The Interactive Advertising Bureau (IAB) is a trade organization that represents the digital advertising industry. The IAB sets standards and guidelines for digital advertising and helps shape industry practices and policies. In recent times, with the proliferation of video content on various digital platforms, the IAB has turned its attention to video advertising. The IAB has proposed a new classification for instream video ads, which could have significant implications for both buyers and sellers.

This proposal aims to provide a framework that clarifies the different types of instream ads and their associated pricing models, thereby enabling more transparent and efficient transactions in the digital advertising space.

The proposal has sparked controversy as it suggests a new classification for instream video ads, which could have significant implications for buyers and sellers. Instream ads, which are commonly found before, during, or after digital video content, would be split into two new categories: primary instream and accompanying instream. These ads make up the majority of video advertising on various platforms, including YouTube, Facebook Watch, and Snapchat Shows, but not within social feeds.

Under the proposal, primary instream ads would require viewers to initiate the video with sound on, and they would represent a small percentage (5-10%) of the total video inventory, with CPM rates comparable to connected TV. Accompanying instream ads, on the other hand, would encompass other videos that accompany editorial content, and they could play automatically with the sound off. This group would make up approximately 40% of the total video inventory. The remaining 50% of video inventory would consist of outstream ads, which run alone or within their own player in a display placement.

After receiving feedback from industry stakeholders, the Interactive Advertising Bureau (IAB) proposed a new specification for classifying instream video ads during its annual leadership meeting in January. This followed an earlier proposal in August 2022 that would have tightened the criteria for instream ads, potentially reclassifying 90% of the inventory as outstream, according to comments attributed to Eric Hochberger, CEO of Mediavine, in Adweek. The earlier proposal had caused a rift between advertisers and publishers, with advertisers welcoming the increased clarity it would bring to ad buying, but publishers concerned about the potential loss of revenue, as instream ads typically command higher CPM rates (15-20%) than outstream.

The economic implications of the proposed changes to the classification of instream video ads are significant. In the US, digital video ad spending is projected to reach $93 billion in 2023 and is expected to exceed $143 billion by 2026. This growth rate is expected to outpace that of digital ad spending, highlighting the growing importance of video in the ad industry. Moreover, native video ad spending, which mainly consists of outstream ads, is set to surpass $38 billion in 2023 and will continue to grow at double-digit rates until 2024. These figures underscore the importance of the upcoming decision on instream ad classification and its potential impact on the digital advertising landscape.

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