The Great Video Migration

2009 Ad Spending
$ Billions

It seems all eyes in the media industry are on the data illustrated in this chart. And for good reason. Over the next few years billions of dollars in TV ad spending will start migrating from TV to online, following the viewers to their preferred viewing platforms. Much of the spending will stay with the big media companies (who generate the lion's share of television content) as they carefully craft online commercial ad strategies and new subscription models.

An Ad Age columnist a few weeks ago described in detail how addressability and interactivity (leading to greater consumer engagement) could enable television content owners to actually make more ad revenue from online video than traditional television.

But online video is still in it's infancy and the spending shown in the chart above is pretty much aligned with actual viewing.  As I pointed our in a blog post last year, 98% of video consumption is still happening on traditional television. Looking at it another way, the average American watches nearly 160 hours per month of TV and just over 3 hours of Internet video.

We all just think we are watching a lot more video online because we are snacking throughout the day, watching lots of short clips that don't really add up to a lot of time, and leaving the longer sessions for the television.  This is going to change quickly as we start connecting our TVs to the the web in mass.  As I pointed out on this blog a few months ago, 24% of US homes have a tv-web-connection.  And a recent study from consumer electronics site Retrevo (as reported in Mashable) shows that people under 25 watch a quarter of all their TV shows online. 

The broadcast networks are carefully and impressively preparing for the inevitable.  I recently sat through a one-minute pre-roll ad on on MSNBC.com where I was catching a Brian Williams news segment. I was given the opportunity to watch shorter ads, but with more frequency.  The one-minute ad was well targeted, reasonably entertaining and presented in a clean interface.  I didn't mind at all.  It seemed worth the price to watch a piece of content exactly when and where I wanted to see it.

And even after every minute of television programming finds it way online, we will continue snacking (our "crisis of attention" as Steve Rubel call it, is permanent) forcing TV programmers to repackage and distribute their longer form content in new ways, yet also provide big opportunities for smaller, niche-oriented content producers and emerging video ad networks and exchanges.

The Real Impact of the iPad

I just spent an hour touring the iPad with my friend Evan, who is the CTO and Chief Digital Strategist at a big media and entertainment company. He is and always has been an Apple evangelist and his initial review of the iPad falls clearly on Walt Mossberg’s (glowing, "game changing") side of what has been a very partisan stream of reviews.

While I haven't spent enough time with the iPad to provide a review, nor will I ever be qualified to make a prediction on it's future success, there seems to be no doubt that just the introduction of this device is having a massive impact on the advertising and media distribution businesses. And that is what Evan and I chatted about after the tour.

Practically every significant brand in the world dedicated more resources to their mobile media strategy in advance of the launch of the iPad. And those that didn't, jumped in this week, feeling the pressure of a big race starting without them. The rich, multi-media interface of the iPad signals enormous potential opportunities for brands to connect with their customers like never before.

How to execute on this opportunity is the big question being asked in thousands of offices this week. Should brands dedicate resources to build an App and be held hostage to Apple's arbitrary approval approval process and over-crowded App Store or should they focus on developing a smart, mobile-friendly web site that can detect on the fly the best delivery format?

Meanwhile, magazines and newspapers see a whole new set of opportunities to break free of print's production, distribution and presentation restraints. Time Magazine's App is pretty stunning, providing the iconic magazine a completely new digital identity. But the same efficiencies and ease of market entry are available to all.

As Evan said, "the competition is now everyone."

What Will Mobile Advertising Look Like?

3 months ago I upgraded to a 3G, GPS enabled Smartphone (the Blackberry Bold) with the intent purpose of finally using my phone to do more than just talk and read emails. (I rarely responded to emails unless it required just a few words and I never opened links or downloaded attachments as the processing speed was just too slow.)

Up until then, I remained tethered to my computer for most of my work. At the time, a popular new media blogger I follow, Steve Rubel, was regularly describing the emerging role of his Smartphone in every aspect of his digital life, leading to the point where he could travel on business trips without his computer. I was falling way behind.

Moving to 3G is like moving from a dial-up internet connection to broadband. Activities that once took minutes now take seconds. Within a few days of purchasing the new device I was using it to regularly browse the web, read my news feeds in Google Reader and even watch an occasional streaming video. Soon after I was using it to moderate comments on this blog, read documents and post status updates and photos to Twitter and Facebook.

To many of you with iPhones, this is all yesterday's news. But with 3G becoming the standard for every new phone sold, and even more robust mobile technology platforms coming shortly, the stage is finally set for mobile advertising to become a significant business.

What form this new advertising model will take is anyone's guess. But two of the most powerful companies in the world are in the midst of an escalating battle to define and own it. Apple, with no advertising sales experience, recently bought a fast-growing mobile advertising company after being outbid by Google for its first choice. This skirmish, as well as many others between the two former allies was described in juicy detail in a New York Times feature story last Sunday titled "Phone Fight!"

Apple wants to leverage its strong market penetration (25% of all smart phones), closed operating system and tightly controlled iphone app network to create compelling ad solutions. Google wants to leverage its roaring, open-source, Android operating system (which grew from 2.8% to 7.1% Smartphone penetration in the last quarter) and unrivaled search advertising machine.

