As a format, outstream video has made a remarkable rise, coming out of nowhere to what is now an almost $1 billion market. Its journey from what was considered a few years ago to be a fraudulent selling practice to now being seen as a major driver of future video growth in the $12 billion digital ad market, holds some important lessons about where the industry can go wrong, and how markets inevitably get back on track.

The birth of outstream

Outstream originated as a basic arbitrage opportunity. When instream video started to benefit from programmatic and the first wave of DSPs and SSPs started catering to it at scale, the average CPM for instream video (much of which was brands directly translating their high budget TV spots for online) was north of $15. In contrast, the CPM for an average 300×250 display ad was between $.70 and $1. The massive delta between the two gave rise to a host of bad actors in the market, who were taking an instream video ad, buying an in-banner placement on an exchange, and running the video inside the banner. They were taking advantage of the expectation of instream and a high value CPM and distributing out of stream in a smaller window (with a worse experience). Some of these actors even delivered these in banner video units off the side of the page where a user was not likely to see them. The economics of it were lucrative. They could charge the advertiser 10 times or so more than what the banner CPMs were costing them, but there was a total lack of transparency to the buyer.

The switch

Advertisers quickly wised up and labeled this what it was: fraudulent behavior. Outstream today though is a more transparent version of the same basic idea. The switch started with different groups stepping in to clear up misleading buying practices. Verification providers started looking at the problem, helping brands make sure that they were getting what they paid for. The IAB defined in-banner video as an ad unit separate to instream video and a traditional banner ad. Brand Safety providers developed methods for detecting small 300×250 video players. This led the supply side to create a more tailored and transparent version of a video running in an outstream display placement. The user experience is improved and the transparency is there, paving the way for above-board products and tremendous growth..

What does this tell us?

• Supply-constrained markets are more vulnerable. When you have a lot of demand for an ad unit, like instream video, but supply is limited, it can lead to some funky behavior. Prices go up and a scarcity is created, which leads to an imbalance in the market. A few years ago there was so much video demand and so little video supply, that demand needed to find another channel. Being able to buy cheap views and sell them to someone who is willing to pay a premium, as these early outstream sellers were doing, represented another outlet for demand, but was a short sighted business practice that couldn’t last as the value was not being created for the advertiser due to the poor user experience.

• Markets can self-repair from bad actors. When you’re leaching out of the middle like these early outstream movers were, what happened in the market to correct the practice shows just how well the market can autocorrect and work to repair itself. Processes were built for brands to know exactly where their video ads were ending up and in what form. The industry set standards, and brand safety and verification providers gave advertisers the confidence to continue to buy instream in the way they intended.

• Transparent value exchange is essential to a well-functioning market. As the market started to tidy itself up, companies like Teads and Unruly stepped in, creating a standard nomenclature to ensure more brand safe outstream video ad placements. Properly labeling the video units created a transparent understanding of the value exchange between all participants. Advertisers knew what they were buying, publishers were making space on their sites, and there were no third parties taking advantage of being in the middle, beyond the normal practices of exchange based buying and selling.  It’s worth noting that some DSPs are still catching up to create a distinction in their buying platforms between instream and outstream, but this is quickly evolving.

Native outstream video completes outstream’s ascent

The next evolution of outstream and the digital video ad market is native outstream video: video ads that play out of the stream of other video content, but run inside content-feeds, the architecture of the modern internet. Evolving from the original form of outstream video, the native outstream video takes further advantage of how the modern consumer is browsing today through their feeds, with an appreciation for ads that autoplay silently, running with a headline and description to add context, so they can decide to engage further with it based on the headline, or move along.

Native outstream video demand and supply will explode in 2017 as the pipes are put in place for it to be traded programmatically. Outstream’s ascent from fraud to darling will soon be complete.