ADOTAS — There may still be more commercials on TV than on the Web, but online video ads are encroaching on TV’s advertising dollars as the potential viewers rival prime-time audiences and quality content increases.
Television remains the dominant advertising medium in the U.S, but it’s starting to lose its luster. The trend becomes more obvious when you follow ad spend: the Interactive Advertising Bureau (IAB) recently surveyed 5,000 advertising executives and found that 75% will relocate at least some of their budgets to digital video ads.
The market for video ads is soaring with approximately 58 percent of the U.S. population watching streaming media. It also captures audiences that are difficult to reach through TV ads only, such as light viewers or young adults, IAB says. Only about 15 percent of U.S. adults don’t go online, Princeton Survey Research Associates has found.
Advertisers are now understanding that people are starting to consume more content through digital media, and more content is coming online, Late-night talk shows have begun to exploit the potential of well-produced viral videos while Emmy-winning programs such as “House of Cards” are only available online. The online audience is growing, and new technologies powered by semantic ad matching are emerging that are making it easier to discover relevant content. It’s really all just beginning.
The shift in ad spend could be viewed as a horse race. eMarketer estimates that U.S. advertisers will spend $66.4 billion on TV ads this year, compared to $4.1 billion online. Video ads will grow another 40 percent over the year. That doesn’t bode well for TV advertising at first blush, but the TV ad market is still growing (just more slowly), and it’s much more mature. eMarketer says that U.S. TV ad spending will rise from $66.35 billion this year to $75 billion in 2017; $64.54 billion was spent in 2012.
However, viewing TV and online advertising as rivals is a narrow perspective: one reinforces the other. In fact, brands and publishers are more often than not viewing the platforms through an integrated lens. David Matathia, Director of Marketing communications at Hyundai Motor America’s stated, “We’re pretty much approaching all of our major broadcast partnerships in concert with our digital programs.
Online ads create additional opportunities as demonstrated by a July Nielsen report commissioned by Facebook that said “cross-screen” bundles are more effective.
Social networks like broadcast networks
“The emergence of far-reaching publishers like Facebook, however, means that marketers now have another option for reaching consumers en masse. Likewise, the availability of true cross-screen metrics enables them to understand how digital can reinforce and complement their TV investment,” the Nielsen report said.
Morgan Stanley is predicting that Facebook’s forthcoming online video ad platform could become a $1 billion business next year. Ad revenues could reach $6.5 billion by 2020, its analysts say. Advertisers are willing to pay a premium to Facebook because its reach into the 25-34 year-old demographic meets or exceeds the four TV networks, Nielsen says. Recently, Facebook COO Sheryl Sandberg told investors that the site has between 88-100 million active users online during U.S. prime time hours, and it will charge millions for ad space.
Having another medium that is as viable as TV, and in some ways even more targeted, is great for content makers. The creation of content isn’t easy, and it’s also expensive. Major upfront investment goes into creating great content that must be HD quality, professionally produced, and ultimately placed where it can attract viewership. To justify the investment, content creators need an ongoing distribution strategy.
Online Video Syndication: It’s just good business
Ad networks will benefit because brands want good editorial content and they are willing to pay for it. Content producers are constantly looking for ways to drive new revenue and create a one-to-one relationship with a brand. Publishers aren’t just looking for a way to “give their content away”, they want to reach the right audience at scale, and to use it to drive greater returns. If that means partnering with content syndication providers that can drive a relevant audience to get eyeballs to their video, that’s fine, as long as they have a share in the revenue where their content is featured.
The rise of video advertising and video syndication is good for brands and for content providers as it creates engagement, and that means greater monetization. In the future, content producers will be more selective about the type of videos they make and the partners they choose to distribute them with over time. As the quality of the content that is created continues to improve, selling it at a premium price will become more important and distribution will be key. As this trend unfolds content products are going to want a greater share in the revenue generated from their content and that means working with syndication partners who afford them this opportunity.
Online video ads will generate even greater revenues as distribution and syndication opportunities improve allowing consumers to continue to view more streaming media and as new advertising platforms and business models take hold. The pie might grow larger with serendipity, but TV is losing some of its potential market.