iPod: TV’s Odyssey: Advertisers Clamoring for Online TV Episodes

Oct 9, 2006  •  Post A Comment

Commercial slots in the online versions of network shows are a hot commodity, with ABC, CBS and NBC all reporting quick sellouts of Internet advertising in this, the first season that television has plunged headfirst into the Web.

But digital sales represent just a ripple in total spending on video entertainment, and it’s likely to be a while before the traditional 30-second TV spot is supplanted.

“Money is shifting from traditional media to online and new media, so [the networks] have to embrace that space,” said Bill Cella, chairman and CEO of Magna Global. “They have to embrace where the money’s going.”

ABC collected $2.3 billion for prime-time advertising space at this year’s upfront market. By comparison, the network has signed up 36 fourth-quarter advertisers for ABC.com at more than $100,000 a pop. The numbers illustrate advertisers’ desire to explore the Web’s potential without abandoning the format they know best.

“The appetite on the advertisers’ side to try to find additional ways to make connections with customers … just continues unabated,” said Mike Shaw, president for advertising and marketing at ABC.

One of the advertisers on ABC.com is Honda. “This really gives us the opportunity to reach our target and showcase the video commercials online in a highly engaged environment that has 100 percent exclusivity,” said Lauren Mehl, associate media director for PRA, ad agency for the car maker.

Expanding digital income is a corporate priority at Scripps Networks, which expects to generate about $50 million in online and interactive sales this season, said Steve Gigliotti, executive VP of advertising and digital media for the company. That would represent between 5 percent and 10 percent of total advertising revenue at Scripps.

While traditional ad sales at Scripps networks, including HGTV and Food Network, rose by double digits this year, advertisers doubled the amount of money they added to packages that incorporate online advertising, Mr. Gigliotti said.

By 2011, spending on digital outgrowths of TV will more than triple to $5 billion annually, Jupiter Research estimated in a report. That sum still would represent only 2 percent of spending by advertisers and consumers on filmed and television entertainment, so network executives must be careful to protect their mass audience on television while creating smaller groups of more engaged viewers on digital platforms.

“We deliver tremendous value to our cable operator and distribution partners and we have no interest in harming that value,” said Mark Lazarus, president of Turner Entertainment. “We’re in an era where we’re foolish not to test, but fools rush in. We’re going to do a little bit of everything and figure out what works.”

The demand for online advertising partly reflects some advertisers’ fears that digital video recorders are eroding the effectiveness of TV advertising. In a worst-case scenario, DVRs could wipe out about 11 percent of commercial watching and a similar amount of TV advertising revenue by 2011, Jupiter said.

Mr. Shaw and Jupiter analyst David Card said it’s unclear whether advertisers have begun to move serious money from TV into interactive media. And reports of traditional television’s demise may be premature, as proven by the increase in the number of viewers tuning in to network series this season.

“I do find it counterintuitive to say in the face of what my consumers are choosing to do I’m going to advertise to them in other ways,” Mr. Shaw said.