Trends - Online Video Killed the TV Star

Online Video Killed the TV Star

by Editor

I like TV, more than someone in the Internet age probably should, and if I admit to how little video content I consume while sitting in front of an Internet enabled device, well, we won't go there. Let's just say there are reasons why the DMConfidiential doesn't cover the world of podcasting, and it has little to do with our opinions on the business model. Enough people must still feel the same way, about television not podcasting, because outside of the Super Bowl, one of the biggest events in small screen viewing took place earlier this week - the season premiere of American Idol. For those who do not watch Idol, and even if you do watch the show, you could easily dismiss it as the sad reflection on the state of America's media taste and education level. Even if you do feel that way, you can still respect the television show which now enters its seventh season. To draw an Internet advertising comparison, it is the Google of television series, drawing in more than double the audience size of the next show. Consider this. Those with a better educated guess than you or I, estimate that Idol earns the network as much as $800 million in revenues - more than Valueclick, more than AOL's Platform A, and certainly more than YouTube. And, speaking to the topic of "Business Cycles", that commanding audience helps Fox lure more viewers for its other shows, increasing their revenues.

As we covered in our article "When Writer's Strike," if we hadn't already started to reach a critical juncture in the production and consumption of media, the Writers Guild of America's decision to go on strike only serves to shake an already unstable situation. So, while Idol continues strong, the total number of people watching TV continues to slip; or perhaps, the total number of impressions are down. I suspect that unlike some figures suggest, 20% fewer people watch, the real story entails not only a decrease in viewers but mostly a decrease in the average consumption per person. Regardless of the mechanics driving the decline, online video sites have come out as the real ratings' winners. Whether a direct result of the writers' strike or a by product of their absence (people hearing that online sites will do well and as a result checking them out), numbers across the board have increased far more than the number of viewers for television has decreased. Year over year growth by one polling method pegs the number at a 45% increase. Put another way, the percentage of people in their late teens and twenties who watch video content on a daily basis exceeds the percent who watch television daily.

We can frame the nature of online video consumption quite similar to that of premium versus remnant advertising. While the percentage of users in this younger demographic watching video online daily outnumbers those who do not, the total number of ad impressions generated by this wired group doesn't match that of the group watching traditional TV. In other words, even though we have a high percentage of users consuming video content, they still don't come close, if we judge by the total number of hours. None of that is bad news, except perhaps to traditional broadcast television, as it implies that this growth in video usage can go only up. It also explains why companies specializing in video monetization continue to find fans among investors. This past week we saw online video agency and adnetwork Tremor Media take in $11 million as well as the Canadian startup and domain challenged Overlay.tv who raised $4.5 million prior to even launching. The question of course is what happens next? The writers are on strike, which might explain why we have 5 reality shows in the top 20, which has proven a boon to online, but the economy sits on the verge of significant change.

When the economy worsens, it should certainly help Hollywood, as money spent on movies tends to go down much less than spending on other non-essential goods. When you are stressed or perhaps in jeopardy of losing your job, do you want to hear about the Federal Reserve (finally) telling people to expect more rough times ahead or that Eddie Murphy and his new bride split after two weeks? (Answer honestly.) Even non-Eddie Murphy fans might find themselves drawn to losing themselves in the anomalous behavior of celebs, adding more fuel to fire under the increase in viewership of online sites. Can these sites weather the storm though? Those owned by major companies will make it, but those dependent on ad revenue/venture funding might not have enough cash to last the 12 to 24 months. They will have the right audience trends, but their advertiser penetration, even pre-growth, doesn't come close. It's interesting to think about a site like YouTube. If it had just started to take off now, would the venture firms have continued to pour in money?

Video ad dollars are brand dollars, and they are incremental, and those incremental, on the fringe dollars will disappear first as budgets realign. Again, that won't stop viewers, which is why I predict that online video will become display ad space 2.0. Similar to how display ad growth increased but advertisers decreased when the Internet bubble burst, in the aftermath of the credit bubble, we will see continued growth in video inventory but with not enough mainstream advertisers to purchase enough of it. This could finally open the door for performance marketers who, given the high CPMs, haven't tried to make video work, nor have those with video content actively embraced this group of highly flexible, testing savvy marketers. In the end, direct marketers might end up being the porn of Internet video - pioneering the way, be it in nature of the ad (overlay versus pre-roll) to what makes for a successful ad, for the brand marketers when their ad budgets become untethered.

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