SMG Breaks Broadband Upfront, Places Millions on Yahoo, MSN, Feedroom, With More To Come

In a flurry of deals reminiscent of the broadcast network upfront, Starcom MediaVest Group has quietly placed some $5 million for video advertising buys on leading online broadband players including Yahoo!, MSN and Feedroom. The buys, which began about a week-and-a-half ago are expected to grow in dollar volume and in terms of the number of broadband players involved.

On Tuesday, SMG executives were in deep negotiations with AOL Broadband for a piece of SMG's so-called broadband upfront budget and the agency expects to continue cutting such deals well into next year.

"We've made our first moves and additional moves are coming," said Rishad Tobaccowala, president of SMG IP and chief architect of SMG's broadband market strategy. "We have laid down a base and additional moves are coming."

To date, he said, those buys primarily cover video ads on broadband services through the fourth quarter, but he said SMG is currently in talks to place broadband buys for the first, second and third quarters of 2004.

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As such, Tobaccowala said the broadband upfront differs from the broadcast upfront, which normally takes place in a concentrated period of time for the following full broadcast year. Other than that, he said the deals are not dissimilar to broadcast upfront buys and include such standard upfront terms as cancellation options and audience delivery guarantees.

But SMG executives said the real motive behind the broadband upfront isn't simply upfront terms and conditions, but the ability to lock up potentially critical broadband content and applications.

"These are first-mover opportunities," explained Tobaccowala. "In some cases it's premium content. In other cases it's premium technology. But all of them involve some soft of first mover opportunity."

He said most of those deals were exclusive to SMG's clients who retain first rights of refusal on renewing the sponsorships.

Tobaccowala declined to specify which SMG clients have participated in the broadband upfront to date, but the agency, which represents such heavy- hitters as McDonald's, Procter & Gamble, Coca-Cola, Kraft and Kellogg, said it is negotiating on behalf of 12 advertisers.

In fact, while the deals are structured to generate immediate advertising returns, most also are designed to serve as labs for testing and developing future video advertising formats and methods.

"The whole idea began with the idea that we have this engaging video advertising and what other ways we could use it over time," said Tobaccowala. "There is all this money going into television. Could we use some of it and go to market and tell the broadband people we're serious, with real money and real clients."

SMG would not say how serious it and its clients ultimately would be in terms of real broadband dollars, but they say the dollar volume isn't as important as establishing a base for what the agency ultimately believes will be part of the future for all video advertising.

"I you think about it, isn't broadband really just another form of video on demand," noted Tobaccowala, who estimates that about a third of the broadband budgets are coming out of traditional TV advertising budgets, a third from online ad budgets and a third from incremental spending.

In addition to learning about how users interact with video-on-demand, the agency hopes the deals establish new benchmarks for measuring and posting the return on broadband advertising buys. Among other things, the agency is working with third-party video servers to establish norms for what constitutes a video ad impression online and what are the best environments in which to serve them.

The deals come four months after SMG chief Jack Klues unveiled that agencies intention to develop a broadband upfront, but after four months of learning, Tobaccowala says the agency is thinking of scrapping the upfront terminology altogether.

"We've moved from the term broadband upfront to broadband embrace, because that's what this really is. We're embracing broadband and we're using real dollars and real clients to do it."

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