By
SUZANNE VRANICA
Several major advertisers, including MasterCard, MA -0.25% Mondelez InternationalMDLZ +0.69% and Verizon Wireless in the past year have moved a portion
of the money they previously spent on television to online outlets, conscious
that viewers are more frequently watching video online, ad executives say. And
with online outlets in recent weeks unveiling plans to ramp up their
programming, more shifts are likely, say media buyers.
Money for online video is "definitely coming out of
TV," said Ben Jankowski, head of global media for MasterCard Inc., which
shifted a small portion of its TV budget to online last year and will move more
money this year.
Starcom MediaVest, a big ad-buying firm, said
it shifted more than $500 million out of TV over the past 12 months, three
quarters of which went to online outlets. The agency, which is owned by Publicis Groupe SA PUB.FR +0.56% said it is planning a bigger shift during this year's
"upfront" ad sales negotiations with major TV networks, which kicked
off Monday.
"For us, it's really about shifting to
where audiences are" said Laura Desmond, chief executive of Starcom
MediaVest, which buys roughly $40 billion in ad time and space annually on
behalf of marketers such as Procter & Gamble Co. PG -0.15% and Honda
Motor Co. 7267.TO +3.50% "More and more people are spending time with other
channels beyond the broadcast and cable networks," she added.
While companies have been putting money into online video ads
for years, few talked about moving TV ad dollars there. Rather, it usually came
from their print and display ad budgets. But video content has been improving
and audience measurement has improved, the two things have made marketers more
comfortable with moving TV dollars, said ad buyers.
Nearly 88 million people watched online video on a daily basis
in March, according to comScore, up 14% on a year earlier. While the time
viewers spend watching traditional TV continues to grow, according to Nielsen,
many of the major cable and broadcast networks have seen sharp ratings declines
in the past couple of years.
At stake is the giant pot of money spent by advertisers.
Television pulled in $66.35 billion last year, according to eMarketer,
accounting for 38.8% of total U.S. ad spending.
Digital media drew about 25% of total ad dollars. EMarketer
predicts television will remain bigger than digital until 2018, by which time
TV's share of total ad spending will slip to 36.1% and digital—including not
just online video but all website ads and mobile ads—will reach 36.4%.
Online outlets, such as Google Inc. GOOGL +0.58% 's YouTube, Yahoo Inc.,YHOO -0.15% AOL Inc. AOL -3.06% and Microsoft Corp.'s MSFT +1.84% Xbox, are trying hard to speed up that shift. These
companies have been ramping up efforts to lure some of television's ad dollars,
holding their own "upfront"-like programming presentations for
advertisers.
How much these outlets can draw from TV
budgets in the near term will be determined partly by this spring's upfront ad
sales negotiations. On Monday, 21st Century Fox's Fox network and Comcast Corp.'s CMCSA -1.07% NBC network launched a week of star-studded presentations
of coming new programs.
NBC said it plans to use the hits "The
Voice" and "The Blacklist" as building blocks for
its prime-time lineup, which will
feature edgy new dramas, such as the comic-book themed
"Constantine," as well as a handful of female-oriented comedies like
"Unbreakable Kimmy Schmidt," created by Tina Fey.
Ad buyers and Wall Street are expecting the upfront market to be
lackluster. J.P. Morgan said last month that spending commitments for broadcast
networks could decline between 2% and 3% while advertising commitments to cable
networks could increase roughly 5%.
Wall Street analysts say online video isn't likely to take a big
chunk out of TV commitments this year but it could have an impact. The threat
of online video "could be used to hold down the price increase the
networks get, but that will be very modest," said John Janedis, an analyst
with Jefferies LLC.
Marketers say major TV networks continue to be more appealing
because of their ability to draw mass audiences. The Super Bowl, for instance,
can draw as many as 100 million viewers.
Still, ad executives are conscious that television can't meet
all their needs. In particular, younger consumers are gravitating to online.
According to Nielsen, 30% of online video users are age 18 to 34. By
comparison, 21% of TV viewers are 18-34.
"Younger consumers are consuming less TV as a portion of
their total media consumption," said Laura Henderson, associate director
of communications planning and media at Mondelez, maker of Oreo cookies and
Trident gum. The company said it plans to shift 10% of its global TV ad
spending into online video by the end of this year.
MasterCard's Mr. Jankowski says declining
broadcast-TV ratings over the past few years were a factor in the credit-card
firm's shifting a low- to mid-single digit percentage of its overall TV budget
in the U.S. to online video channels such as YouTube and Microsoftlast year. He said MasterCard
is likely to boost that by a few more percentage points this year. Another
factor was that online allows advertisers to target viewers more precisely.
MasterCard spent $81.8 million on TV ads in
2013, according to Kantar Media, an ad-tracking firm owned by WPP WPP.LN -0.55% PLC. The company declined to provide exact spending
figures.
Meanwhile, Verizon Wireless, a unit of Verizon Communications Inc., VZ -0.64% a shifted more than 10% of its TV
dollars to online video last year with the majority of the dollars going to
online ad portals and online video ad exchanges, according to a person familiar
with the matter.
Analysts and marketers say advertisers are feeling more
comfortable with moving TV dollars as Nielsen and others have begun to be able
to offer better measurement of how their TV ads compare with the performance of
online video digital ads. Still, the measurement is far from perfect and mobile
video consumption is still hard to figure out.
Late last year, Google reversed course and allowed Nielsen to
place measurement tags on ads running on YouTube. That agreement "allowed
the creek to flow," said Brian Weiser, an analyst with Pivotal Research
Group.
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