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Summary:

The growth in online video shows means more alternatives to TV than ever before — but advertising dollars are stubbornly sticking with the older medium.

TV, bored, watching tv
photo: ollyy

In the future of television land, everyone from AOL to the Wall Street Journal will be making awesome online shows and sponsors will ply them with ad budgets once reserved for TV. And why not? After all, online audiences are growing fast and might provide much better marketing opportunities.

There’s just one problem — it won’t happen anytime soon. According to consulting firm PwC’s annual media report, online video will increase from $2.3 billion in 2012 to $5.9 billion by 2017. The figure represents 9 percent of future online ad spending, but this is still a small amount compared to TV ads — which PwC predicts will pull in $81.6 billion, or 37 percent of all ad dollars in 2017 (the figure includes ads “around broadcasters TV content” so adjust accordingly.)

This slow growth forecast jibes with the assessment of industry experts who spoke at a VideoNuze ad event last week in New York City. Their explanation was simple enough — brands already feel their budgets are spread thin by TV and they’re not in a mood to experiment.

“If you followed viewers across all screens, we’d have to add at least 70 percent to the budget … our clients say ‘we don’t have have any more money and everything’s more expensive,'” said Michael Bologna, Director of Emerging Communications at GroupM.

Bologna and Digitas’ SVP of Media, Adam Schlachter, both said that media companies’ recent “NewFronts” in New York (a boozy, glitzy preview of new shows intended to resemble the Upfronts in LA), had at best “sparked a conversation” but did not lead to any resolutions to turn on the cash spigots.

The main problem, for now, appears to be a lack of consensus on how to measure the effectiveness of online video ads. Here’s how PwC puts it:

There are [..] challenges facing audience-measurement researchers seeking to provide more accurate data for their clients: …Until progress is made on these, migration of advertising revenues from traditional TV to online video platforms will lag consumer adoption of these new services.

The ongoing status quo (whatever its cause) appeared to frustrate at least one audience member at the VideoNuze event, who demanded that someone explain why TV stations charged more even as they bring brand messages to fewer people.

“We don’t want to pay the failure tax any more. It should be more like the stock market [where value declines with performance]. The agency must say, if your audience goes down, you get less.”

The panel host, Forrester’s Jim Nail, suggested a culture of risk aversion may explain the status quo: “Nobody gets fired for buying ABC, NBC, CBS and Fox.”

  1. I seriously don’t understand the excuse of waiting for improved measurement around digital video advertising before shifting ad dollars. The level of measurement that can be provided already far outstrips any measurement that TV has ever been able to offer in its long history.

    Surely what they actually mean is that they’re waiting for marketing managers to be digitally experienced enough to have an instinctive feel for the value of digital video advertising in the same way they do for traditional media channels from years of executing the same TV media buys year after year.

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  2. “but advertising dollars are stubbornly sticking with the older medium.”

    The only thing “stubborn” here is the repeated, anti-illectual argument that TV ad spend must be fall to zero, else no one really “gets it.” $80 billion-plus, AFTER ALL THESE YEARS, is one hell of a mule, eh?

    You might as well cut and paste this article and future date it for release in June 2014.

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  3. Refer to the “Technology Adoption Life Cycle” in Geoffrey Moore’s book “Crossing the Chasm” and you will see the answer to why the ad buys aren’t jumping to online.

    The ad agencies are firmly in the “Early Majority” to “Late Majority” cohort. They are simply waiting for the technology to prove its efficacy. That proof of efficacy will be found in the metrics when the metric measurement improves.

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  4. Ramzi,

    I have over 20 years experience in advertising sales including having sold some “first of” online campaigns in Canada and I can assure you that marketing manager inexperience with online advertising has little or nothing to do with the problem.

    TV advertising is overwhelmingly purchased by and through an agency. Agencies are not renowned for their lack of experience in nor their distaste for online advertising. In fact, IMO they adore it.

    Agencies get paid by and large from the spread between rate card price and agency discount provided by the medium. In other words, the medium is actually paying the agency but the agency’s client is writing the cheque.

    Every year when the agency pitches their client for contract renewal they are obliged to demonstrate the effectiveness of the media they chose to recommend the previous year. To demonstrate that efficacy the agency relies on standard metric packages and standards.

    So, IMO and based upon decades of experience, the agencies are simply being prudent and hedging their bets. They are waiting until any new medium can prove that it can deliver more eyes and more sales to their client before they go out on the limb and pitch a significant move to a new medium. More eyes without more sales means little in the end.

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  5. TV ads will always be here, it’s a multi-billion dollar industry! I advertisers, especially the very small businesses working off small budgets need to realize that with online video they are no longer in the shadows of big MNC’s who spend millions on TV ads. There are new companies and software that allow advertisers to cut out the time and costs of production teams…small business can make video ads in minutes and they CAN measure results!! Simple Google Analytics will show you whether or not traffic has increased or not…if you roll out a 30 second video ad, for the month of June, do you think it is just a coincidence that the traffic and conversions have increased? I think not…

    Scrap waiting around for ‘easier’ tools to measure video ads. Simple common sense is enough to measure the effects a video campaign may or may not have. Video ads make marketing managers become more and more accountable for their campaigns and therefore I believe this is the true reason for the delayed introduction of online video ad campaigns.

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