Digital Video Advertising: What's holding it back? - Gene DeWitt- MediaBizBlogger

DVA (Digital Video Advertising) has some fantastic advertising attributes:

• Sight, sound and motion
• High advertiser demand
• Targeted audiences
• Interactivity
• Measurable performance

What's missing from this picture? To become 'the next big thing' in media, DVA needs to accomplish the following:

1. Scale. A recent WSJ report noted that a MySpace show sponsored by Ford, "Special Delivery" delivered a very unspecial audience of 200,000 viewers. In a country of 300 million people and an auto company that sold 2.1 million cars in the U.S. last year, this is not even spit in a bucket.

2. Efficiency. In a recent speech to a group of Columbia University Business School alumni, Rishad Tobaccowala, CEO of Denuo, said that advertisers could buy mass TV ads for around $20 cost per thousand exposures vs. about $560 for online video CPM's. For a smaller screen and a shorter message, this seems out of line with common sense, no matter how engaged or targeted the audience.

3. Production Quality. MySpace estimates its production costs at $1,000 per minute vs. as much as $50,000 per minute for broadcast network programming. One wonders if this affords a high quality program environment for a major advertiser's message. As for user-generated content, that may be fine if you're marketing songs or soft drinks to sub-teens, but may not be appropriate for advertising leisure travel or financial services to older, affluent audiences.

I'm reminded of the early days of cable when all the new networks would come in and present proposals that promised extraordinary ad efficiencies if each network 'only' delivered a 1.0 rating. When the first Nielsen surveys came out, I recall that it took an accumulation of eighteen cable networks to total a 1.0 rating. The cable networks then called it 'targetcasting' which Ted Turner, founder of the Turner networks, called 'a euphemism for low ratings.'

Nevertheless, cable not only survived, it thrived. Perhaps there are some lessons for digital video ventures in what we learned in building audiences and advertising for cable.

1. Promotion. Presenting a TV or video content and advertising opportunity without promoting 'tune-in' is like staging an expensive party without sending invitations. However, increased tune-in promotion alone, while necessary, is unlikely to drive online video advertising to critical mass levels.

2. Syndication.Given the somewhat scattered nature of online viewing, an aggregation of platforms may be required to accumulate significant audiences for internet programming. This will require individual sites to find a way to collaborate on the development, scheduling, promotion and ad sales for a new generation of video with wider appeal to potential audiences and advertisers.

3. An Entrepreneurial Business Model. When I advised Jon Hendricks and his Discovery channels in building audience and advertising throughout the 1990's, we developed a P&L pro forma for every program and special. The idea was that spending more on promotion and programming could be justified if this resulted in higher ratings and ad spend. Similarly, DVA providers will need to invest in added promotion and broader distribution to make the leap into the big time.

And big time it will be since these are not particularly daunting obstacles. What's needed is a bit of vision to get over the blinders of today in order to see the path to tomorrow.