Posts for 'Jupiter Research'

If you're like me - and millions of other Americans - this past weekend likely found you involved in conversations with family or friends about the dismal state of the U.S. economy and where things go from here.

Of course nobody really knows. I've been spending time trying to get my head around what the economy's implications are for the broadband video industry. I've sought out reactions from industry colleagues, read up on what the "experts" say about a typical down economy's impact and considered my own past experiences. I concede my conclusions are anything but rock solid, but here they are for your consideration:

Broadband access is a now a utility, so addressable video universe remains strong - I was heartened by a new study out last week from Jupiter finding that only 2% of survey respondents would cut off their Internet service to reduce expenses in tough times. That affirms two assumptions I've held since helping launch broadband Internet access service for Continental Cablevision back in the mid-90's: once you're online, you're not going to go offline, and once you're on broadband, you're not going back to dialup. A stable universe of broadband homes means plenty of people to target broadband video to.

Free video beats paid video - With experts suggesting consumer spending is going off a cliff, the free, ad-supported video model becomes even more attractive. Some will counter that advertising spending always contracts in tough times, so relying on ads is no sanctuary. True enough, but my sense is that in this downturn, with the cost of so many essential goods (food, gas, health care, etc.) going up, any ad spending downturn may seem modest compared to the downturn in consumer discretionary spending. Another X factor: if you're paying $45-60/month for broadband Internet access, the more you use it, especially for high-quality experiences, the better value it is.

Advertising on broadband video is less affected than in other media sectors - I heard a widely respected industry analyst say last week that broadband ads will get hammered in this downturn, because most broadband spending is still experimental, and these budgets get eliminated first in a downturn. Yet video ad network executives I've spoken to say that while it's still early days for broadband spending, for many we're beyond experimentation. Plus several other fundamentals suggest broadband ads could hold up decently well: tight inventory for premium video, continued audience shifting to online viewing, better targeting and interactivity, relatively small total broadband spending, etc.

Tough holiday season for broadband devices - I see a tough holiday season coming for all discretionary broadband devices meant to bridge broadband to the TV or enable portable viewing. While they may be cool, for all but the least economically-impacted consumers these devices will fail the "Honey, do we really need this now?" test. That means we're likely to see some shaking out in the broadband device space post-Christmas.

Early stage/indie broadband video providers tighten their belts a bit - While major media companies have existing revenues to support their online initiatives, broadband-only players don't have this luxury. I see early stage/indie providers becoming extra judicious in their spending, likely cutting back on their production plans until the ad climate clears up.

That's all that I have for now. The good news is that broadband video's fundamentals are extremely strong. For all of us in the industry, be thankful you're not in autos, home construction, finance, retail or other hard-hit sectors. Still, there are difficult times ahead for everyone, no question about it. Try to remember the old saying: "what doesn't kill you makes you stronger.'

What do you think? Post a comment now.

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!