Posts for 'eMarketer'

Two days ago, I posted "Why NBCOlympics.com's Video Ad Revenues Don't Matter." I'll take the risk today of "beating a dead dog" by writing again about this same topic, for a couple of reasons.

First, there were some great comments on the site and I received many emails both supporting and challenging my arguments. (As a sidenote, I've discovered an interesting dynamic with VideoNuze - though I've repeatedly tried to encourage readers to post comments so all readers are able to see, folks seem more comfortable just emailing me directly for a one-on-one dialogue. I'm not going to resist human nature here, but again, I would love even more if you share your reactions by posting a comment so the whole community benefits!)

Second, the real trigger for writing a follow-up part 2 today is an incident I experienced yesterday. I gave a presentation about broadband video to a group of investors. These were mainly people who are familiar with broadband video, but not necessarily steeped in it. Upon finishing up and opening the Q&A, an early question/comment was, "Hey Will you lay out great points about broadband, yet I just read somewhere earlier this week that even NBC's Olympic video, which should have been a big revenue opportunity if ever there was one, generated little money for NBC and looks like it was a total failure for them. Given that, why should people bother investing in this medium? It doesn't seem promising."

Ugh. Ugh. Ugh. This is exactly the perception that I sensed would be created out of the blogosphere's and mainstream media's coverage of eMarketer's NBCOlympics.com revenue estimate. And why it is so vital that people interested in broadband video not get distracted by this single data point. Instead, maintaining perspective about where the industry stands and what needs to be done to grow should be the real focus.

I totally get the point made by people in their comments and emails that video providers must show they can make real money in the broadband medium. Ultimately, that's paramount. In particular it's key that broadband not get tagged as the "digital pennies" medium, in contrast to the traditional "analog dollars" model.

But I'll continue to insist that the path to industry revenues and profits begins by demonstrating the technical/operational viability of the broadband medium, massive user adoption of it and differentiated engagement with it. To be sure, progress is being made on all fronts. Still, there is still a long road ahead to drive significant shifts in advertiser spending to broadband. If you're a media buyer today, you're very intrigued by broadband and are likely experimenting with it.

But you're looking for more proof points before making bigger spending commitments. Can broadband's architecture scale to handle massive traffic loads, or are the Chicken Littles right that the Internet will crash under video's massive weight? Can broadband video's quality compare with TV, and HD in particular? Given the broadband choice, will users in fact shift their consumption patterns? And if they do, how different will their awareness and engagement with ads be? Importantly, when is broadband video actually going to be widely and easily available on TVs, not just computers?

These are but a few of the questions repeatedly being asked. And many of these are what NBCOlympics.com has helped to answer. NBC could have done lots of things to squeeze more money out of its Olympics video (though my guess is that no matter what revenue they generated cynics would have still said, "Is that all?"). Instead they focused on user value/experience and pushed the broadband envelope considerably. Others are doing the same. More needs to be done, and I believe it will.

As the saying goes, "Rome wasn't built in a day." So too with this exciting new medium. Revenues will not gush immediately. Staying focused on the core building blocks is the key. In short, I'm bullish long-term, but highly realistic short-term.

What do you think? Please post a comment! Or send me an email if you really prefer!

Today's post is from TDG's Mugs Buckley, who discusses the confusing state of video advertising projections.

The Reality of Web Video Advertising Just Doesn't Seem to Add Up

by: Mugs Buckley, Contributing Analyst, The Diffusion Group

I used to think I was pretty good at math, but after trying to make sense of recent forecasts regarding web video advertising, I'm beginning to doubt my skills. Let it be known that I'm a big believer in the growth potential of the Internet video ad business; I'm simply struggling to follow the numbers that have been reported. Since no single analysis offers an "apples-to-apples" industry comparison, I thought I'd offer up some of the available forecasts and offer a few thoughts.

So here's where I'm stuck.

The estimates and forecasts for only video ads are all over the place. For example:

• eMarketer estimates that US marketers spent $775M in 2007 and will spend $1.3B in 2008 for online video streaming and in-page ads.
• Jupiter Research predicts that 2008 online video ads in the US will yield $768M.
• comScore reported that online viewers consumed 9.8B videos in January 2008 (down from December 2007's 10.1B) of which 3.4B were Google/YouTube videos.
• In a November 2007 Financial Times article, a leading media buyer for Starcom Media Group (who is well aware of her buys and rates) predicted that the 2007 market for "The Big Four" broadcast networks was likely to generate around $120M.

So here's where it gets a bit confusing.

• If we use the 3.4B monthly view Google/YouTube view estimate for January and run that out for a 12-month period, add some growth for fun, we come up with about 45B views for all of 2008.
• YouTube charges $15 CPMs for their in-video overlay ads (down from the initial $20 CPMs used during beta testing).
• If 100% of the 45B Google/YouTube videos were sold at $15 CPMs, that would yield revenue of $675M. But that assumes 100% inventory sold, which won't happen for a variety for reasons (in particular because YouTube only sells overly ads on their contracted partner deals, not user-generated content).
• According to Bear Stearns, YouTube is set to generate $22.6M in revenue for video ads, about 3.3% of the possible $675M at 100% inventory sold.

Hmmm. So if YouTube (at 34% of all web video consumed) could generate $22.6M in revenue in 2008, and the Big Four were running about $120M in 2007, how does one arrive at these impressive near-billion dollar predictions? Where else is this revenue coming from?

Let's not rule out operator error - I'll quickly admit that I may have misinterpreted how these numbers were derived and what they represent. That being said, however, there doesn't seem to be a rational way to reconcile these disparate estimates. Can anyone out there help to square these numbers? Is it simply a matter of under- or over-reporting? Are the measurement systems currently in place so poor and mutually exclusive in methodology that they necessarily offer conflicting estimates?

Something just isn't adding up. Yes, this may seem to be a bit nit-picky on my part; the rambling of an analyst with too much time on her hands. Then again, without accurate revenue and usage estimates, it is impossible to know the real value of any form of advertising, much less an emerging model such as web-based video advertising.

Please let us know what you think!