year decrease of 2%. Similarly, Mango TV experienced a dip in advertising revenue in the first half of 2024, plummeting by 3.9%. In stark contrast, Tencent Video saw a robust growth rate of 30% in advertising revenue, but even this growth isn't enough to counteract the overall downward trajectory of the long video segment in the ad market.

The retreat of advertising from long video platforms can partly be attributed to the fact that key metrics for evaluating ad effectiveness have shiftedAdvertisers are increasingly prioritizing click-through rates (CTR) over traditional cost-per-thousand impressions (CPM). CTR is a vital indicator as it gauges the engagement level of advertisements and reflects user interests more accuratelyA higher CTR typically points to content that resonates better with target audiences, leading to greater potential for conversion.

This shift in focus means advertisers are now using CTR comparisons across different platforms, including short video channels, to inform their budget allocationsLong video ads primarily target non-member users, which can result in missed opportunities to engage high-potential consumersWith even limited advertising aimed at membership audiences being designed to avoid disrupting user experience, platforms tend to underdeliver in terms of effective advertising engagement, impacting CTR.

Advertisers also face challenges due to the uneven distribution of traffic across video platforms

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While premium content often enjoys an abundance of high-quality ad resources, mid-tier and less popular content struggles to attract ad dollarsThe purchasing mechanisms for high-quality content typically favor CPM-based contracts, a model that relies heavily on negotiations between advertisers and platforms, resulting in limited ad placements for brands.

A mere list of major clients reveals that only around 100 key accounts significantly influence brand advertising spend across the digital landscape, covering over half of the total spendThe industry concentration is particularly high among fast-moving consumer goods (FMCG) brands, such as those in the food and beverage, personal care, and electronics sectors.

The focus on reaching narrow advertising goals creates an environment of scarcity for high-quality ad resources, leading brands to compete aggressivelyTo maintain relationships, long video platforms often reschedule contracts with premium brands, offering a supplementary 10% to 20% exposure bonus during times of shortageThis scarcity has inadvertently resulted in a surge of advertisements for high-profile series, highlighting instances where multiple brands, such as Mengniu and Yili, partner simultaneously in the same show — a rarity in earlier times.

Meanwhile, for less popular resources characterized by lower-tier content, advertising inventory remains untapped and thus surplusPlatforms like iQIYI, Youku, and Mango have turned to Ad Exchange platforms to auction ad inventory for lower-tier content based on CPM, CPV (cost per view), or CPC (cost per click) modelsThis shift has allowed advertisers to purchase ads more cost-effectively, especially as the conversion efficiencies of performance advertising riseEnhanced AIGC (Artificial Intelligence Generated Content) is also playing a crucial role in the production of performance ad materials, boosting contributions from performance advertising to long video offerings.

Brands, however, find themselves in a dilemma; while they aspire to auction for quality placements, they are often compelled to withdraw budget from long-video platforms

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Different industries exhibit varied needs for advertisement placements in long-form video contentFor instance, the food and beverage sector enjoys a wider range of opportunities in content insertion, often leveraging audience demographics and engagement trends for better targetingIn contrast, beauty brands typically prefer more vertically-integrated content placements, placing significant emphasis on IP integrity and narrative quality.

The primary goal for brands investing in long video is expansive exposure to reach their target demographicsAs such, leading brands often opt for integrated campaigns that combine product placements with supplementary adsA case in point is the in-depth product integration of Mengniu's Pure Yuan in "The Story of Yanxi Palace," coupled with additional ad placements costing 50% more than standard CPMThis hybrid approach contributes approximately 70% to 80% of overall ad revenue.

Nevertheless, despite the limited scope for IP content integration within ad revenue generation, the prominence of high-value IP content retains its significanceThis is evident as high-profile clients such as Apple or IKEA often shy away from product placements due to brand safety concerns, instead opting for more predictable ad formatsTheir focus on brand integrity often leads them to remain cautious about the adjacent content in which their products appear, preferring controlled environments for their ads.

