Commentary

Is The Big Shift Underway?

This week, I was having a conversation with a colleague who has been at the top of the digital agency world for the past decade. This is the kind of person from whom you tend to learn something every time you chat -- a real maven. We touched on a variety of topics, including online video. Specifically, I wanted to get his take on why we aren't seeing a seismic shift of budgets from TV to online. The online user base is highly engaged, and there is more premium content and measurement ability than even one year ago. My question centered around the marketers who are interested, but not at the level of going all-in.

"Simple," my friend said. "Big brand advertisers want scale. TV delivers it, and cheaper. It's hard not to justify just buying more TV rather than investing in online."

That statement points to a supply/demand imbalance that online has been struggling with for the past few years. In mid-2008, Forrester pegged premium online video CPMs at $40-$70 (the latter being for a level of programming like NBC's "The Office") while TV averaged $25. Even in 2009, when CPMs are lower across the board, TV still wins because it has the critical mass to deliver pricing efficiency. Right now, the only online video format that has significant scale is user-generated video, which most brand advertisers shun for reasons discussed many times in Video Insider posts such as brand adjacency, length of content, quality of content and user experience.

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So we wait for the big shift of more professional content creation and consumption to occur, while TV gets the lion's share of marketer attention. And we wonder when the shift will begin.

Well, recent findings by AccuStream iMedia Research presented by eMarketer in late February show that the shift may have started last year. AccuStream reported that professionally produced content grew nearly 25% last year, with TV content (think those prized episodes of "The Office") making up 17% of the viewed streams.

It's difficult to project out growth rates in anything online due to the emergence of game-changing properties and technologies every couple of years. Irrespective of that, it's clear that the supply is growing. And if it keeps up, the "TV is just cheaper" argument won't last for much longer.

13 comments about "Is The Big Shift Underway?".
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  1. Aldo Bello from Mind & Media, Inc., March 30, 2009 at 3:16 p.m.

    Eric,

    What examples of professionally produced online video content can you give us...other than the professionally produced TV content that is making the shift from the medium screen to the really tiny one?

  2. Jim Courtright from Big Thinking By The Hour, March 30, 2009 at 3:27 p.m.

    Unlike the model discussed in the article, we think there is another business model emerging for brands leveraging video on the Web: Brands hosting video content on their own site instead of running ads around someone else's video at an aggregated site.

    Our vision is that brands will soon realize that a person watching video content on a brand's website are easily worth 20 times the value of a viewer offsite watching an ad.

    We think a new metric will soon be developed. And it will define the ROI of brands creating their own engaging, fun content on their own websites that visitors want to see.

    And that new metric may well beat the old model of spending media dollars on ads that people are trained to ignore.

    Jim Courtright
    Big Thinking By The Hour, Inc.

  3. Jeff Bach from Quietwater Media, March 30, 2009 at 3:51 p.m.

    @Aldo

    I was just watching Wildcast on Blip.tv. I think that could be an example of well produced online video content.

    Jeff Bach

  4. Jim Kiszka from Kellogg company, March 30, 2009 at 4:03 p.m.

    I would revisit your media plans. If you are paying $25 CPM your are missing out. Online can deliver cheaper, deliver ROI, account for every impression, demo and geo targeting for the most effective reach. TV can give you scale but online can give you targeted reach to the eyeballs you want. TV scale can equal heavy waste.
    Did i also mention we are retarget based on clicks/views/visits?

  5. Scott Doniger from Wirestone, March 30, 2009 at 4:22 p.m.

    the big shift will occur when baby boomers fully retire, which is less than 10 years away -- because the generations that are following them are open to new programming models and content formulas that lend themselves better to interactive experiences. while baby boomers are increasingly engaged with digitial media they are still beholden to appointment, lean-back tv -- most of tivo's use by baby boomers is to time-shift the same experiences they would normally be forced to watch. cpms for online video will likely only rise when the number of baby boomers attracting advertiser dollars falls...

  6. Andrew Budkofsky from Rolling Stone, March 30, 2009 at 9:11 p.m.

    You're comparing apples to oranges when you discuss CPM's. Television sells cpm's against a demo, online video sells against households. When the online video industry moves to sell against demo (we're doing it here at Break), and third party research confirms it's effectiveness, clients will feel more comfortable investing in online video.

  7. Patrick Fitzgerald, March 30, 2009 at 9:17 p.m.

    A great topic and some interesting responses; all of which have circled the bulls eye. I have written about this issue on my Blog blog.straightfacecomedy.com. Read the post The Money Train. The BIG MOMENT will come when the Brands demand that the Agencies deliver real results, not the status quo derivative measures of GRP, but measurable results through the sales chain. Unfortunately, for those living in the digital frontier, Agencies own the relationship with the clients. The Agency business model is built on creating and producing expensive content for broadcast on the television platform. Until they can figure out how to deploy digital creative and make it as expensive to produce as television or, the Brands demand results, we will be on the side waiting for the train. The current economic situation helps the cause for digital; if in this environment “everything is under review” we need to be at the table making the case for engaging content with measurable results. TV will become a reach vehicle; the digital domain will be the engagement piece. If we do our jobs well enough now, digital will always have a higher CPM because we offer more.

