Why online video will soon eat other media for lunch
If the NewFronts held in New York City last spring were the official coming-out for the online video
advertising market, it was the party to beat all parties. How many debs can brag about having 11,000 guests and a show-stopping performance by Jay-Z at their big do? Online video may still be a sliver
of the $40 billion ad pie, but if projections hold true, it may be eating the other media for lunch by the time next year’s NewFronts roll around.
Online video viewing and ad spending have been trending steadily — and sometimes dramatically — upward over the last nine months. The number of viewers between January 2012 and July 2012 rose 3 percent to 184 million, according to digital research firm comScore, while the number of video ads rose 40 percent to 10 million. Total reach hit 51 percent, and the average viewer was watching 25 percent more ads. The view from the money side is even better: Online ad spending is projected to reach $40 million by year’s end — a 23 percent increase over 2011, according to eMarketer. And by 2015, that number is expected to soar to $7 billion.
So what do all the streaming stats and projections add up to for marketers? Everything. And nothing when it comes to the numbers that really count. While online video viewership and ad sales are soaring, the medium still lacks uniform roi metrics to compare it to tv — a concern even for pioneer online advertisers. “At the end of the day, it’s really about measurement,” says Greg Milner, director of global interactive marketing at computer maker Lenovo. “Is your ad working or not?”
It’s a problem. Half the respondents surveyed for the most recent Video State of the Industry Report by Adap.tv and Digiday stated that uniform standards were “very” important, and another 13 percent thought they were “most” important. That makes sense, given that the majority of respondents believe online video aligns more with tv than with online display. In fact, three-fourths said they would be planning online and tv together in 2013, while, nearly two-thirds said they believed that online video advertising is equally or more effective than the ads that show up on tv. But then again, without uniform measurements, what do they know?
If the marketers at Lenovo were concerned about the lack of standard metrics, it didn’t stop them from jumping with both feet into online video advertising when they launched the brand’s first image campaign, “For Those Who Do,” in Spring 2011. Aimed at 18- to 35-year olds, the Saatchi-created campaign, now in its third phase, spans four screens: tv, computer, tablet and mobile. Along with tv, digital media was a big portion of the mix, and more than 50 percent of those dollars went to online video, according to Milner.
Not surprisingly, one of the key factors behind the online spend was demographics. The 18- to 34-year-old “Generation C” consumers are the most connected age group in America (followed closely by 35-49)—representing 27 percent of total online viewers, and 27 percent of visits to social media sites and blogs, according to Nielsen’s u.s.Consumer Report. They also own 33 percent of the tablets and 39 percent of the smartphones in the u.s.
Another reason Lenovo went with online video was the availability of inventory, according to Milner. While tv has experienced an inventory shortage, online availability continues to expand — along with the amount of online content being offered. This year has been a watershed for new online video programming. During the 14 days of NewFronts alone, YouTube announced it was adding 100 new channels of original content, spending $100 million on content creation. Yahoo presented eight new original shows; aol Digital Content unveiled six; and Hulu and vevo rolled out four apiece.
“There’s been a massive investment in high quality original online video, driven by a huge demand from advertisers,” says John McCarus, senior vice president of brand content at Digitas, the Publicis Group agency behind the NewFronts. “It is expensive to have true engagement and effectiveness. You need tools, high-quality content, and conversation around that content.”
Engagement is the driving force for online video advertisers — and the most significant advantage that the burgeoning medium has over tv. Online video ads and branded content let marketers interact with consumers in a highly targeted way that no other medium can match. “Viewers are participating with brands and with each other, facilitated by brands,” says McCarus.
nascar.com’s RaceBuddy, billed as an “online companion viewing experience,” is just one example of the deep audience engagement that online video can offer. Presented by Nationwide Insurance, RaceBuddy showed live video of some of the events in the 2012 Nationwide Series, including enhancements to tv coverage, such as cameras positioned around the track, in-car cameras, and a mosaic view that allows fans to see all streams at once. It also featured a video chat so viewers could talk during the race.
That’s exactly the kind of conversation marketers want to have with consumers, according to Marc Jenkins, vice president of digital media at nascar. “Brands can build a relationship with fans when they are engaged in what they love. Marketers are really looking for an association with premium content. It’s bigger than a pre-roll; it’s about branded content consistent with the brand itself.”
