TV Ad Dollars Slowly Shifting to Web Video
TV Ad Dollars Slowly Shifting to Web Video
Increasing Portion of Broadcast and Cable Budgets Follow
Younger Audience Online
By SUZANNE VRANICA CONNECT
Updated May 12, 2014 5:31 p.m. ET
Online video outlets are finally starting to chip away at
television's hold on advertisers.
Several major advertisers, including MasterCard, MA, Mondelez International MDLZ and Verizon
Wireless in the past year have moved a portion of the money they previously
spent on television to online outlets, conscious that viewers are more
frequently watching video online, ad executives say. And with online outlets in
recent weeks unveiling plans to ramp up their programming, more shifts are
likely, say media buyers.
Money for online video is "definitely coming out of
TV," said Ben Jankowski, head of global media for MasterCard Inc., which
shifted a small portion of its TV budget to online last year and will move more
money this year.
Starcom MediaVest, a big ad-buying firm, said it shifted
more than $500 million out of TV over the past 12 months, three quarters of
which went to online outlets. The agency, which is owned by Publicis Groupe SA
PUB.FR said it is planning a bigger shift during this year's
"upfront" ad sales negotiations with major TV networks, which kicked
off Monday.
"For us, it's really about shifting to where
audiences are" said Laura Desmond, chief executive of Starcom MediaVest,
which buys roughly $40 billion in ad time and space annually on behalf of
marketers such as Procter & Gamble Co. PG and Honda Motor Co. "More
and more people are spending time with other channels beyond the broadcast and cable
networks," she added.
While companies have been putting money into online video
ads for years, few talked about moving TV ad dollars there. Rather, it usually
came from their print and display ad budgets. But video content has been
improving and audience measurement has improved, the two things have made
marketers more comfortable with moving TV dollars, said ad buyers.
Nearly 88 million people watched online video on a daily
basis in March, according to comScore, up 14% on a year earlier. While the time
viewers spend watching traditional TV continues to grow, according to Nielsen,
many of the major cable and broadcast networks have seen sharp ratings declines
in the past couple of years.
At stake is the giant pot of money spent by advertisers.
Television pulled in $66.35 billion last year, according to eMarketer,
accounting for 38.8% of total U.S. ad spending.
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Digital media drew about 25% of total ad dollars.
EMarketer predicts television will remain bigger than digital until 2018, by
which time TV's share of total ad spending will slip to 36.1% and
digital—including not just online video but all website ads and mobile ads—will
reach 36.4%.
Online outlets, such as Google Inc. GOOGL's YouTube,
Yahoo Inc., YHOO, AOL Inc. AOL and Microsoft Corp.'s MSFT Xbox, are trying hard
to speed up that shift. These companies have been ramping up efforts to lure
some of television's ad dollars, holding their own "upfront"-like
programming presentations for advertisers, called the NewFronts.
How much these outlets can draw from TV budgets in the
near term will be determined partly by this spring's upfront ad sales
negotiations. On Monday, 21st Century Fox's Fox network and Comcast Corp.'s
CMCSA NBC network launched a week of star-studded presentations of coming new
programs.
NBC said it plans to use the hits "The Voice"
and "The Blacklist" as building blocks for its prime-time lineup,
which will feature edgy new dramas, such as the comic-book themed
"Constantine," as well as a handful of female-oriented comedies like
"Unbreakable Kimmy Schmidt," created by Tina Fey.
Ad buyers and Wall Street are expecting the upfront
market to be lackluster. J.P. Morgan said in a note to investors last month
that spending commitments for broadcast networks could decline between 2% and
3% while advertising commitments to cable networks could increase roughly 5%.
Wall Street analysts say online video isn't likely to
take a big chunk out of TV commitments this year but it could have an impact.
The threat of online video "could be used to hold down the price increase
the networks get, but that will be very modest," said John Janedis, an
analyst with Jefferies LLC.
Marketers say major TV networks continue to be more
appealing because of their ability to draw mass audiences. The Super Bowl, for
instance, can draw as many as 100 million viewers.
Still, ad executives are conscious that television can't
meet all their needs. In particular, younger consumers are gravitating to
online. According to Nielsen, 30% of online video users are age 18 to 34. By
comparison, 21% of TV viewers are 18-34.
"Younger consumers are consuming less TV as a
portion of their total media consumption," said Laura Henderson, associate
director of communications planning and media at Mondelez, maker of Oreo
cookies and Trident gum. The company said it plans to shift 10% of its global
TV ad spending into online video by the end of this year, following a
double-digit percentage shift in the U.S. last year.
Mondelez is pushing into online video to find
"lighter TV viewers," Ms. Henderson added.
MasterCard's Mr. Jankowski says declining broadcast-TV
ratings over the past few years were a factor in the credit-card firm's
shifting a low- to mid-single digit percentage of its overall TV budget in the
U.S. to online video channels such as YouTube and Microsoft last year. He said
MasterCard is likely to boost that by a few more percentage points this year.
Another factor was that online allows advertisers to target viewers more
precisely.
MasterCard spent $81.8 million on TV ads in 2013,
according to Kantar Media, an ad-tracking firm owned by WPP WPP.LN PLC. The company declined to provide exact
spending figures.
Meanwhile, Verizon Wireless, a unit of Verizon
Communications Inc., VZ a shifted more than 10% of its TV dollars to online
video last year with the majority of the dollars going to online ad portals and
online video ad exchanges, according to a person familiar with the matter.
Analysts and marketers say advertisers are feeling more
comfortable with moving TV dollars as Nielsen and others have begun to be able
to offer better measurement of how their TV ads compare with the performance of
online video digital ads. Still, the measurement is far from perfect and mobile
video consumption is still hard to figure out.
Late last year, Google reversed course and allowed
Nielsen to place measurement tags on ads running on YouTube. That agreement
"allowed the creek to flow," said Brian Weiser, an analyst with
Pivotal Research Group.
Still, Mr. Weiser said it isn't a flood of money, adding
that advertisers are holding back moving bigger chunks of their TV budget
because of a lack of premium content online.
"Programmers are taking baby steps with investing in
content," added Mr. Weiser. "If they spend more, they will get
more."
Write to Suzanne Vranica at suzanne.vranica@wsj.com
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