Behind the Numbers: Small Change Got Rained On

Shrinking screens bring in shrinking revenues

You'd think with the raging popularity of Internet video, we'd be looking to the Web for something unique, something we haven't seen before. But it turns out we use our computers just like we use our TVs. We're watching the same stuff online that we watched on the tube.

The first place people go for online videos is YouTube. Sure, that's no surprise. And now about 57 percent of online video viewers visit YouTube each month, according to Forrester Research.

But when the 70 million unique visitors go to the biggest video-sharing site each month, they're not necessarily going there to watch the latest viral video star or some cool underground Web comedian. The most-watched YouTube videos are usually stuff you'd find on TV: music videos from Avril Lavigne and Rihanna, news clips from CNN and ABC, bits from The Late Show with David Letterman.

And when we're not watching YouTube, what are we checking out? Interestingly enough, the answer is news. News is the second biggest category of online video viewership. In fact, more than half - about 51 percent - of online video viewers watch news online in any given month. Forrester found that 32 percent of online video viewers watch local news and 39 percent watch national news.

And in third place are TV shows. Nearly one-third of online video viewers watch TV clips, while one-quarter watch full-length episodes of shows.

"People are going online for three roughly equivalent experiences," says James McQuivey, the Forrester analyst who wrote the report. "It's music videos or outtakes from Letterman, news and local TV, and professional TV content."

What does this all mean? It means the Internet isn't changing our tastes, just our habits.

When we watch video online we control when, where and how we watch; we don't change what we're consuming very much.

But there are consequences for advertisers when consumers insist on the same diet online. Because eventually we're going to be dining at the laptop trough a lot more often than at the big screen one. And Web video - even duplicative content - contains a heck of a lot less ads.

Right now networks are snagging a 50 percent or higher CPM from advertisers with online video than with TV, or about a $40 CPM on average, McQuivey says. The most popular shows pull in $60 and $70 CPMs online.

But even a 50 percent increase in CPMs won't make up the difference in potentially lost ad revenue as consumers tune out the big screen for a smaller one.

That means one thing is coming for sure: more ads in streaming video. Especially when two-thirds of national advertisers already believe TV advertising is less effective than it was two years ago.

That's why advertising in streaming video is the fastest growing segment of the interactive ad market and will likely hit $7.2 billion in 2012, Forrester says. That increase will come in part because TV networks will have no choice but to create more inventory online. The irony is that online ads, ad dollars and ad rates will rise as we watch the same stuff we're already watching on TV. The more things change, the more they mostly stay the same.

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