And any discussion of the future of mobile advertising has to include the highly publicized location-based platforms that leverage the smart phone's GPS technology. Companies large (Facebook, Yelp) and small (Four Square, Gowalla) are staking claims.

2 weeks ago, anxious to now stay a bit more ahead of the adoption curve, I signed up for Four Square and have been "checking in" to restaurants I visit ever since. The opportunities for services like this to transform local advertising are very real.

The Web On Your TV Now

Over the past few days I polled a few random friends - who are not particularly technical in their orientation - and found that half (3 out of 6) regularly view web based video content on their TV screen. One friend simply connects his laptop to the TV monitor, another uses Apple TV, and the other streams Netflix TV shows and movies through his X-Box 360.

I was surprised by what I heard. But it turns out that a significant swath of the country is also connecting.

According to a new research study from The Leichtman Research Group (as reported in Media Post), 24% of US homes have a Web-TV-Connection.  As with my friends, the methods of connecting are many and varied - from video game consoles and Blue Ray players to Internet connected TV sets, Roku players and PCs/Laptops.

It is a highly fragmented market but clearly indicates that consumers want to take greater control of their TV viewing, bypassing the traditional distribution platforms. (The outrageous battle between Cablevision and ABC earlier this week that kept 3 million homes without the Oscar telecast for 20 minutes will only fuel this trend.)

The Networks who supply the content have some critical decisions to make in the immediate future. How do they make their content available on all these platforms without disrupting their enormous cable and satellite subscription business?

And how much do they charge for commercial-free versions (see my iTunes post about this) and what should the commercial load be for those who want to watch it online for free?

The market moved to 24% without anyone really noticing. The 50% threshold could be passed by the end of 2011.

The same day the Media Post article appeared, Walt Mossberg wrote a column in The Wall Street Journal describing some popular new ways to wirelessly beam web video from your computer to your TV screen.

The iTunes TV Network?

One of the bigger topics of discussion in the media world this week (fueled by a feature story in The New York Times) is Apple's push to lower the price of TV shows on iTunes to 99 cents, roughly half the current price. Apple's position is that 99 cents is the ideal number, proven by the massive success of music downloads at this price; and they are aggressively trying to get their TV network suppliers to agree.

I started buying TV shows and movies on iTunes just about a year ago and now watch almost as much TV on my iPod and lap top as I do on the 40" plasma screen in my living room. I am basically paying for this content twice, once to Apple on my credit card and a second time to TW Cable in my monthly cable bill.

For me, the iTunes option is purely a business travel survival tactic.  I am OK paying 34.95 for an entire season of my favorite show, "30 Rock", to have on my iPod/laptop and ease the pain of a long business trips. But I was reluctant to pay $9.99 per episode (or $54.95 for all six segments) of the Ken burns documentary "The National Parks - America's Best Idea", as I was some other shows.

I would certainly sample at a lower price, which probably would lead to a purchase of more episodes. I buy dozens of songs every month on iTunes without ever thinking twice.

As reported in the NY Times article only 375 million TV episodes have been downloaded from iTunes compared to 10 billion songs. iTunes clearly remains a music store and will need to do something dramatic to grow the TV side of their business.

The latest news is that CBS, the highest rated network, may be willing to test a few shows under a dollar in the near future.

If the networks cooperate and Apple has even a quarter of the success with TV that they are having with music, the implications for the TV industry will be enormous.

Two billion dollar questions:

1. Will the new revenue from iTunes (and the other services like Netflix and Amazon who would be likely invited to participate) offset the lost revenue from broadcast advertising as more viewers migrate to this new platform?

2. What will be the impact be to the existing television subscription providers (cable, telco and satellite) as consumers bypass them and create their own a-la-carte programming packages?

Advertising In the Super Bowl is a Good Bet

A few years ago a friend of mine who ran a digital agency was outspoken in his belief that advertising in the Super Bowl was a colossal waste of money. At the time, for less than the cost of one thirty-second ad in the game, an advertiser could take over the home page of MSN, Yahoo and AOL for an entire day, reaching an even bigger audience and engaging them in a more direct manner. His view, albeit a self-serving one, was that this was a much better way to make a splash with a couple of million dollars; and I agreed.

After all, the game could be a blowout or a yawn; and creating a buzz-worthy commercial is always an expensive gamble. And then there is the jaw-dropping mathematical calculation: $2+ million = 30 seconds = $68,000 per second.

But the emergence of the social media engine has changed everything. Weeks prior to this year's Super Bowl, the "stream" was flowing with news and gossip about who was going to be in the game and who wasn't (Pepsi actually received millions of dollars in attention for choosing to sit out), and whose ads were going to be naughty (Go Daddy) and nice (Google).

During the game, millions of Tweets provided real time viewer commentary on the popularity (and effectiveness?) of the ads. For days after the game, even the ads that ranked towards the bottom of the popularity polls were getting written about and linked to in the blogosphere and garnering millions of additional views on You Tube, NFL.com, their own sites and other video destinations.

Stuart Elliot wrote in the New York Times  the other day about renewed interest in a trend he calls "big event television" which he went on to describe as programs "that can attract large, involved audiences at a time when consumers have been atomized into tiny niche markets."

Seems every advertiser with the means should consider the Super Bowl, and start planning the creative and social media executions a year in advance.