It has long been put forth that less being spent on TV advertising means more going to online video advertising, but a recent report from eMarketer states that it's simply not true. We all know that our industry is growing at an amazing rate and will probably continue to do so for some time. We also know that ad spending is increasing for online video, so where is that money coming from?
Many believed that money was being taken directly out of TV advertising and dumped straight into online video advertising but a new study shows that is not exactly the case. Television is the massive gas giant in the advertising solar system, pulling in $65 for every $1 used for online video ad placement in 2009. Also the gravity well that is TV also still pulls in far more viewers and the impact is said to be the highest of all yet.
One major difference comes in pricing. Where TV is about thirteen cents per hour viewed, online spending is about seventeen cents. The added engagement and interaction of online video is probably the main reason that this added expenditure has been deemed worth it and the online video ads deemed valuable. The report states that this inequality will need to end in order for online video to become an ad choice du jour. However, we believe that if there is greater value, ROI and engagement then that added expense is justified no?
Online video advertising is predicted to be about 4.3% of all ad dollars spend online while TV spending is already down about 20% they say. That means (doing all the math in my head, carry the one...) Online video advertising will be a whopping 1.6% of TV ad expenditures. So says the eMarketer study which means that online video advertising certainly isn't pulling away the millions of dollars that TV execs continue to proclaim it is. This leaves about 18.4% of historic ad dollars MIA which is most likely due to the poor economy and not in fact to online video ads.
The eMarketer study goes on to predict that by 2013 up to 11% of online ad spend will be video and that will be an astounding 5.5% of TV advertising. Like I said, the industry is growing, but certainly doesn't seem to be siphoning the TV ad cash flow. This would seem to indicate that the rapid shift from TV to online video isn't so rapid nor is it as huge as some would have us believe.
Now they define video advertising as 'sound and motion' which does not include ads displayed in video player skins, animated images, etc.
They state that the online video ad industry is 'in danger of becoming an important niche ad format, but a niche nonetheless,' due to targeting not being as robust as possible, lack of proper metrics and no convergence of TV and Internet video (we beg to differ as major LCD TV makers are already incorporating Wi-Fi, Internet widgets and more). First off, ad targeting is by far more robust with online than it ever will be with television due to the bi-directional nature of network communication which is still lacking in TV. With television you get a general demographic who are interested in a particular show or content type. Is it perfect? No, and the industry knows this:
"...we need to improve scale, standards and efficiency of online video advertising." - Suzie Reider, Head of Advertising Sales for Youtube
On Internet you get a wide range of people who you can target on time, geo-location, language and other demographics as well as content interest. How much more robust targeting for online video needs to be we are not sure but it's more robust than most other forms of advertising the way we see it. Sure it could be more robust and drill down even further to better target the ads and it will as innovation drives the industry forward, but there is always a margin of error.
Another assumption they make is that Online CPMs will have to come down to TV levels in order to maintain 40%+ growth rate year-over-year and to draw away the majority of TV ad dollars. But if you're getting more results out of less advertising, would you not then justify the expenditure? If online video ads have a higher impact on sales, brand awareness or whatever the specific target of the campaign is, then you would, logically, be able to do less advertising, achieve better results and in the end pay close to what you already were paying. I think what we really need here is a straightforward, unbiased TV ad impact vs. Online video ad impact study to see just exactly what the percentage difference in effectiveness really is and then we can decide whether or not the higher cost of online video ads is justified and if you can achieve better results for the same ad dollars as with TV ads. That is a crucial piece of the puzzle that everyone is missing at present. In-game ads utilizing video are already proving more useful than TV ads are, can the same really be said about online video ads? Nielsen IAG seems to think so as they presented that very information at an ANA Brand Management Committee earlier this year saying:
A piece of creative running on a site such as Hulu.com (or ABC.com, NBC.com, CBS.com, etc.) delivers more effective advertising in terms of brand and message recall, than the same piece of creative running on TV.
So while TV is down, it's not due to online video but online video does seem to be valued higher than TV by about 25% roughly. That's a great number right there. Online video ads are pulling in a 25% premium per hour viewed over TV. It certainly shows that there is believed to be some fair amount of value in placing those ads online and that they must have some ROI and impact on sales to continue drawing that rate. But are they 25% more effective? That's the question. If they are 25% or more effective then there are few reasons not to move your advertising online.