For marketers, investing in online video advertising isn’t business as usual — nor is it business they want to simply turn over to their agencies to develop and execute. It’s new, it’s complex, and it has unparalleled potential. The desire to have a deeper understanding of the medium and a greater involvement in the process has led brands to hire in-house expertise, a trend many expect to gain traction over the next year.
“Marketers feel like they need more intellectual capability because agencies are struggling to move fast enough,” says McCarus. “They need to rethink the teams, and how they’re deployed.”
The vast majority of advertisers aren’t there yet, according to Tod Sacerdoti, ceo and founder of video advertising network BrightRoll. Sacerdoti estimates that 5 to 10 percent of marketers are highly sophisticated in their understanding of online video; 30 to 40 percent are average; and 50 percent are unsophisticated. “The average advertiser may not understand it, but they may not need to,” he says. “They need to understand effectiveness, because then, you don’t need to get into the philosophical argument — it’s just the most effective way to buy media.”
The few advertisers that have been in the space for a while are in deep. Understanding the medium as well, if not better than, their agencies, they are partners in all aspects of video advertising — creative, strategic, logistic. “It’s different; clients used to be consultative, rather than at the table,” says Lenovo’s Milner. That’s not the right model for online video advertising. Now, marketers have “digital evangelists” on board to work with their agencies.
“We’ve got the luxury of having really smart partners, and that’s how we view it — as a partnership,” says nascar’s Jenkins. “The marketplace has evolved significantly, from all sides. The most successful marketers approach it as a content producer.”
For now, most video advertising creative comes straight from tv spots, which works fine on three of the four screens: tv, computer and tablet. Mobile is another story — and another question mark. Advertisers know they have to be in the mobile space because viewers are, but they aren’t sure what works. And once again, there’s no way to know. “The problem with mobile is the screen,” says Milner. “How do you create the same experience? It’s really difficult to measure the impact on mobile.”
Lack of measurement hasn’t kept marketers away, however, just as it hasn’t stopped them from putting video ads on computers and tablets. Nearly two-thirds of the respondents in the Video State of the Industry Report said they would place video ads on smartphones this year. For nascar and its advertisers, mobile measurement has been a non-issue. “The brands we work with have an appreciation for being across screens,” says Jenkins. “This has been our platform. It’s about connecting around the event for us. It goes across sports and entertainment, tying in a partner’s overall sponsorship and tv buy, and digital, with a focus on online.”
For most advertisers, putting tv commercials on a telephone takes a leap of faith. But as the saying goes, you have to be in it to win it. “It’s an environment where viewership is,” says Sacerdoti. “Advertisers should be present and testing that environment. There’s absolutely no doubt that if you’re a top 200 advertiser in tv, you should be testing mobile.”
Lenovo is doing so, but in limited fashion. “The inventory is not there in mobile,” says Milner. “We’ve got tests going on, but it’s all very small buys.”
Until marketers have a better sense of the effectiveness of mobile video ads, they won’t be spending money on new creative for the tiny screen. It’s just not worth it. “We would love to have customized creative,” says Sacerdoti, “but if you look at it, it’s a small spend, with a small portion of budget allocated to it. Would it perform better if it had its own creative? Yes. But there’s no reason to believe the existing creative wouldn’t work.”
Like everything else about online video, the reliance on existing creative for mobile is expected to change. And probably sooner rather than later, given the rapid rise in smartphone users in the u.s. As of March 2012, just over half of all American mobile subscribers owned smartphones, according to Nielsen, up from 38 percent in June 2011. More important, more than two-thirds of mobile subscribers between the ages of 25 and 34 own smartphones. As more video content and more eyeballs move to mobile, advertisers will step up their investment on the small screen, too. “For now, all of our campaigns are adaptive of the tv, and we have an eye to make sure it works on the smaller screen,” says Milner. “That’s the process we do today, but we have to evolve as well.”
So does the matter of measurements. But until there is a standard way to compare the effectiveness of online video ads and tv ads, marketers will just have to keep the faith. “roi is critical to all brands,” says Jenkins, “but from our standpoint, we have found that they are able to measure in terms of their own metrics, and it’s enough. The brands we deal with have a very good understanding of the value: deeper engagement around what they’re doing.”
For all the advertisers testing the online waters, that’s the ultimate measure of success, anyway.