Online Video Offers a Way to Achieve Higher Engagement with Consumers for Far Less Money
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HBR.ORG June 2013 REPRINT F1306A IDEA WATCH How to Profit From “Lean Advertising” Online video offers a way to achieve higher engagement with consumers for far less money. by Thales Teixeira This article is made available to you with compliments of Dr. Thales S. Teixeira. Further posting, copying, or distribution is copyright infringement. FOR ARTICLE REPRInts call 800-988-0886 or 617-783-7500, OR VISIT HBR.ORG MARKETING Online video offers a way to achieve higher engagement with consumers for far less money. by Thales Teixeira he footwear industry has tradition- ally been a hotbed of memorable Tadvertising, with brands such as Nike and Reebok spending millions to sign athlete-endorsers and hire ad agencies that create spectacular TV campaigns. But the approach taken by DC Shoes, which makes footwear for skateboarders, couldn’t be more different. In 2009 the company be- gan shooting videos featuring its cofounder Ken Block driving a tricked-out race car around closed-off airports, theme parks, and even the port of San Francisco. The videos last up to nine minutes and have almost no talking; the stunt driving is in- terspersed with glamour shots of footwear. Instead of buying expensive TV time, DC Shoes uploads the videos to YouTube. Over the past four years they have gotten more than 180 million views—and in 2011 alone, sales jumped 15%. One was YouTube’s most-shared video of 2011; another gar- nered a million views in its first 24 hours. ETH S Paying online media for this type of expo- ON: I sure would cost upward of $5 million. Using “lean advertising,” DC Shoes achieved it for ILLUSTRAT a tiny fraction of that amount. COPYRIght © 2013 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. June 2013 Harvard Business Review 2 This article is made available to you with compliments of Dr. Thales S. Teixeira. Further posting, copying, or distribution is copyright infringement. IDEA WATCH Many other companies would like to fewer people watch TV commercials than year-old firm that, for a fee, posts specs mimic this approach. In my research, I use in the past. And online video is becom- for a project and matches it with freelance eye-tracking technology, facial-expression ing more popular each year: In 2011, 83% creative talent willing to work for relatively analysis, and lab experiments to better of U.S. internet users regularly watched low pay. For instance, a company might understand why people choose to view online videos, and the research company want 90-second videos that mention the online videos, what narrative techniques comScore estimated that 12% of the clips brand name at least twice and show the keep them watching, and what features viewed were ads. Moreover, because view- logo for two seconds. Tongal members prompt them to share videos with friends. ers actively choose online videos, they submit 250-word proposals that meet Since writing about this work in HBR last tend to watch them more attentively than those specs, and the brand company pays year (see “The New Science of Viral Ads,” they watch TV ads. According to a 2010 $500, on average, for the rights to the ideas March 2012), I’ve received a steady stream survey by the research firm Vision Critical, it likes. Members then create clips based of requests from companies asking: How 48% of those who watched an online ad at on the winning ideas, with those who can we put that research to use? As a result, any point subsequently visited the brand’s produce the best ones typically receiving I’ve been studying how companies create website, 11% shared the video with a friend, $5,000 to $20,000. Because Tongal draws and distribute online video advertisements, and 22% made a purchase. on the skill sets of many professionals and and I’ve examined some of the new firms competent amateurs, the ads tend to be of that specialize in helping them do so. I’ve Create It Yourself or Find high quality. found many examples of companies that Outside Talent? Companies pay $10,000 to $50,000, on have produced effective campaigns for 10% Developing an ad campaign involves two average, for ads from Tongal, and the most or even 1% of what they would have spent main tasks: Creating content and distrib- successful Tongal contributors have earned on traditional ad agencies and paid mass uting it. A traditional agency typically more than $150,000 from their work on media. charges $100,000 to $1 million to produce dozens of projects. Companies generally Lower cost isn’t the only reason to con- a 30-second TV spot, and networks charge use the ads online, but some go further: sider online video. Because of channel surf- $14,000 to $545,000 each time a spot airs. For example, Speed Stick paid $17,000 for a ing, DVRs, and the growing use of “second Companies looking to cut those costs can Tongal-produced ad and