Additionally, many regional clients resolutely focus their budgets on basic advertisement forms rather than product placements simply due to financial constraintsThey typically engage their audience by directly targeting specific cities instead of investing in context-driven content, leading to a less efficient use of their advertising spend.

Brands rarely limit their video platform collaborations to just one or two players but usually spread their advertising budgets through year-long contracts across major platforms like iQIYI, Youku, Tencent Video, and Mango TV

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The minimum annual budget for top-tier advertisers often starts at 20 million yuanHowever, this budget is subject to constant fluctuation based on advertising consumption and strategic nodes, meaning that not all allocated budget is necessarily spent on the contracted platformAs a result, unspent long video ad funds often leak to alternative channelsTwo primary directions emerge from this budget adjustment: moving towards short video platforms or influencer-driven content marketing approaches.

Analyzing specific industries, particularly dairy brands like Yili and Mengniu, reveals a significant contraction in long video advertising allocations, which now only accounts for 17.1% of advertising budgets, a substantial drop from 24.5% the previous yearIn parallel, these enterprises are moving their ad spend to short video platforms, which saw a shift from 19.8% to 37.2% for the first half of 2024.

This transition highlights the rising efficiency and profitable avenues presented by shorter video formatsConversations with industry insiders reveal that brands are increasingly favoring the performance of ads in short formats, evident in results from platforms like Douyin and Kuaishou, which offer significantly superior return on investment compared to traditional placements.

Furthermore, influencer or KOL-driven marketing initiatives are being employed to enhance consumer perceptions and drive sales beyond just the audience engagement seen with premium contentLeading brands are now funneling increasingly significant budgets into platforms like Xiaohongshu and Douyin, which cater to a more hands-on consumer engagement model.

The advantages of this approach lie in its tighter connection to transaction mechanisms, nudging consumers closer to purchase decisions while reinforcing brand perceptions more effectively than traditional adsData indicates that between January and July 2024, typical advertisers spent 7.17 billion yuan on Douyin and 4.59 billion yuan on Xiaohongshu, reflecting the growing dependence on these platforms for digital brand advertising

A substantial 70% of surveyed brands anticipate that the amount spent on promotional marketing will account for over half of their total marketing spend in the near future.

The long video segment continues to struggle in finding a sustainable advertising model for boosting revenue; its reliance on quality content remains paramount for driving subscription and advertisement revenuesYet, the unpredictability regarding the production of hit shows limits long-form platforms from scaling effectivelyEfforts to address inventory shortages have seen platforms innovate in various ways:

1. They are implementing viewer ads by creating options for skippable pre-rolls or closely integrated ads that feel more organic to the viewing experience.

2. Platforms are experimenting with attention-grabbing formats such as full-screen interruptions and innovative visual styles to capture viewer attention better.

3. Some ads are being sold with a fixed placement model, in response to challenges surrounding the measurement of integrated ads, as advertisers seek clarity on the impact of their investments.

4. Interactive ad formats are also emerging, such as comments-based ads or audience-engaging tactics, which can enhance CTR by fostering user participation.

However, many of these innovations face challenges, including high customization costs and difficulty scaling, especially as aggressive advertising maneuvers line up against viewer experiencesFurthermore, the Television Screen sector may present growth opportunities, as platforms like YouTube and Amazon Prime are already capitalizing on connected TV advertising revenuesForecasts suggest the number of companies generating over $1 billion in U.S. connected TV advertising will grow significantly this year as market dynamics evolve.

Nonetheless, the domestic landscape presents unique challenges due to complex interdependencies among platforms, licenses, and end-users, compounded by regulatory and measurement issues that hinder rapid growth in connected TV advertising.

In light of these challenges, long video platforms now face a double threat: external competition as they grapple with tighter budgets and shifting consumer behavior complemented by rising demands for short video ads

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