• by Jonathan Blum , June 27, 2006

Web video is here to stay, though it's difficult to buy and to measure

The Internet may represent the future for TV advertising: There are so many eyeballs to grab and so much money to make. But big obstacles lurk.

Is there even a demand for broadband TV? Will consumers pay a premium for online TV, or will they agree to watch pre-roll commercials? In the broadband marketplace, proven returns are scarce and measures for ad effectiveness scant.

For Tracey Scheppach, the broadband video revolution is a continuing challenge. Vice president and director of video innovations at Starcom USA, Scheppach is bubbly and upbeat when she talks about the merits of network video-on-demand versus pc-based broadband TV.

But when talk turns to deploying broadband technology, her tone turns darker. "Broadband TV is not an option," she says. "I do nothing but look at new technologies 10 hours a day, and I am still waiting for that brilliant idea to come through the door that puts all the pieces together."

Scheppach isn't the only new media officer evaluating the obstacles that must be confronted before online video can challenge broadcast's dominance. "We'll get there," says Miah Sullivan, senior manager media planning and buying at Luxottica Group, an eyewear marketer. "But a lot of media companies are in denial about the new world. It takes more resources. I see a lot of conflicts every day."

Glimpsing Tomorrow

During the 2006 TV and cable upfronts, nearly every major media company pushed multiplatform video buys that included traditional TV and broadband video inventory. CBS rolled out its broadband-only Innertube channel, NBC launched Dotcomedy, a broadband comedy channel, and CourtTV promised a broadband service, as did Fox, Lifetime, and others.

Indeed, broadband video was fetching higher ad rates per viewer than similar purchases on traditional TV. A buyer, who requested anonymity because of the sensitivity of ad pricing, estimated that the premium usually worked out to what an ad unit cost during the go-go 1990s. And spending for broadband video ads seems poised to grow. Forrester Research pegged growth at 28 percent, growing to $12.4 billion from a year earlier.

Still, spending on broadband video is so far just a fraction of overall television buys. Estimates vary, but some observers say that 99 percent of ad spending for some brands is still locked into traditional TV. By and large, consumers still consume almost all of their video content via traditional television. Luxottica data show that Americans average 4.33 hours of TV per day per person, an all-time high. Broadband TV viewing on the pc is estimated at between 1 and 2 percent of that amount.

The lag in broadband video viewing puts advertisers in the tricky position of knowing they must invest in an emerging media platform before the platform is fully realized. "I do not have a problem getting a broadband buy past management," Luxottica's Sullivan says. "And a brand like Ray-Ban uses no traditional TV video at all. But [online] is still not what the consumer is doing."

After advertisers take the leap of faith into broadband, their headaches are just beginning. Most broadband video buys are sold at a premium over traditional media; the rationale is that inter-active video hits consumers when they are highly engaged. Trouble is, there aren't ways to measure how engaged a user is or how much more effective an online ad is. No one can say what that premium is really worth.

"It boils down to paying for the option of getting the consumer when they are leaning forward and doing something just before they lean back to watch a clip," says Arthur Chan, senior vice president Palisades Media Group, a Los Angeles-based agency. "What concerns me," Chan adds, "is that the increase in pricing is for the novelty and not the true value. I am 100 percent pro-interactive. But if you look at reach and comp cost per thousand versus TV, you sort of scratch your head."

Because no one knows how to measure broadband television advertising's effectiveness, questions linger. What exactly does an advertiser get with a broadband video ad buy? Impressions? Time spent viewing? Interactivity? Small viewer sample sizes make measuring ad effectiveness harder still.

"For all the talk of engagement, the lingua franca we're reduced to is reach and frequency," says Greg Smith, executive vice president, media insights at Carat Fusion, a New York-based advertising and planning firm. "It's not unusual for digital plans and 'nontraditional' elements to be measured as gross rating points per reach per frequency."

There's a misconception that the Web is a super-cache of ad inventory. But even billions of Web pages can't yet match all the ad impressions pushed through cable, broadcast, and satellite television. The inventory is not there. "I have not seen a broadband ad unit that has blown my socks off yet," says Christine Bensen, vice president of media at Modem Media West, San Francisco.

Cultural Challenges

For big media players, broadband challenges entrenched hierarchies that divide video among broadcast, local, Web, in-game, and now mobile. These separate fiefdoms can make it tough for companies and their media agencies to adapt to broadband advertising's strange new world.  "There is a major battle of expertise shaping up," Bensen says.

Some companies have rebuilt their media and marketing operations to adapt to the Web. Luxottica has lumped its Lenscrafters, Sears Optical, Sunglass Hut, Ray-Ban, and Arnette businesses into a single video-buying unit. Think of it as the "Eyes Have It" advertising collection. The unit buys video impressions across cable, broadcast, and broadband media. Luxottica then measures its impressions as different types of gross ratings points: high engagement, mainstream, and efficiency.

"We roll all that up into a large gross ratings points figure, weight that, and make our media plan from there," Sullivan says. "We view broadband as a high engagement GRP."

Despite the hurdles, the future still points online for Starcom's Scheppach and her colleagues. Clients like the Web's versatility, innovation, and exposure. And marketers are anticipating a merger of TV and the Web. "I want to be on the record as saying this is absolutely our future," Scheppach says. "But I wonder how long it's going to take."