DeadlineNow Morning Report: Oldman Apologizes On ‘Kimmel’, Online Vs TV Ads, USA Advances In World Cup (Video)
Here’s a fun fact that summarizes RBC Capital Markets’ David Bank’s conclusion from his thorough examination this morning of the video ad marketplace — and the potential threat that digital poses to broadcast and pay TV: An entire week of YouTube is roughly as valuable to major advertisers as a single, first-run episode of The Big Bang Theory. “Is The Big Bang Theory a big show? Yes,” Bank says. “Does its scale threaten the fabric of the rest of the TV advertising ecosystem? We do not think so.” That’s one reason the analyst says the market isn’t a zero-sum game, and is big enough to support growth in digital and traditional video ad sales.
It’s an important issue for investors. Many are becoming wary about conventional TV’s prospects as the ranks of people who watch video on their smartphones, tablets, and PCs grow. Last year was the first in which people spent more time with digital devices including their phones than they did with TV, and the gap between the platforms will continue to grow. No wonder advertisers also are looking seriously at digital, which companies including Google, Yahoo, and AOL encouraged at their NewFront presentations. Sales to national and local Web video providers have grown an average of 20.6% a year since 2009 vs 4.9% a year for national and local TV.
The companies say that they’ll offer comScore‘s validated Campaign Essentials (or vCE) to buyers who use Google‘s DoubleClick ad platform — providing advertisers with real-time data showing how well their digital sales pitches are working so they can quickly adjust messages that aren’t hitting the mark. That could appeal to brand managers who’ve been skittish about the medium as they continue to spend on television and other tried-and-true ad outlets. “It allows us to radically simplify digital media buying for the industry, while enhancing quality and accountability,” says comScore President Serge Matta. “This directly addresses many of the everyday challenges that prevent our clients from investing further in digital.” The initiative will begin in the U.S. this year for video and desktop display ads; they plan to add mobile and cross-platform later. Once rolled out, Google and comScore say that they’ll ask the Media Rating Council to accredit the service. Clients will be able to see “industry trusted, neutral data that’s directly comparable to TV and other traditional media,” the companies say. The speed and ease of use make this “a tipping point for brand advertising in the digital realm,” says Starcom MediaVest’s Global Digital, Data & Analytics President Lisa Weinstein. Advertisers spent about $43B on the Internet last year, an 18% increase vs 2012, Needham analyst Laura Martin estimates. But online media still salivate over the $75B that she says went to TV.
It’s time for ad companies to release their year-end forecasts, and ZenithOptimedia is out today with a bullish one – largely tied to big increases it expects for ads on smartphones and tablets. It projects global spending in 2014 to hit $532B – a 5.3% increase vs this year which is +3.6% from 2012. (The new projection is up slightly from the company’s forecast in September for spending to grow 5.1% in 2014.) The Winter Olympics and mid-term elections should propel spending in North America 4.6% from this year’s $166.9B, which is +3.3% vs 2012. But mobile is the big story. The medium “is now the main driver of global adspend growth,” it says. “This is the first time in the past 20 years that a new platform is expanding overall media consumption without cannibalizing any of the other media platforms.” By 2016 mobile should become the fourth largest ad medium, ahead of radio, outdoor and magazines, ZenithOptimedia says. This is the first time the company also has made some three-year projections. It says that global spending on mobile will hit $45.4B in 2016, up from $13.5B this year. In the U.S. ad sales for mobile display will increase 239.4% by 2016 to $6.4B. Smartphone penetration will grow to 77.3% from 54% in 2013, while 37.1% will own tablets, up from 23.8%. Over the same period, global ad sales on television will increase by $29.8B, but its market share will slip to 39.3% …
Hollywood will find little encouragement today in the data from the research firm’s latest annual “Global Entertainment and Media Outlook” report. PwC projects that U.S. consumers and advertisers will spend $31B on filmed entertainment in 2013, up just 1% from last year. That contrasts with 4.6% growth, to $376.4B, in the entire domestic media and entertainment economy. PwC’s soothsayers see the annual growth in filmed entertainment spending accelerating over the five-year period through 2017; it will average +3.4% a year to $36.4B. But with the broader business growing at an average of 4.8% a year, by 2017 filmed entertainment will account for just 5.8% of total U.S. media spending, down from 7.1% in 2009. PwC has even drearier news for pay TV, until recently one media’s hottest businesses: Outlays for “TV Subscriptions and License Fees” will average +2.2% a year to $83B in 2017. That’s a slower growth rate than for radio, expected to be +2.5% a year to $21.6B. TV ads will fare better, at +5.1% a year to $81.6B. But Internet ads are catching up fast, averaging +13.7% a year to $69.4B in 2017.
