BY LEVI SHAPIRO If you want to start a “show me the money” discussion in Hollywood, don’t mention online video. However, there are eager listeners when the subject is premium TV content. ABC’s Lost, for example, was viewed by more than 1.4 million unique viewers in December 2008 (according to Nielsen). The growing traffic and robust CPMs (cost per thousand impressions) for premium online video suggests a promising advertising market. So the problem has not been with existing TV shows migrating to the Internet. What has been lacking are programming and advertising formats that reflect the new medium. This is despite the good news that the Internet audience is much younger, wealthier and better educated than the TV set audience. Advertisers will pay a premium for access to this 18-49 demographic, lifting CPMs for premium content online to over $25. Advertisers also like the ad recall rates of 21 percent for streaming video, more than double the recall for TV. Moreover, digital consumption is both additive and doesn’t cannibalize traditional platforms. More than 80 percent of the online audience was unable to view the original program on the TV set. Despite the additional viewing options, Americans still watch more television than ever, 142 hours per month in the third quarter of 2008 (per Nielsen). From a small base, New York-based research company eMarketer estimates that spending for U.S. online video advertising will double from last year ($587 million) to $1.25 billion in 2010. Specifically, long-form premium content, which is now 41 percent of U.S. online video streaming ad revenues, should increase to 70 percent of revenue by 2013 (according to the Dallas, Texas-based research firm Diffusion Group). The bad news is revenue. One senior broadcast executive estimates that for the same viewer, revenue from an hour of online viewing is only one-third for the same viewer on television. Some of that difference represents the 18 minutes of advertising available on broadcast television compared to the four-to-six advertising pods (or group of ads) online. Welcome to what NBC’s Jeff Zucker termed the “analog dollars for digital pennies” comparison. The TV industry has begun to explore new advertising and creative formats for the Internet entertainment sector. “At the moment,” said Hardie Tankersley, vp, Online Content & Strategy at Fox Broadcasting Corporation, “online shows are still TV shows, crammed into a different place. We need to take advantage of what an interactive computer platform does well and develop creative and interactive models for advertising. It is a creative problem more than a technology or business problem.” Agencies are getting plenty of TV Internet-related data. Unfortunately, it is not all relevant from a brand-activation perspective. Yaakov Kimmelfeld, svp, Analytics at New York ad agency Mediavest, said, “there are still challenges for successful planning and making the [TV-Internet] campaigns accountable. We can measure user engagement, based on viewing behavior. The trick is to tie these behaviors to branding impact and brand ROI [Return on Investment].” Brands, agencies and TV broadcast networks are collaborating to resolve those issues. The Interactive Advertising Bureau issued guidelines last year for online video advertising standards. The Disney-owned ABC TV network announced its own emerging media and advertising research lab in Austin, under the direction of Australian professor Duane Varan (who did not answer VideoAge’s questions on the subject, after initially expressing interest). Perhaps most promising is an industry consortium, led by Chicago-based Starcom Mediavest that unites major advertisers and content publishers to fieldtest the efficacy of online video ad units. Already, online video site YouTube offers advertising with its full-length, premium videos. The company has championed overlays, which appear in the lower third of video screens and are less intrusive. However, the format has failed to gain traction with advertisers and most of YouTube’s $200 million ad revenue has come from display ads. Hoping to validate the overlay format, Google partnered with Berkeley, California-based NeuroFocus, a research company that applies neuroscience to the world of advertising, and used biometric measures like brainwave activity, eye-tracking and skin response to measure the impact of overlays. Based on criteria including attention level, emotional engagement and memory retention, overlay ads scored a respectable 6.6 out of 10. The biggest difference among the U.S. TV networks has been the approach toTVInternet programming. Walker Jacobs, senior vice president for New York’s Turner Sports and Entertainment Digital Ad Sales, uses content “as a complement to the television experience.” For example, hardcore fans of Turner sites like NBA.com (basketball), NASCAR.com (stock cars), PGA.com (golf) or CNN.com (news) have an online experience that is a complement to the on-air experience. “We have a product called TNT Overtime with additional camera angles. We also have live programming for PGA.com. That means people at an office can follow one group or one golfer. It is not the same broadcast but an alternate view of that broadcast.” Turner is careful not to jeopardize cable systems’ partnerships with its Internet efforts. “We certainly don’t believe in ubiquity. We will segment out the type of content we will syndicate [such as sports highlights], whereas live programming is something we generally keep in our domain.” MTV Networks migrated to an online, ad-supported TV model about two years ago. Alice Kim, svp of Digital Distribution & Partner Relations, said, “there have been surprises. During the election, we saw over one million streams of The Daily Show and The Colbert Report per week, which did not cannibalize iTunes sales. Also, we were not expecting online success of the archives. Shows like Bromance found a niche online. MTV Networks also cut a deal with MySpace and Auditude (a Palo Alto, California-based company that fingerprints or tags media content and attaches advertising to that content as it is syndicated across the Internet) in which all MTV content is fingerprinted. If a user uploads a video from an MTV show such as Punk’d, Auditude will recognize it, attach some ads and MySpace splits the profits with MTV. “This gives us a way to monetize user uploads.” ABC has used its full episode player as a means to establish a high quality viewing experience in a controlled environment. As a result, despite syndication agreements with ABC affiliates AOL, Veoh, Fancast and Cox, more than 95 percent of viewing comes from the ABC.com website. This has helped to ensure higher CPMs. Patrick McGovern, svp, Sales and Strategic Planning and Digital Media at ABC Television (part of ABC network) told advertisers “we care as much about a consistent user and advertiser experience as you do.” This also has enabled easier data collection for ABC’s 100 advertisers. “We found that additional brands and commercials per episode did not hurt aided recall.” Based on Nielsen numbers ABC had seven of the top 10 streamed programs. It should be noted that CBS network, with an Internet syndication strategy oriented toward ubiquity and openness, had the fewest number of programs in Nielsen’s top 10. Measurement techniques (e.g., metrics) need to evolve as well. Walker Jacobs of Turner commented, “metrics need to reflect this different medium,” while Patrick McGovern of ABC noted, “a large portion of our audience are Mac users. That is not measured by Nielsen or [Internet marketing research company] ComScore. As an industry, we need to get better at measurement.” Finally, there are companies addressing the technical challenges as well. Explained Doug Knopper, a former executive at New York-based DoubleClick: “Content owners may have multiple shows with different distributors (for example, ABC owns Grey’s Anatomy, which is shown across different distributors online such as AOL, Cox and all of the local ABC affiliates’ sites) and each of those distributors has its own unique terms (including financial arrangements, frequency of a program airing or time an episode can be shown, etc.). We manage that complexity and ensure they get their fair share in the revenue stream.” V I D E O • A G E MA R C H/ AP R I L 2 0 0 9 34 D i g i t a l M o n e y Analog Dollars Vs. Digital Pennies: The TV Industry Quandary ABC Television’s Patrick McGovern
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