SMWest 2006: Is there money in broadband channels?

Steve Safran October 31st, 2006

Streaming Media West 2006

“The Rise of Broadband Channels”

Moderator: Raghav Gupta, Business Development & Strategy, Brightcove

PANEL:

Alix Baudin, VP Business Development, BET Interactive
Brian Buchwald, GM, NBBC
Jeremy Lockhorn, Group Director, Avenue A Razorfish

Moderator: Where are we in the lifecycle of broadband television?

Buchwald: We’re clearly at the early stages of the game. I joined NBC last year at the time when a clip called “Lazy Sunday” hit YouTube. It brought a whole new audience to Saturday Night Live and galvanized the existing audience. We couldn’t afford to wait for our audience to find us, it was important to go out and find visitors on other sites. So we started NBBC.

Baudin: We started our broadband business in March of this year. It has ramped up significantly. It tells you about the need for content on the web and on mobile. Our strategy is to create an efficient and effective delivery platform. We want to put more content on a broadband player and optimize the experience.

Moderator (to Lockhorn): How do you from an agency perspective see broadband television? Is it showing up as a line item on an ad buy?

Lockhorn: I don’t know that we’re yet at a point where we’re showing up as a line item. It’s a big focus for us over the next 18 months. Interactive video should be the best marketing tool the world has ever known. The analytics that power interactive media should be the Holy Grail for marketing. We’re early in the process, we’re trying to figure out the metrics, where it fits for our clients, and inventory is a problem as well.

Moderator:

Baudin: BET is advertising based from a broadband perspective. We would look to iTunes, but we’re ad supported.

Buchwald: We see the ad supported model as the most promising. It’s how people are accustomed to dealing with mass media. It ties in to the thinking of our media buying partners. The issue we do have on the ad side is the inventory. We see a lot of inventory from low quality sites that the advertiser may be reluctant to be associated with or we see high quality sites with a more niche audience.

The frequency issue is another advertising matter. People get tired of seeing the same ad over and over agin. Frequency capping needs to be in place, or companies need to create a bunch of different TV spots.

Moderator: But with frequency capping the inventory issue becomes an even bigger problem. What’s the solution?

Buchwald: We have to retrain ourselves as to what’s “quality” and what’s not. We need to be able to cordon off pieces of a site that may be more favorable to an advertiser.

Baudin: Aggregation would definitely help solve the inventory crunch. Advertisers are concerned about where their ads live. It’s always going to be a compelling problem for them.

Buchwald: Outside the preroll/companion ad environment, agencies are creating their own multimedia ads. It can be a five minute piece of content that is viewed as entertainment.

Lockhorn: We’re exploring any and all approaches to video. That’s the kind of thinking that gets us excited. Taking your TV spot and putting it online is not the best use of the medium. It’s exciting to hear those kinds of approaches.

Moderator (to Lockhorn): Let’s talk numbers. When you put a buy together, what sort of CPMs do you see? How do you put a buy together?

Lockhorn: First – a caveat—I’m not a media buyer. CPMs range broadly, but we’re seeing CPMs online are higher than they are on TV. For a preroll it’s a $20 - $50 CPM depending on how fine we’re able to target the audience. We’re experimenting with in-banner (video) placements. We’re producing original video for those placements. That’s less expensive than a preroll. You have to deal with more clutter on the page, as opposed to a preroll. But the experimentation we’ve done so far has been successful.

There’s no minimum size client – if we have a client that has an audience of 15,000 and it’s a niche audience, we’re interested. I’m going to be interested in talking to anybody that has an audience, no matter how small. There isn’t a minimum threshold.

Our clients are actively asking to experiment in this world. In a lot of cases those clients are willing to look at the PR value and learning they can get, even if the audience is really small.

Moderator (to Baudin): Give us a sense of your inventory and sales numbers

Baudin: You can definitely see a range of $20 - $50. We are sold out, we’ve been sold out for months. Our biggest challenge is to generate more inventory. We need to generate more compelling experiences for our audience. There is not enough traffic out there to monetize, it’s really that tight. In March, we launched and in June we had our BET awards. In the two day period we did north of one million streams. Whenever we have a major event there is a ton of traffic. Imagine if you had that on a consistent basis and you monetized that.

Moderator: In terms of growing the audience, is the best way to have more live events and drive people away from the TV?

Baudin: We are definitely messaging the user to go online and see extra clips. Convergence is the strategy for our company. If you watch clips online, it drives you to watch TV. Teens are watching TV and they’re online and they have their mobile phone next to them, all at once. That’s the world we’re living in. The faster you can adapt, the better.

Moderator (to Buchwald): Are the economics such that people can make money off broadband TV?

Buchwald: We’re sold out in terms of the network we’ve built now – tens of millions of impressions per month. We’ve offered website publishers a branded experience and content. Even if a site like BET is getting five million streams, we can take that content, get it out there, and maybe get it ten million more streams.