This is one of several findings out today from a survey of 50 ad buyers that Cowen & Co says helped it to update and expand its coverage of Internet and New Media stocks. The advertisers are upbeat about 2013, seeing overall U.S. spending grow 4.6% vs 2012. That’s pretty good considering how much the election and Olympics boosted this year’s sales. But the additional dollars will mostly go to digital media — and especially those that appeal to smartphone and tablet owners. Digital will account for 33.5% of next year’s spending, up from 28.7% this year, Cowen analyst John Blackledge says. Meanwhile, TV’s market share will fall to 39.3% from 41.4%. The company notes that “TV consumption has remained static at 12-13 hrs/week” from 2004 to 2010. “Only Internet consumption has increased, from under 6 hrs/week in 2004 to 13 hrs/week in 2010.” The big surprise, though, is how eager advertisers are to spend on mobile. Cowen projects that smartphones, tablets and other portable devices will account for 26% of digital ad sales in 2018, up from 9% this year. But the firm says its survey suggests that the forecast may be too conservative — and that mobile could account for more than half of all digital ad sales in six years. That should concern moguls because Cowen says that “mobile ad dollars come at the expense of traditional ad mediums (TV, print, radio, etc).” Google is …
The 95.4% increase in sales of ads for smartphones, tablets and other mobile devices — to $1.2B in the first six months of 2012 — helped to propel the results from the Interactive Advertising Bureau’s latest Internet Advertising Revenue Report. And search, which accounts for nearly half of all Internet ad sales, still looks robust: It was up 18.8% to $8.1B. Digital video also stood out, growing 18.2% to nearly $1.1B. But display-related ads were only up 4.4% to $5.6B. And a few categories declined including classifieds (-6.1% to $1.2B) and email (-1.3% to $78M). “Solid double-digit growth in a stagnating economy is a significant accomplishment,” says Sherrill Mane, IAB’s SVP Research, Analytics and Measurement. “There is evidence that CPMs are maintaining, and even increasing, further substantiating the vitality of the internet ad market.”
This has been one of the big sticking points for TV Everywhere: Advertisers and programmers say they still can’t tell who’s watching when a show is streamed to online audiences. That could result in lots of lost ad revenues. It’s the opposite of what you might expect. Internet users give up gobs of information about themselves every time they click a keyboard or mouse, while ad rates for conventional TV depend on imperfect surveys. But Internet server measurement “systematically overstates audience because it cannot distinguish one person using multiple browsers, account for cookie deletion, or distinguish content served to non-human audiences (i.e. crawlers, bots),” Bernstein Research’s Todd Juenger says this morning in a report. He provides the clearest explanation I’ve seen so far of what advertisers do and don’t know about viewers from different platforms. Here (with his permission) is how he explains what an advertiser on Glee might learn about the show’s multiple audiences:
Three of the most prominent ad-forecasting firms kicked off the UBS Annual Global Media and Communications Conference this morning — as they typically do at this event — by unveiling their updated forecasts for 2012. And they pretty much agree: 2012 will be better than 2011. MagnaGlobal is on the conservative side, projecting 3.2% growth in North America, and GroupM is more bullish at 4%. MagnaGlobal EVP Vincent Letang says that the U.S. ad market will benefit from the strongest-ever quadrennial effect with $2.4B hitting the market from political campaigns, and $600M related to the Summer Olympics in London. That’s why GroupM Futures Director Adam Smith warns that the ad-growth number in 2013 — without the quadrennial effect – ”might be harder to look at.” The forecasters agree that television and digital will benefit most from the growth in ad spending. But they warn that pay TV providers need to watch out: Subscriptions “will go down by 500,000 a year for next five years” partly due to competition from Web video providers such as Netflix, says ZenithOptimedia CEO Steve King, whose company released its forecast last night. He also says that there’s a reason to take the forecasts with a big grain of salt. “The factor that none of us have incorporated is a default” by European country.
