The Limits Of ‘NewFronts’

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April 30, 2012 – 12:03 am

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The Limits Of ‘NewFronts'

This past week's NewFront events – a bid to connect online video advertising to the roughly $10 billion TV upfront marketplace – generated a lot of attention (see AdExchanger coverage here and here), but it's worth wondering about the substance of the extravaganzas held by Publicis Groupe's Digitas, Hulu, AOL, Yahoo and Microsoft.

In the view of Pivotal Research Group analyst Brian Wieser, the shows put on by the above entities won't add up to much in terms of moving significant amounts of ad budgets to online video from TV.

For one thing, as many media buyers have told me repeatedly, online video is plagued by a lack of premium inventory. Still, the original web video that was promoted at the various NewFront presentations this week surely is a start in terms of addressing that problem.

But that's what it is – just a start. After all, as eMarketer has noted, Ad spending on online video totaled just $2.02 billion – still, it has experienced an impressive rise of 55 percent from 2010 – while TV advertising in the U.S. hit $72 billion last year, according to Nielsen figures released this past week.

Wieser also points out that actual viewing of online video, while growing vastly, is still small, as consumers spend only a small percentage of their time with video-based properties. "While publishers are finding ways to expand inventory (for example, by placing pre-roll video ads prior to online games or by adding to ad loads), the total volume available for sale is limited, and very little of it would be deemed to be of sufficient value that it must be locked up in advance," Wieser writes in an analyst note (pdf-only, not available online).

He goes on to note that media buyers consider online video inventory convenient way to contain traditional TV pricing. "For now, most of the buys of online video will remain within the bundles that traditional TV sellers attach to conventional buys, as occurs today with the broadcast networks and Hulu, for example," Wieser says, highlighting the increased focus on cross-platform deals.

Ultimately, most online video comes from digital budgets, not TV, Wieser adds. With that in mind, there's little or no benefit to long-term commitments for advertisers, which is the basis of the TV upfront negotiations. "As for the rest of online video, the business will continue to grow," Wieser says. "Online video should grow by 22% to $2.3 billion during 2012 in the U.S. alone. It just doesn't require anything resembling an upfront marketplace… These buys will continue to have shorter lead-times than TV, as online advertising is typically planned closer to the time at which campaigns run. As well, for these budgets, online video is only one of an array of digital tactics, and there remains no shortage of ways in which digital budgets can be executed without committing months (or up to a year) in advance, as is the case with the conventional Upfront."

That said, in five years, the dividing lines between TV and online video may come more into balance, as the TV becomes viewed as "just another screen" by consumers. But will that mean that the ad landscape will resemble the scarce inventory of TV or the practically infinite horizon associated with online avails? It's not too unreasonable to bet that the ability to create truly "premium" experiences online will drive higher advertising and require some form of a futures market to lock in ad rates versus the scatter market that currently exists for online video.

Of course, it's still hard to dismiss the more uncertain scenario: that video consumption on online video properties will still attract only fleeting users, imperiling the cycle of premium ad dollars needed to support quality content.

But the same was probably said about cable's early challenge to broadcast in its early days. In other words, unless digital video really has changed the habits of consumers and advertisers – and who's to say it hasn't? – the business model that has continued to bring massive amounts of spending to TV will ultimately embrace and absorb the digital model and reshape it accordingly, rather than the other way around.

YouTube Aims For Small Biz Ad Dollars

For all the talk about bringing TV-like ads – and accompanying ad dollars – to online video, perhaps the greatest opportunities can be found in the kinds of marketers that are more associated with local broadcast advertising, or even the Yellow Pages.

There is probably no other video site as prepared to tap that largely untapped video market better than YouTube. Last week, the Google-owned site opened up AdWords for Video to all advertisers. AdWords, which is still so central to Google's business and has served as the key building block for all the search giant's ad sales business, will likely unlock small-business users' dollars, since they're already the primary conduit for the general AdWords product.

For one thing, AdWords' proposition has been hard to resist, since advertisers only pay for the ads that are viewed. Secondly, the self-service model promises the ability to set up an account in just five minutes (give or take). Read YouTube's blog post for more details.

As Techcrunch's Anthony Ha notes, the YouTube AdWords program could be the main way Google drives revenue for YouTube, which has always been a source of intense media scrutiny and mystery. YouTube is also enlisting advertisers as "ambassadors" to get the word out.

Secondly, YouTube is promising not to blanket every video with such ads. "There's a set of videos that are monetizable," says Baljeet Singh , YouTube's group product manager. "Clearly, with more demand, that's going to imply that more of those videos … are going to be monetized. But it won't change the set of videos that are monetizable."

But Wait. There's More!

By David Kaplan

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April 30, 2012 – 12:03 am

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