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Advertising, Too, Was Finding Its Way, and Consumers Were Open to Just About Anything

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Advertising, Too, Was Finding Its Way, and Consumers Were Open to Just About Anything 20110207-SUPP-WP--0001,0002,0003,0004,0005,0006,0007,0008,0009,0010,0011,0012,0013,0014,0015,0016,0017,0018,0019,0020,0021,0022 WHITE PAPER The Economics of Online Video 2011 Online video and TV content are set to converge on a range of platforms, from Hulu to Google TV, while players like AOL step up original web video production. What will dominate:angry fruit and cute cats or broadcast and cable shows? Here’s a look at the contenders for consumers’ attention and marketers’ad dollars. 20110207-SUPP-WP--0001,0002,0003,0004,0005,0006,0007,0008,0009,0010,0011,0012,0013,0014,0015,0016,0017,0018,0019,0020,0021,0022 WHITE PAPER THE ECONOMICS OF ONLINE VIDEO 2011 Introduction online video, depending on who you ask, is content that nearly CHART 1 everyone is watching these days—or only a few “in the margins.” The difference of opinion reflects the range of video content being MOST-WATCHED CONTENT BY CATEGORY created, what qualifies and counts as a view and an ongoing evolu- tion of the metrics to sort it out. With so many companies with a % of online adults who say they watch each type of video, stake in the future of online video, opinions are nearly visceral. by year We’re certainly a long way from the quaint days of Mom, Dad, ■ 2009 ■ 2007 Bobby and Sue sitting around the TV set after supper to watch the three broadcast networks. Today, not only do many homes have Comedy or 50 humorous videos multiple TVs—30.9% of households own four or more sets, 31 Nielsen reported in its September 2010 State of the Media report— 43 but now other screens must be factored in as well. Individual PC News videos ownership is at nearly one per person in the U.S. and Canada, 37 according to the Economist Intelligence Unit, while 22% of house- 38 holds boast a smartphone, according to a study by Nielsen. The Educational videos 22 video content being watched on all these screens ranges from ama- teur videos about cats and short webisodes created specifically with Movies or 32 internet culture in mind to the rebroadcast (or re-streaming) of pro- TV shows 16 fessionally produced shows found on traditional TV (see chart 1). And yet in many ways, today’s video landscape—“video” used as 32 Music videos a term to encapsulate traditional network and cable TV content as 22 well as new types of content available for streaming or download over the internet, regardless of device—shares much in common 30 Political videos with those midcentury days. In TV’s infancy, programming includ- 15 ed shows adapted directly from its broadcasting precursor, radio— microphones and all. How laughable it now seems that actors stood Animation or 22 around mics reading lines while being filmed. It took a few years and cartoons 19 the emergence of a new type of content for TV programming to set- tle into its own. Will we find the rebroadcasting of traditional TV 21 Sports videos shows over the web similarly laughable one day? 14 In those early days of TV, advertising, too, was finding its way, and consumers were open to just about anything. Today, advertisers Commercials or 15 are still experimenting with the most effective ways to reach con- advertisements 13 sumers through online video, arguing over “ad loads” as they dip 7 their toes into “engagement” tools. Adult At the top end, this is a universe estimated to be about 178 mil- 6 lion —although those in the “in-the-margins” camp believe the size 8 of the audience is just 10% of that, or about 17 million. Largely, it is Other 6 still the interactive media buyers who are paying attention to online video, and their budgets are still much smaller than their tradition- Note: In 2007, all internet users were asked if they watched each of these 11 types of video. In the current al-TV counterparts. Marketers spent $1.5 billion in 2010 (an increase survey, only those internet users who met the definition of online video watchers/downloaders were asked which type of video they watched, and those figures were then re-percentaged based on all of 48.1% over 2009), as estimated by eMarketer. Nearly one-third internet users. Source: Pew Internet of all online ad dollars is expected to go to video in 2011. Analysts 2 | February 14, 2011 | 20110207-SUPP-WP--0001,0002,0003,0004,0005,0006,0007,0008,0009,0010,0011,0012,0013,0014,0015,0016,0017,0018,0019,0020,0021,0022 THE ECONOMICS OF ONLINE VIDEO 2011 WHITE PAPER ➜ DOWNLOAD TABLE OF CONTENTS Key charts from this paper are available for buyers of this white INTRODUCTION 2 paper to download as Power NEW PROGRAMMING, NEW ADVERTISING, Point slides. Use this link to NEW DEVICES: WHERE ARE WE NOW? 4 access the slides: 6 AdAge.com/whitepapers CREATING VIDEO FOR THE WEB TV