Online Video Finally Starts to Attract Television Money

online video advertisingAdvertisers have been very loyal to television, even with the advent of online video and increase in Internet viewership. However, the time has finally come when media buyers and advertisers are following the masses to the web.

Multiple major advertisers, including MasterCard, Mondelez International and Verizon Wireless, have systematically moved a portion of their advertising spending to online venues. According to ad executives, more shifts are likely as online outlets improve and perfect their programs for purchasing ad time and space.

Upfront predictions. Both ad buyers and Wall Street are predicting a disappointing upfront season for broadcast networks. Despite the best efforts of the networks, spending commitments could decline 2% to 3% for broadcast television. Advertising for cable networks is expected to increase by 5%. 

Major TV networks are a draw because of their large audiences. For example, the Super Bowl draws in as many as 100 million viewers each year. This is something that online outlets can’t compete with. But even with those large figures, ad executives are very aware of the needs that television can’t meet. Online advertising is far more effective at reaching younger consumers who spend more of their entertainment time on the web. Nielsen reports that the 18 to 34 year old demographic accounts for 30% of online video use. Just 21% of TV viewers are in that key demographic.

TV budget money. Money spent on online videos is coming directly from TV budgets, which means that there is a lot more to be spent in the future. Starcom MediaVest, for example, has shifted more than $500 million out of TV spending in the last 12 months alone. The company said that it planned a bigger shift during the “upfront” ad sales negotiations this year. It buys roughly $40 billion in ad time and space on an annual basis for their clients such as Procter & Gamble and Honda. These marketers want to be where the audience is and are now willing to put TV money behind it.

MasterCard, which spent $81.8 million on TV ads in 2013, is planning on shifting a few percentage points of spending to online media per year. Verizon Wireless has moved more than 10% of their TV advertising spending to online video. 

How many people can they reach with online advertising? Nearly 88 million people daily watch online video. This is up 14% from a year before according to comScore’s analysis. Major cable and broadcast networks have seen ratings take a nosedive as more people turn their attention online. TV advertising pulled in $66.35 billion last year, according to eMarketer, and was 38.8% of total U.S. ad spending.

In contrast, digital media attracted 25% of total ad dollars. eMarketer also estimates that television will keep its lead for the next four years. By 2016, they expect TV’s share to fall to 36.1% and digital to grow to 36.4%.

Making it easy to for digital ad spending to grow. Google, YouTube, Yahoo, AOL and Microsoft’s Corp’s Xbox are all making it easier for digital ad spending to grow. For example, digital media “upfronts” have become more common. At these events, online media outlets present their content, their audience numbers and the advertising opportunities in hopes to get commitments from advertisers.

In addition, Nielsen and others have laid the foundation for better measurement and tracking tools, which can make marketers and media buyers even more comfortable with spending their budgets online. These measurement programs have a long way to go before they are granular enough to be reliable, but it’s a step in the right direction for online content providers that want to provide advertising opportunities.

The stage is set for the rise in online advertising spending. Although advertisers will never completely abandon television, the online audience is too strong of a draw to ignore any longer.

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