How much is this still-new revenue stream worth? More important, how much will it be worth in the future?
Networks generated $120 million in ad revenue from freeof content online in 2007, according to an estimate from Chicago-based media buying firm Starcom USA. That's just a fraction of the more than $9 billion spent on traditional TV advertising this season.
But advertising in the online space is growing at a much faster clip. All online-video advertising -- not just the networks' take -- doubled between 2005 and 2006, according to Accustream Media Research, up to as much as $1.3 billion last year. By 2012, online-video ad spending will exceed $7 billion, according to Forrester Research.
What has irked some WGA members is that much of the viewing ofvideo is done within the 17-day window. Indeed, NBC said 78% of online viewers watch video to catch up on episodes they've missed.
What makes this space so attractive to advertisers -- and potentially lucrative for networks -- is the rate at which viewers recall commercial messages.
"Brand recall is through the roof," said Chris Allen, vice president and director of video innovation at Starcom USA. "We've seen some numbers in the 60% and higher range, which is phenomenal, considering that with traditional, a brand might fall into the single digits."
When networks first offered free episodes of TV shows online, recall rates were in the stratosphere -- 80%-95%. But as the space has become more crowded and the novelty for viewers has waned, recall rates have plateaued.
Nevertheless, marketers expect online viewing to continue to deliver higher-quality brand impressions than, which is littered with lengthy commercial pods, commonly skipped by digital-video-recorder users. And advertisers are willing to pay for it in the form of higher cost-per-thousand rates.
The recall rates for online viewing can be chalked up to "engagement," the Holy Grail for marketers in a fragmented media universe.
Online offers a more personal experience for the viewer, who has sought out the program and so is predisposed to a higher degree of engagement. Add to that the marketing exclusivity of most online streaming. For the most part, networks have stuck with the single-sponsor model, so advertisers are essentially delivering messages in an ad vacuum. NBC started streaming programs with more than one commercial sponsor -- and advertisers quickly cautioned the network not to clutter up the space.
"I think there has been a constant effort by advertisers to be respectful to viewers in this space," Allen said. "As long as you are not inundating them with commercial messages, I think in some instances, consumers may be grateful for the content and recognize that because it's ad-supported is why it's free to them."
For Hollywood writers, that's precisely the point: Advertising in the digital space will continue to grow, and they've staked their claim to that revenue stream.
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