Michael Hudes, YuMe: “Digital TV and video are going to collide. They will become one”
Portada interviewed Michael Hudes, EVP, Emerging Markets at YuMe, a multiscreen digital video advertising company with presence in Latin America and also in China. Hudes talks about the state of the video market in the world and in Latin America. He makes an interesting comparison between the state of the Chinese online video market and Latin America.How will video evolve in the next years? Is the Latin American market on the same level that as the Asian market? Hudes' answers below.
Portada: What do you think about the programmatic video buying market in Latin America?
Michael Hudes: "When we discussed programmatic today and the opportunity in Latin America, it’s merely driven by opportunities in display advertising. And the majority of display advertising is performance- based not brand-based."
The opportunity for video programmatic is still premature in Latin America.
"So, as it relates to YuMe’s strategy and our point of view on programmatic in Latin America, I will say that the opportunity for video, which is a brand tool (and that’s what we are really experts at: video), it is still premature for programmatic video. For one primary reason: the digital video market in Latin America is relatively small. It still is the early days for digital video as a market. Once the advertisers, brands and publishers engage more or do more business, I think that programmatic will follow. This pattern has been born out in all the other major media markets: US and Europe, where programmatic started with display advertising and is now shifting to video."
Portada: You´ve opened offices in Mexico and Miami for your panregional business, why are you betting on Latin America?
Michael Hudes: Well, we think that the opportunity in digital video is today. Because of the trends that are showing consumers increasingly choosing to consume video based-content in a myriad of devices, as that trend continues, advertisers and brands can’t ignore it.
In the U.S and Europe programmatic started with display advertising and is now shifting to video.
"Now, the characteristics of every ad are different and the opportunity is different across each of the markets in Latin America individually. TV is still the primary means of communicating brand messaging, that is not going to change. Even with the growth of digital video in the U.S., TV consumption and traditional TV broadcast consumption, on average, are going to continue at a steady level.
We do not see that digital video replaces TV. What digital video allows you to do is to find a percentage of your audience that is not consuming TV.
Video allows you to find a percentage of your audience that you just cannot reach on TV anymore and that audience tends to be younger, millennials. So, we believe that digital video should complement a broadcast TV buy."
Portada: You were saying that the market is different in each country of the LatAm region. Which do you think is the strongest?
Michael Hudes: "Let me say that, I think the opportunity tends to reflect the overall size of the individual media market. So, by that measure markets like Brazil and Mexico are where we find more opportunities because they tend to be the largest media markets, but we also see a significant opportunity in sort of what I would call the “second tier”, which includes Peru, Colombia and Argentina. So, as a company we focus first on Mexico because it is easier to enter that market than Brazil, it is easier to open a business there, particularly being a US company. Mainly due to the regulatory environment, language (Spanish vs Portuguese), startup cause (the cause to start a business and get the property licensing, etc.). So, we are not shying away from Brazil, it is just that we can get to market quicker in Mexico, which is why we started there. But we’ve been planning a marketing strategy in Brazil as well."
Portada: What is your opinion about the Latin American video market in comparison with the Asian video market?
Michael Hudes: "The other significant market that we’ve been looking at and we are prepared to make an entry to is China. With that as context, the major difference between LatAm and China beyond the obvious difference, which is the size of the Chinese market vs any single market in LatAm. is that LatAm is not a homogeneous region. The biggest difference actually is that the Chinese online video market is very efficient. There recently has been a consolidation of online players, which has created opportunities in the next platform: mobile and connected television, and other connected devices. So the Chinese online video market is very mature actually, much more mature than Latin America. One of the most important factors that lead to that is that China is embracing programmatic for video."
The reasons why China is ready to embrace programmatic are two:
- The online video market is mature, while LatAm is still immature. So again, taking the lead to programmatic requires that you understand that in order to create a marketplace, you need to have suppliers of inventory. Buyers need to understand what the value of the inventory is. So, if you don’t have direct experience buying and selling videos I think it is hard to put that on a programmatic business to start. And so, in the case of China, they have a very robust and mature online video marketplace, which is lead to the natural extension into programmatic.
- Another major point and difference between LatAm and China is that fundamentally, in LatAm, if you are looking at its’ media history, one of the largest businesses is broadcast television. Broadcast television is very mature. In order to reach at mass scale they use TV. The difference in China is that broadcast television was never a big business. That is because for many years broadcast television was controlled by the government. There were only a handful of TV channels and those channels did not have advertising. Once the internet boomed in China and opportunities presented itself online, people started moving online to find content they could not find in traditional television owned by the government. So, in LatAm we are somehow constrained by the shadow created by broadcast television. People hesitate to move money to other platforms because the familiarity and working knowledge of broadcast TV. That is not the case in China.
The reasons why China is ready to embrace programmatic are two: the online video market is mature and broadcast TV business was never a big business.
Portada: Where do you think video will be in the next five years?
Michael Hudes: "I think in the future we will see very little distinction between what we today call digital video and broadcast TV, because how broadcast TV is delivered and because how it is being consumed: on demand, time-shifted, on alternative devices, etc. Again, what we see is that digital TV and video are going to collide. They will become one."
What we see is that digital TV and video are going to collide. They will become one.
"People will be able to find all forms of digital video content (long form, soft player, on a traditional TV display or short form).All forms will be basically available on any number of devices and left to the consumer to figure out how and when they want to enjoy that content."
Portada: Do you think this will be challenging to the marketing industry?
Michael Hudes: "Well, the only reason why it could be a problem is if people fail to embrace it, because it may be hard to plan it, to buy it or measure it. Now,the other question is whether programmatic really will be embraced. But the screens will converge. Basically, everything will be digital TV."
Portada: Are you worried about the low smartphones’ penetration in LatAm?
Michael Hudes: "If you take a look in LatAm, country by country, I think it is just a matter of time before smartphones become ubiquitous. I mean, we are seeing now in the west in North America and Europe that the percentages and numbers of households that now have smartphones are quite staggering. Let’s be clear, certainly the disparity in incomes in most Latin America countries is far greater than the disparity in incomes in the U.S. But, if you look across the social strata in the U.S. the wealthiest Americans and the poorest Americans are all carrying smartphones. My point is, there will be an increase in smartphone penetration globally, the price of handsets will continue to decrease. That I believe will happen. The company will build lower price smartphones, which means less power. The real question will come to the carriers and what’s the cost to operate the smartphone. But I have to believe that if they find models to make it economically and advantageous to them to put smartphones on people’s hands, then they will. As they do that, people will start using them the way they use them in the rest of the world to live more their lives on their smartphones, which means consume more video."
Portada: How would you describe the relationship between video and mobile globally and regionally today?
Michael Hudes: "I think you need to separate mobile into tablets and smartphones. On tablets we see increasing video usage, because in many ways they are replacing TV. Especially for people on the go. Given their average size and people’s pattern of movement, I think is not only replacing the TV but the magazine.
On the smartphone, on the other side, people tend to consume shorter forms. There is a real opportunity for marketers to reach interested consumers. Smartphones are an excellent way to connect consumers in real time as they are moving through the world, which allows for better targeting and better merchandising."