"Within two years, 75% of TV Content will be on other platforms." While that may seem to be a wild conjecture, representatives from Disney/ESPN, Comcast, and Turner Broadcasting made that statement at the Elevate Video Advertising Summit last week. "TV Everywhere" seemed imminent, and specific distribution outlet irrelevant - at least if two issues get resolved (licensing rights, and advertising measurement). The second issue was the focus at the conference.
There are two problems arising from the expansion of distribution and the shift in audience viewing habits. The first is that, for now, online video advertising levels and rates are significantly lower than in traditional media. There is concern that as viewing shifts, total ad revenue will fall. Second, and more fundamental, is that most measurement systems (ratings) actually measure exposure to the programming that ads are embedded in. If program exposure begins to be split among a variety of options (multiple showings on multiple networks, online viewing, delayed viewing, etc.), how can all that be measured? More importantly from the advertiser's perspective is this issue - unless the ad is embedded in the programming, or otherwise present in all the myriad viewing options, then measures of program exposure (ratings) are no longer a viable substitute for exposure to advertising. Ratings then become less useful and valuable for advertisers, and ad buying based on those measures become riskier (which would drive prices down).
Will online ad rates and revenues quickly match those of traditional broadcasters? The consensus at the conference was, not soon, if ever - there are good economic reasons for differential rates.. But total revenues are likely to converge over time (some projections show total online ad revenues passing TV ad revenues by 2021). Right now, TV gets $70 billion in ad dollars, while online video generates $1.5 billion. Some of that reflects levels of viewing (audience). But advertising isn't just one generic market - it's well-known that advertisers will pay a premium for appropriately targeted audiences. What is discussed less, is that there is a separate (and sizable) ad market for large general audiences - just like some advertisers want targets, others want a more broad-based reach. They may not value that more (on a per person basis), but it is a separate added demand fighting for a fixed advertising supply on a relative few TV channels that can deliver that level of exposure. The big general-interest channels have an additional layer of demand, and the increased demand drives up the prices they can get, and thus higher revenues. This is illustrated by the ad market for the SuperBowl. Online video's strength is in targeting, not in reaching the large, general-interest audience. Even now, online video ad revenues are prioritized more or less this way: Broadcasters; Internet portals (Yahoo, Google, YouTube), followed by ad networks and video publishers..
Finding good content and advertising exposure measures has been difficult to do (I addressed that issue earlier, here, here, and here). One fundamental problem is that as competition shrinks audience, media firms have looked to inflate the numbers by including other content distribution and use. But, unless the same ads are included with all of the added distribution forms and uses, those measures become less and less useful for advertisers. Another concern has been accuracy, both in terms of overall numbers, and in the ability to deliver targeted advertising as promised. A new report from Nielsen's Online Campaign Ratings service found than targeted campaigns based on an age range of less than 20 years delivered that audience only 30% of the time (for larger age ranges, it was still only 77%). Targeting by gender and age reached the intended audience slightly more than a quarter of the time. Both media and industry has been working on coming up with new, hopefully more appropriate, measures, but getting consensus and acceptance has been difficult.
Sources: "As Video Distribution Becomes Ubiquitous, Advertising Differences Become Blurry," Online Video Insider
"Online Campaigns Miss Targets, Need Better Measurements," Online Media Daily