Baudin: It’s very difficult for a brand like ours to figure out the right path. We will eventually syndicate our content. But you also have to factor in what that does to the brand, what it does in terms of our users. If a significant amount of our content lives on another destination and drives the traffic there, that will affect our model. We need to figure out the economics and how it would work from an operational perspective and an ad sales perspective. Right now we’re focused on driving traffic to our site.

We will go down the path of syndicating our content. How do you create a compelling content that’s really deep? If I have content that lives on another site – if it links back to our site, fine. But if it creates a better experience on their site, that’s a problem. We want a syndication strategy that drives our audience back to us.

Buchwald: You have a sales team that needs its compensation. If their paychecks are dependent on their sales, it makes offering syndication challenging. You have to create a model where another media partner feels comfortable with the process of syndication. This is important for the content owner and the advertiser.

We offer different ad revenue share models. Sometimes, we offer a fairly even split. If content owners bring in the advertiser, they get a bigger share of the revenue.

Lockhorn The key is that it’s fairly clear to us to know who to call.:

Moderator: Networks are starting to bypass traditional routes and send content directly to consumers. Is that creating conflicts?

Baudin: A successful broadband channel could create conflicts with our cable operators. We haven’t had an issue, but it’s still the early, early days.

Buchwald: We want the content and the media to be made available over as many different platforms as possible. Everybody deserves their slice of the pie as long as they are the ones aggregating the audience. The cable audience saw a lot of value in the past 20 years build up on their end.

Moderator: User-generated content – are advertisers buying?

Lockhorn: We have bought on YouTube. There are a lot of eyeballs, so that demands our attention. Our clients are going to want to be associated with content and be involved with placements where their products will be painted in a positive light. Not only are there a lot of eyeballs out there, but it’s an audience of folks that are passionate about sharing their points of view. Some are even building positive ads for the advertisers. You’re getting the advertisers to make the ads for you. We haven’t gotten into preroll placements on sites like YouTube. We do banner placements. We haven’t done our own video mashups, but we’re looking at it.

Baudin: We want to explore UGC. We’ve been content focused, and the trend is to capture it. The issue is – how do you monetize it? We don’t know what the business plan is. Once we have a handle on that, we’ll have a better idea of how to make a business around it.

Moderator: How do you work with YouTube?

Buchwald: From a promotional perspective for a company like NBC, YouTube is a very effective tool. It becomes a major driver of what people are watching, especially within targeted user groups. The second piece is copyright issue. One of the reasons media buyers have trouble buying ads on YouTube is because of the copyright material. There are sites that are solving this problem by licensing the content. The last question is – how do you make it work for your brand?

Moderator: What’s this space going to be like a year from now?

Baudin: Still working on driving more compelling content. Do we capture original programming? From a platform perspective – will there be more video on mobile? It’s still too early.

Buchwald: I’ve been impressed by what companies like Cisco are doing with IPTV. We’re reaching a point where we’re at the vanguard of a very different industry than we think it’s going to be. It’s not just about putting existing video on a website. This is going to shake the foundations of companies. This is a change that’s finally come.

Moderator: What are sites people should know about?

Lockhorn: One interesting company is BuddyTV.com – launched by former Avenue A employees. They do two-screen TV-style programming. They can have someone moderate an interactive multimedia video – I can watch Big Brother and have him moderate it at the same time. From an ad perspective – that opens up a whole lot of new possibilities. That also mitigates the time-shifting issue, because it makes the show more of a live event.

Q&A:

Question: There is a lot of talk about advertiser concern on UGC sites. What about UGC sites that are concerned about the ads that are placed there?

Lockhorn: I’m actually pleased to hear this. I have this argument with myself all the time. I question if we are radically rethinking the advertising model enough. There is fear around this idea of consumer control. Like it or not, the internet, TiVo is that users are gaining control. We shouldn’t fear that, we should embrace that. It is the greatest marketing opportunity we’ve ever seen.

Question: You talk about being sold out of inventory. But local TV stations are seeing the opposite – lots of video plays, lots of open inventory. What advice is there for locals that aren’t selling local video ads?

Buchwald: Working with a network like NBBC, Brightcove, Roo – we can work with many different advertisers – some of which have local needs. I spoke with a client yesterday that was only interested in local buys. We see those guys on a daily basis. From the supply side, we have to think about how video advertising is created. It’s still not at the point where local advertisers can always afford the production. We need to figure out ways of creating ads simply and put campaigns in place effectively.

Question: Do you see this going to the living room television? How soon?

Baudin: We haven’t developed a strategy for that as of yet. We’re really focused on our existing broadband and VOD strategy. The real question is – when will there be a device out there that makes that feasible.

Lockhorn: I hear frustration from a lot of people – set top box makers, content makers, ad buyers. People are frustrated at the slow pace of development. We all recognize that it’s moving slowly, but we’re stuck in this world where we want to own everything, and that is slowing things down.

Question: What percentage of the cable viewership is making it online?

Baudin: We are in 80 million plus households. We’re pretty much in every African-American household, period. The latest stat I saw was that there are 20 million African-Americans online. Other metrics say 9-10 million.