No big money in online video ads… yet
Cory Bergman February 16th, 2007
MediaPost’s Wayne Friedman breaks out his calculator and guesstimates how much revenue the networks are generating from online video advertising, and then he compares the number to high-priced TV spots to make a point. “ABC says it does 3.7 million streams a month,” he writes. “At the high $40 CPM level, that means ABC does $148,000 a month — which probably wouldn’t even get you one prime-time spot on Men In Trees.” He continues, “There is a pie in the Internet sky, for sure. But right now this isn’t even about crumbs. It’s about the molecules holding the sugar and flour together…. So during this upfront season, what are TV sales executives really going to be working on?” As you might imagine, I believe Friedman is myopic, and articles like these are dangerous for TV sales execs to read. Here’s why: 1) This week’s Borrell Associates report predicts skyrocketing growth in local online video revenue, and traditional CPM advertising is only a subset of that number. Much of the growth will be advertorial, product placement, focused user video and other creative sponsorship and in-content opportunities. If TV sales people apply Friedman’s “spots and dots” thinking to online video instead of thinking creatively, they’ll miss out on much of this explosive growth. 2) Aggressive video content production and innovation is one of the top critical success factors for driving overall traffic to any content site, which results in higher revenue across the board, not just in video. 3) And as any top TV executive will tell you, aggressive growth in online video revenue, even with small numbers, is critical to tell a positive story to Wall Street.
Adds Drew in comments: “I think Friedman’s analysis shouldn’t be construed as a slam against online video. But it is a slam against VOD clips with prerolls, postrolls etc. VOD is a whole new way of looking at video which the networks and ad agencies haven’t figured out yet. I don’t think VOD will ever be as big a traditional TV. HOWEVER when linear TV is up and running on the Internet, the math will change quickly. Not pie. Maybe brownies.”
3 Comments Add your own
1. Rocker | February 16th, 2007 at 1:00 pm
People said the same things…did the same kind of math…back in the mid-late ’80’s when cable was just gettng started. I do agree that ultimately professionally-produced content is always going to dominate viewing, and therefore advertising. That is not to denigrate the importance of the long end of the Long Tail…just to keep it in perspective though.
2. Drew Robertson | February 16th, 2007 at 1:20 pm
I think Friedman’s analysis shouldn’t be construed as a slam against online video. But it is a slam against VOD clips with prerolls, postrolls etc. VOD is a whole new way of looking at video which the networks and ad agencies haven’t figured out yet. I don’t think VOD will ever be as big a traditional TV. HOWEVER when linear TV is up and running on the Internet, the math will change quickly. Not pie. Maybe brownies.
3. Troy Hanford | February 18th, 2007 at 9:50 am
I like the CPM analysis. But, let put a different spin on ABCs efforts…. 1) they had the content already, 2) since the average viewer only watches 3-4 minutes per experience, the cost for streaming is very very low (probably less than $20,000 mer month). So, they are making $1+M net a year with this one aspect of their online services. And, it promotes and draws customers into the their prime distribution outlets, which should be worth something too. Maybe $1M net is crumbs to some, but I think your math will draw people in….
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