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Internet Television Moves to Center Stage

Mar 1, 2009  •  Post A Comment

Since online video is one of the few advertising mediums expected to grow this year, it will be a closely watched marketing category.
According to eMarketer, Web video advertising spending will rise 45% to $850 million in 2009, a year in which most other mediums are expected to shed value.
As a result, Internet television will be one of the pervasive themes at this week’s 4A’s conference in New Orleans, with several panels devoted exclusively to the topic. That includes Thursday’s panel “Digital Video: Who’s Making It? It’s Not Just the Consumer” led by Rob Norman, CEO of GroupM Interaction Worldwide. His panelists include Ryan Magnussen, founder and CEO of Ripe Digital Entertainment; Kevin McGurn, VP of national sales at Hulu; Jeff Minsky, director, Emerging Media Platforms at OMD Digital NEXT; and Suzie Reider, head of ad sales for YouTube and Google Display.
“The big issues are who’s watching video online, what are they watching and who’s making it,” Mr. Norman said. “And who is making the best sense of it from the seller’s side and the people who are owning the inventory and on the advertising side. Online video has become a significant distribution for the consumption of regular TV programming, but it’s not yet been replaced by an effective advertising model.”
Sure, sites like Hulu that carry full-length TV shows and movies are growing significantly in revenues and viewership. Hulu averages anywhere from 6 million to 9 million unique visitors each month and has been increasing its ad dollars each month, too, the company said.
Hulu also has said it’s working on more innovative advertising formats and efficient targeting that take advantage of the online platform.
But Hulu accounts for only a small portion of overall online video viewing. YouTube commands about 40% of all the videos viewed on the Internet. The massive site is still testing which ad models its users will tolerate and whether advertisers, wary about edgier content, would even consider sponsoring many of the videos on the site.
“They are OK with edgy skateboarding tricks and less comfortable with self-immolation videos,” Mr. Norman joked. “The point is, advertising has always operated in a highly regulated environment, in that there are FCC standards on decency and so forth. The real difference here is in the degree to which brands are talking to their consumers in an unregulated environment and if consumers are going to consume in an unregulated environment now. Advertising works but works on a contract—I give you content for free and you watch my ads.”
That contract is changing, however, and advertisers need to figure out how to adapt. “I have always taken the view that there are covert contracts that either consumers agree to be interrupted by these ads because they know they get the show for free, or with an HBO there is an overt contract where consumers pay to have a different kind of experience,” Mr. Norman said.
The trouble with online video is that the terms of the contract aren’t clear yet. For instance, Mr. Norman asked, is it reasonable to run a 30-second ad once every 20 videos? “The work that needs to be done is understanding both from the seller, creative and the buyer how to replicate the effectiveness or find some new alternative way into those channels, and I am hoping the panel can give some ideas and consideration to that,” he said.
Then there’s that nagging issue of the ad load in online video. It’s unlikely consumers will tolerate more than a handful of ads when watching a TV show online, raising the question of how networks can make up the money lost when consumers aren’t watching as many ads online as they would have on TV.
Expect a premium, then, in online TV shows, Mr. Norman said. “Advertisers have always been prepared to pay a premium for what is exclusivity. You pay a premium to be first in a pod, you pay a premium to be the exclusive sponsor in a category. The math needs to be established online, but the notion is there,” he said.
While researchers are predicting big growth in online video this year, the marketplace is still very cloudy for now and the forecast won’t be clear until after the upfront, Mr. Norman said.
“The upcoming upfront will be a witching hour and no one knows yet what the real impact of corporate behavior is going to be,” he said.

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