The ad firm’s forecast will set an upbeat tone for the Monday kickoff of the UBS Annual Global Media and Communications Conference, the widely watched series of CEO briefings that runs through Wednesday in New York. Zenith’s projected 3.5% growth, to $160.3B, contrasts with +2.2% in 2011. Much of the improvement is attributable to the predicted excitement around the Summer Olympics in London, as well as the recovery of Japan’s economy following the earthquakes and tsunami in March. That will help to drive large financial companies, retailers, and auto makers back into the ad market. Television will be the main beneficiary, with a 5.1% increase to $61.9B. But the Olympics won’t be enough to stop the ad slide at the major broadcast networks (-1% to $16.9B). The problem is the time difference with London: That “will mean fewer events airing live than there were for the Vancouver Olympics,” Zenith says. It predicts that more viewers will “tune in online to watch their favorite events rather than wait to watch pre-recorded versions.” Syndication will suffer a bigger decline (-12% to $2.2B) as studios struggle to find a daytime host who can match the popularity of Oprah Winfrey. But national cable networks including USA, TBS, and FX will continue to improve (+10% to $20.1B).
In other media: The Internet is still soaring (+16.4% to $30.3B) and will be helped in 2012 by political candidates hoping to reach voters on social media destinations led by Facebook. The Olympics …
The companies say they don’t expect the government to raise antitrust concerns: They’ll continue to compete with each other — but in a way that reduces “friction” for advertisers who want to move display ads between platforms. They’re positioning this alliance as a first step to distinguish their “high-quality inventory” from other sites that advertisers would consider less attractive. Other companies with “high-quality inventory” are welcome to join. The partners hope the program will help to drive up unit costs for their ads, but they say that they don’t know yet how much of an increase they might see. Here’s the release describing how the new plan will work:
REDMOND, Wash., SUNNYVALE, Calif. and NEW YORK, Nov. 8, 2011 – Yahoo! (NASDAQ:YHOO), Microsoft Corp. (NASDAQ: MSFT) and AOL (NYSE: AOL) today announced agreements that should dramatically improve the process of buying and selling premium online display inventory. The agreements will allow ad networks operated by Yahoo!, Microsoft and AOL to offer each other’s premium nonreserved online display inventory to their respective advertising customers.
While agencies and advertisers can continue to choose to partner across Yahoo! Network Plus, AOL’s Advertising.com and the Microsoft Media Network (each of which is differentiated by its capabilities around data, optimization, packaging and inventory), this partnership will also offer the efficiency of buying premium display inventory at scale to reach customers and audiences. Simultaneously, the partnership should enhance the demand for and value of each party’s display advertising offerings as well as provide better yield for both participating publishers and advertisers.
AOL this morning reported third-quarter revenue of $531.7 million, down 6% from a year ago but marking the lowest level of decline in five years. A loss of $2.6 million, or 2 cents a share, also beat Wall Street projections as the company saw year-over-year gains in global advertising revenue, which included a 28% boost in third-party ads and a 15% rise in display — it’s the second consecutive quarter of gains in global ad revenue. ”We continue to build strong consumer experiences as we execute our strategy to build the premium branded media company for the Internet,” CEO Tim Armstrong said in announcing the earnings this morning. “Our share repurchases underlie our belief in the value of AOL and our strategy.” Still, search and contextual ads fell 15% year-over-year and overall ad revenue at AOL properties only increased 1% to $221.8 million despite the additions of The Huffington Post and TechCrunch. Expect Armstrong to be asked during AOL’s call with analysts about those figures as well as rumors of a tie-up with Yahoo, a move he says would save the company $1 billion-$1.5 billion and shore up its ad message to agencies.