laid out $4 million screens” (mainly smartphones and tablets), take a do-it-yourself approach or outsource to air it during the 2013 Super Bowl, whose one or both of those tasks to lower-cost viewers ranked it higher than convention- firms. Let’s look at content creation first. ally produced ads for Coke, Pepsi, Subway, DIY content. As you’d expect, the do- Lincoln, and Anheuser-Busch. it-yourself approach is the cheapest— and sometimes it works remarkably Engineered to Go Viral well. In the most celebrated exam- High-quality content is not the only re- ple, in 2007 the kitchen appliance quirement for successful lean advertising; company Blendtec created a series effective distribution matters, too. Compa- of videos in which the founder, Tom nies can again choose to do it themselves or Dickson, demonstrated the power of its to contract outside help. products by blending such items as mar- DIY distribution. Some companies bles, a rake handle, hockey pucks, and that outsource content creation handle iPods. The videos went viral on YouTube, their own distribution, putting videos on Because viewers landing Dickson on the Tonight Show their websites and posting them on You- actively choose and the Today Show, and sales took off. Tube. Most, however, enlist at least some online videos, they The Blendtec videos have been viewed help drawing in viewers—a service known watch them more nearly 240 million times to date. But the as “inbound marketing” (to distinguish it attentively than odds of replicating that success are low: from traditional, or outbound, marketing). Just 3% of YouTube films are viewed more For a relatively small fee (typically less they watch TV ads. than 25,000 times. Inside the ad industry, than $10,000 a year), inbound-marketing relying on YouTube alone to get a message companies such as HubSpot use search en- out is derided as “post it and pray.” gine optimization and sophisticated ana- Outsourced content. Many compa- lytics to help clients understand which of nies, including Duck Tape, Lego, Duracell, their content offerings draw viewers and and Braun, have turned to Tongal, a four- which don’t. 3 Harvard Business Review June 2013 This article is made available to you with compliments of Dr. Thales S. Teixeira. Further posting, copying, or distribution is copyright infringement. FOR ARTICLE REPRInts call 800-988-0886 or 617-783-7500, OR VISIT HBR.ORG STEP ASIDE, MAD MEN P eople watch more online videos each year, and savvy companies are taking advantage of that fact. Those with tiny budgets can create and distribute videos themselves at low cost; others can spend more to crowdsource content or hire expert distributors. Companies can also mix and match strategies—for example, crowdsourcing content but distributing it themselves. Do It Yourself Others Do It for You Traditional Approach CONTENT CREATION Companies are developing the ability to create Even large companies that can afford agencies, Large companies with big budgets hire full- their own commercials, ranging from simple such as Duck Tape and Lego, are tapping into service ad agencies to create TV spots. product demos like Blendtec’s to elaborate low-cost creative talent and crowdsourcing productions like DC Shoes’. ads via Tongal. CSO T PER AD: CSO T PER AD: CSO T PER AD: <$10,000 $10,000– $100,000– $50,000 $1,000,000 CONTENT DISTRIBUTION Instead of simply posting a video online and Newer ad agencies, such as Mekanism, have Full-service agencies charge commissions hoping people find it, companies hire inbound expertise in engineering ads to go viral; they when they buy time on television for marketing firms such as Hubspot, which use use social media (and sometimes paid spots) traditional ads. low-cost strategies to drive traffic. to drive traffic. ANNUAL COST PER CAMPAIGN: CS O T PER CAMPAIGN: CSO T PER CAMPAIGn (PRIME TIME): $3,000–$6,000 $250,000+ $500,000 NEW APPROACHES WITH LOWER BUDGETS Outsourced distribution. Compa- engaged in things they’ve had a hand in forwards it, visits the company website, or nies seeking more-aggressive distribution creating (see “The IKEA Effect: When Labor begins following the company on Twitter, often look to social media syndication Leads to Love,” HBR February 2009)—and you can quantify the benefits your com- firms such as the San Francisco–based Mekanism often involves consumers in the pany receives from a campaign. Looking at agency Mekanism. The firm does produce creation of its clients’ ads. In a campaign for those benefits against your expenditures traditional ads, but since 2009 its forte has Golden Grahams aimed at recent college will give you a good sense of the efficiency been making and disseminating block- graduates, it posted a series of animated of your campaign, allowing you to compare buster online ads; in 2010 its CEO asserted, videos about job interviews gone comi- online lean advertising techniques with “We guarantee we can create an online cam- cally awry.