  8. Kurt Johansen from Johansen International, March 30, 2009 at 9:28 p.m.

    Hi
    An interesting comparison but the one point missing which Eric was getting to is Response Rates. The only thing a marketer should be concerned with is Response Rates. How many people take up the offer. In my post and blog at http://www.kurtjohansen.com/marketing-ideas/email-marketing-response-rates/ I give more detail. For me it doesn't matter how many open the emails, how many reads the emails, it about who takes up the offer. Can TV give you this figure ????? It should be more than who who watched the Ad. Did the Ad convert and how was it measured is the real importance of advertising.
    Cheers Kurt Johansen -Australia's Email Marketing Guru
    http://www.kurtjohansen.com

  9. Laurent Burman from GlobalScholar, March 31, 2009 at 1:51 a.m.

    Patrick is on the right track. It is partly fabout risk aversion - both on the part of advertisers and their agencies. Even thought TV value/ROI continues to decline (measurably) - the alternative/unkown is too scary for all but the most experienced. And while i'm not a fan of TV, online is equally to blame for why things have transitioned faster... the over-emphasis of transactional-only metrics, the inconsistency/unreliability of measurement and execution, the often uninspired execution of so many campaigns aren't helping. I'm also often suprised at the high cost of so many online efforts (not just the CPMs but also the production/delivery/tracking) - targeting, engagement and tracking/analytics will ultimately win out and continue the trend to online - but we have work to do.

  10. David Camp from Camp Creative, March 31, 2009 at 5:34 p.m.

    People, the entire baby boom is NOT "ten years from retirement"! The boom's peak birth year was 1957. President Obama is a baby boomer. And younger boomers will work longer than any previous generation. All of which will delay their exit from ad targeting.

    But I doubt that boomers are holding back digital spend anyhow.

    I agree with the previous poster who says the primary barrier to higher digital spend is the perception that digital is all transactional rather than brand driven. Even digital agencies reinforce this. My own view is that we'll evolve with our medium; digital will gain in power and share as the physical capacity of online improves, which is happening quickly. Boomers or no boomers.

  11. Phil Guest from Revcelerate, April 1, 2009 at 4:47 a.m.

    I have to agree with Laurent, I think a lot comes down to risk as few marketers are willing to bet the house on something that still has a lot of issues that need sorting, like a single set of consistent metrics.

    There's no doubt that TV delivers scale, but at a price and any communications plan worth its salt relies on a mix of different media yet the reality is that TV often dominates.

    Times are a changing though as the next generation of marketers and media execs become the decision makers rather than influencers they are today. The shift that sees digital as the starting point for communications planning is well under way, one day we might wake up and realize it is here.

    Good discussion, thanks.

  12. Pinaki Saha from Me!Box Media Inc., April 1, 2009 at 2:11 p.m.

    The only word I feel most compelling is 'Engagement'! The online delivery framework can scale on the engagement opportunities and innovation in that framework. It is the only platform that allows creativity to play in and engage viewers in ways that have never been possible on TV framework.

    Scalability of online viewership and ad dollars moving that direction will happen when engagement features are robust, meaningful, enticing, and conversational. Further, the engagement framework also needs to be supported by new kinds of metric and analytics to track the ROI in terms of generating loyalty and high recalls.

  13. Joshua Rex from AP, April 2, 2009 at 3:33 a.m.

    Hi Eric,

    Great article, you do draw some interesting observations. Allow me to add one to the mix. Another reason why we haven't (yet) seen a seismic shift from TV to online video is that we are haven't moved far enough into the right pricing and metric models. You are absolutely right that there is more measurability on the internet now than there was a year ago - and for sure loads more to come - but the reality is that we still price arounf half of content on impression based models. CPMs have no place in an era of accountability. I think it is incumbent upon all industry participants to push aggressively for engagement basd prcing models. If I was an advertiser I would never pay $20/30/30+ CPM rates and have no guarantees (or incentive on the part of a publisher) that the content will engage users. It's quite absurd when you think that we have this fantastic platfrom that can deliver the richenss and emotion of TV plus drive a direct engagement and all we do most of the time is buy footfall. That cool for an analogue world and I am a biog fan of OOH as a medium but really crap for a digital world. The good news in all this is that engament based models now constitute more than half of display media pricing. http://hex.io/j0m. We are on the right track - just need to push ahead.

    Cheers,

    Joshua

    @joshuarex

    thisisopen.com/blog

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