PROGRAMMING ON THE WEB 7 WHERE TO WATCH: DISTRIBUTION 8 CABLE: TV EVERYWHERE, CORD-CUTTING 11 THE METRICS WARS: RESEARCH 13 CHART 2 ADVERTISING 16 CONCLUSION 18 VIDEO AD-SPENDING ESTIMATES, 2010-2014 DIRECTORY OF ONLINE VIDEO PLAYERS 19 eMarketer is most bullish about the growth of the online video ad market over the next five years. CHARTS $6 BILLIONS ■ PIPER JAFFRAY ■ eMARKETER 1: MOST-WATCHED CONTENT BY CATEGORY ■ BARCLAYS CAPITAL ■ FORRESTER RESEARCH Pew Internet 2 5 2: PROJECTIONS OF ONLINE VIDEO REVENUE from four forecasters 3 3: TOP 10 WEBISODES CHART Visible Measures 4 4 4: ONLINE VIDEO CONSUMPTION BY WEB PROPERTY comScore 6 3 5: ONLINE VIDEO AD CONSUMPTION BY WEB PROPERTY comScore 6 6: AVERAGE MINUTES PER VIEW BY DAY OF WEEK 2 TubeMogul 7 7: NETFLIX ACCOUNTS FOR 21% OF INTERNET TRAFFIC AT PEAK TIMESSandvine 8 1 8: TOTAL MINUTES STREAMED BY MEDIA TYPE Tube Mogul 8 2010 2011 2012 2013 2014 9: ONLINE VIDEO VIEWING comScore 9 10: VIEWING BY DAYPART comScore 10 Source: Barclays Capital, eMarketer, Forrester Research, Piper Jaffray 11: OVERLAP IN TV AND ONLINE VIEWING comScore 11 12: CONCURRENT ACTIVITIES WHILE WATCHING TV expect by 2014 that the online video market will be $5.71 billion at ON THE COVER OR ONLINE VIDEO Frank N. Magid Associates 14 the high end of the estimate spectrum (eMarketer), and at the very The chart on 13: LESS ADVERTISING IS NOT A DRIVER OF least, $3.01 billion (Forrester Research) (see chart 2). the cover ONLINE VIDEO WATCHING comScore 15 Looking ahead, Jeff Levick, AOL’s president-global advertising represents the 14: REPURPOSED TV ADS VS. WEB-ORIGINAL CONTENT and strategy, sees 2011 as the year traditional TV buyers make the spending RANK THE SAMETubeMogul 17 leap to online and add it to their budgets as part of overall reach: estimates of 15: CONSUMER ATTITUDES TOWARD WEB ORIGINAL “2011 is important for bringing in the [agencies’] TV group to the four industry VIDEOS Frank N. Magid Associates 18 understand the web extension of your TV audience.” forecasters Fox Networks for one, has already proposed using its internet above. video views as a way to fulfill TV makegoods, turning to its audi- This document and information contained therein are the copyrighted property of Crain Communications Inc. and Advertising Age (Copyright ence on Hulu to accomplish the reach goals promised to clients. 2011) and are for your personal, noncommercial use only. You may not How the networks view this new video medium is key to the reproduce, display on a website, distribute, sell or republish this document, or the information contained therein, without the prior written consent of development of some major players, including Hulu, which must Advertising Age. Copyright 2011 by Crain Communications Inc. All rights work with its broadcast TV owners, and Google TV. reserved. | February 14, 2011 | 3 20110207-SUPP-WP--0001,0002,0003,0004,0005,0006,0007,0008,0009,0010,0011,0012,0013,0014,0015,0016,0017,0018,0019,0020,0021,0022 WHITE PAPER THE ECONOMICS OF ONLINE VIDEO 2011 New programming, new advertising, new devices: Where are we now? This plays to type: An orange sits on a kitchen countertop, animat- was ranked No. 1 by Visible Measures, which tracks the audience of ed human eyes and mouth tacked on to it. The orange begins to web series (see chart 3). The episodes are silly, run anywhere from speak, calling out to a fellow fruit, vegetable or dairy product (or, in one to four minutes each, and reflect the production quality of one case, a bonsai tree). In similar form, they speak back.The series, something you might find on Nickelodeon. It’s expected that the which comes out at least once a week, mostly spoofs pop culture show creator, Dane Boedinger of GagFilms, makes “thousands of memes, whether it’s pieces of fruit calling out “Wazzup?” to one dollars” per episode from Google Ads—and spends less than that another (as in a popular Budweiser commercial), “Auto-Tuning” to produce each episode. The show has no formal distribution rela- the news, or making fun of Super Mario. The episode almost tionship and consistently ranks highest among “top viral video” always ends with the evisceration of one of the characters by rankings as well, according to TubeMogul. human hands. The show plays to one stereotype about the web, perceived in Welcome to the one of the most popular video series on the web, some camps as just an amateur-hour repository of home videos and “The Annoying Orange.” With 54 million viewers in October, it clips of cats. (See the wild success of the site I Can Has Cheezburger,) CHART 3 VIRAL VIDEOS VISIBLE MEASURES’ TOP 10 WEBISODES CHART The most popular webisodes in October 2010, as tracked by Visible Measures 1 2 3 4 5 The Annoying Auto-Tune Key of Fred Happy Tree Orange the News Awesome Friends Last month’s rank: 1 Last month’s rank: 2 Last month’s rank: 3 Last month’s rank: 4 Last month’s rank: 6 Comedy
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