Media Buyers Bristle At Networks' Premium Rates For Online Video Advertising

by Mark Walsh, Jan 24, 2008, 8:15 AM

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Broadcast networks will have a hard time maintaining the premium rates being charged for advertising on TV programs distributed online, according to a group of digital media buyers and researchers.

Speaking Wednesday on a panel on streaming media at the Digital Media Measurement and Pricing Summit, agency executives questioned how long networks can continue to charge CPM rates for online video three to four times higher than those for TV.

"There's a point when you're going to scare advertisers away if you keep driving CPMs up in this space," warned Chris Allen, vice president and director of video innovation at Starcom USA. Panelists estimated typical online video pre-roll CPMs at $25 to $35 compared to $10 to $12 for TV commercials.

"I think it's a very important time for advertisers to step up and set higher expectations of what they're asking from publishers if we're going to continue to pay that premium rate," said Molly Hop, group media director at interactive agency Critical Mass. Asked about Web video rates, Hop said she had seen CPMs as high as $65 for certain sports-related programming online.

Allen acknowledged that viewer recall rates to date have been significantly higher for Web video ads than TV spots--about 60% compared to single-digit percentages. But he said that online recall rates had already fallen to 60% from 80% in the last two years, and would likely fall further.

The networks "are going to have to continue to share with us the reasons why we should pay CPMs that are at a premium to what were paying in other areas," said Allen in an interview following the panel discussion.

Hop also noted that where video gets distributed online doesn't make much difference from a media-buying perspective. "If I have an opportunity to spend with a network, or a [Web] portal or an ad network for my video, I'm going to go with the lowest CPM because right now I'm not really seeing a difference in how it's being branded whether I'm paying a $65 CPM or a $10 CPM," she said.

Working in the networks' favor has been a relative dearth of the professional video content that advertisers are comfortable placing their brands against. But as that inventory grows, Allen believes it will be increasingly difficult for networks to maintain artificially high ad rates.

The panelists said their clients were still skittish about running ads with user-generated content or venturing far beyond the standard video pre-roll format. Among alternate video ad formats emerging last year was the semi-transparent overlay, seen as a less intrusive way for marketers to reach viewers.

While less expensive than pre-rolls, overlays are generating click-through rates of about 1.5%, according to Allen, who said he'd like to see them closer to 5%.

In terms of video metrics, panelists said they relied on research services such as InsightExpress and Dynamic Logic to help analyze user behavior. Hop said Critical Mass tried to go beyond standard metrics like video starts and completions, to look more closely at measures of user engagement like pass-along activity. "We're taking it a step farther and not just looking at 'Did they complete the video,'" she said.

Yoav Arnstein, general manager, North America, for ad technology provider Eyeblaster, agreed that advertisers are hungry for more detailed user data about Web video.

Whether metrics such as average time spent watching a video or how often viewers expanded the screen, "agencies are highly interested in those numbers," he said. The more standardized such measures become, the better for developing the nascent video marketplace, he said.

Agencies are also trying to get a better handle on the online video audience. Jarvis Mak, U.S. director of research and insights at Media Contacts, said the agency was conducting research with comScore to better target mainstream video consumers.

Heavy video users aren't necessarily as desirable because they tend to visit niche sites with more limited reach. "So figuring out that more mainstream audience is what we're leaning toward," Mak said.

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