Media Life Magazine sat down with Steve Kerho, SVP of Strategy, Media & Analytics about the future of the digital newfront. The original interview was published here.
By Diego Vasquez
Last month online video sites held their own version of the upfront, where they gave elaborate presentations to media buyers and advertisers aimed at convincing them that they should allocate more of their budgets to online video. It was the first time these sites had laid out their visions for original and re-packaged video content for an entire year, instead of simply rolling out new programs throughout the year. The aim was to draw attention to new media at a time when buyers and planners are making up their TV budgets. Though online isn’t expected to steal much of the networks’ share this year, media people predict that over the next few years that will change. Already sites are offering “ratings” guarantees similar to those found on broadcast, and a large chunk of the estimated $3 billion to be spent on digital video this year will come from newfront commitments. All this is to say that the newfront should be around for years to come. Steve Kerho, senior vice president of strategy, media and analytics at the San Francisco agency Organic, talks to Media Life about the newfront’s prospects for stealing TV money, how many dollars will be committed, and which sites have the most impressive plans for the coming year.
Why is online video so hot with advertisers?
I think there’s a couple things. One is we live in this world of media fragmentation. That’s making it more difficult to get in front of a large-scale audience. I think the ratings for the top 10 primetime TV shows are about a third of what they were 10 years ago.
And of the total internet population, about 60 percent of that will watch a TV show online. It’s reached a tipping point and it’s been empowered by iPads selling like hot cakes. With tablets we genuinely have a third screen in the home right now.
So it’s fragmentation and increased penetration of video-friendly devices.
How does presenting the major online video players’ coming attractions all together in one event help strengthen their case to media people?
You’ve got this great confluence of all the decision makers being there. The clients are there, the agencies for the clients are there, they’re figuring out how they’re going to allocate their dollars, so it makes sense to try and plan the media at the same time.
Even if you don’t buy it at the same time, at least you’re planning for it.
It was always a challenge going to the TV upfront and then planning print buys, and then online was spread throughout the rest of the year. When online was 2 or 4 percent of the budget that’s one thing, but some clients are now spending 20, 25 or even 30 percent, so that number’s big enough where it has to be planned more.
For the YouTubes, AOLs, and Hulus of the world, they want to get in the minds of the brands at the same time they’re planning the rest of the media. And more of the content they deliver now is broadcast content repackaged to be on this other device. So in some cases it’s just repackaging it, and so that also makes sense to plan it all together.
And as more and more custom content comes out, they want to make sure they have share of mind with their advertisers at the same time they’re looking at new content on broadcast and cable.
Do you think they would have gotten as much attention if they’d done their presentations individually rather than as a group?
They definitely got more attention. I think it was a really smart move by the industry to help get more attention.
The broadcast networks will always lock down dates for their presentations. And the past few years you’ve seen some cable networks wedge their way into the broadcast week. So it’s not really surprising that the digital companies entered the field this year.
It was a concerted effort by Hulu, Google, Yahoo, AOL and Microsoft. They all had their own upfront-like presentations and they were all showcasing video content.
How much money do you think will be committed to digital video as part of the newfront?
I have some idea of what we’ll end up spending for 2012. The current estimates that we see between our clients and some third-party reporting is around $3 billion for online video for 2012. That’s the whole year. So what percentage of that will come out of the newfront? That’s hard to say.
I’ll put a stake in the ground and say a quarter to a third, so a meaningful amount.
Did it help the “newfront” that media people were familiar with the format because of the tradition of the upfront?
Online media compared to broadcast, it’s sort of the stepchild who doesn’t get a lot of attention. This helps validate and justify its importance. Its Thanksgiving and we’re not at the kids table anymore.
And the growth forecasts are really incredible. Some numbers take that $3 billion for this year and by 2015 it could be $7 billion. So more than double, it’s really significant growth. And up until now and going into next year we see a lot of that spending coming from search and display media [budgets], but there will be a point where it comes more from the broadcast budgets.
Will digital video steal dollars away from this year’s cable and broadcast upfront? Why or why not?
I don’t think it will this year.
We’re still living in the world, despite the fragmentation, where broadcast has incredible reach. It’s the fastest way to reach a large audience in a short period of time. But we’re nearing a tipping point, and there’re a lot of shows that will need online video to show growth and meet their numbers.
But some of the things that need to happen to see significant dollars move is there’s a lot of advantages to buying broadcast in the upfront. The biggest is you get an audience guarantee. If it’s a new show on ABC and I’ve got a guaranteed number for an audience share, if those numbers aren’t reached then they have to make that up.
So we’re seeing those types of guarantees making their way to digital video. And as more of that happens you will see a significant shift in dollars.
Also, the broadcast world is about gross and total ratings points [GRPs and TRPs], that’s how you build out a media plan. In online it grew up with a different set of metrics. It was more about impressions, view-throughs, I had so my people complete the video–it was completely different and it’s hard to compare the two.
There’s been a lot of back-and-forth in the industry, and Nielsen just launched this online GRP ratings system [which promises comparable ratings for online and TV viewing]. It needs to be proven out and people need to get used to it and get confidence with it, but if it happens it will make the content providers able to take similar metrics to broadcast and apply them and give you similar guarantees online.
Which sites’ presentations impressed you and why?
Some of the things that were interesting is a lot of these players are coming up with their own content–it’s not just about broadcast content and distributing it. Hulu is creating a market for independent TV, that’s pretty cool.
Google’s YouTube is pouring $100 million into 96 original channels. Hulu has rolled out four shows. ABC News and Katie Couric are joining forces with Yahoo for a weekly show. Oh, and Jeff Goldblum has a project with Amazon Studios.
The thing with something like YouTube is you’re not limited to the number of networks the FCC says can broadcast, so there are endless opportunities. But it of course has to be balanced, you have to have the content to fill them up.
Which sites have the most innovative deals and packages and why?
AOL said they would offer TV-style guarantees where audience delivery is based on demographics, not just clicks or impressions. Hulu has promised some advertisers that they only have to pay if their ads are viewed in full. And I guess Microsoft signed new partners including CBS Interactive and ESPN to accept TV spots within apps on Xbox.
An interesting point is how these things are all starting to blend together. These distinctions we had are falling apart with people wanting their content anywhere, anytime and on any device.