Web Video – An Industry out of Balance - Jim Louderback - MediaBizBlogger

In the seminal 1982 movie "Koyaanisqatsi," life is portrayed as out of balance. These days, when I look at our online video industry, I can't help thinking that we're just as unbalanced as that movie – particularly when it comes to driving audience and traffic.

Much of the imbalance, I think, comes from trying to retrofit the web display model onto what is fundamentally a different medium, one that values a view much differently than a web visit.

To illustrate, let me lay out an example of a problem I was trying to solve yesterday, and the obdurate obstacles I ran into.

We're launching a new show in the next few weeks. And we've got a sponsor attached with the show launch, one that we've promised a certain number of video views. Now I know we're going to hit it out of the park – but I want to prepare for the worst. So I did a little research into how I might be able to drive a little bit of paid traffic to our new show.

Here's where it all falls down. Our show sponsor is paying us a very nice CPM - $80 – which is far above traditional pre-rolls and overlays. We'll probably run those units as well, which could add a few dollars to the effective CPM– in a perfect world. Chances are, we'll probably end up with an effective yield per view of somewhere around a dime – which translates into a $100 CPM.

From what I gather a $100 effective CPM per view is pretty amazing in today's online video world. But what's more amazing is how much I'd have to pay to deliver a non-organic viewer to the show.

Let's say I wanted to use YouTube's videosense product to drive a view. Well, their minimum bid is ten cents per click – or ten cents per view on an auto-play – which means I'd just break even every time someone watches – if I'm the only bidder.

So I looked to others who promise to deliver qualified viewers. I had an interesting exchange with one company CEO – who will remain nameless -- who promised to give me qualified viewers for .20 to .30 cents per view. The amazing thing, to me, was that his pricing was low, compared to some of the other options I researched.

Talk about out of balance. I'd be spending a quarter to get less than a dime. New media, new rules, fer sure. But until we unlock the secrets of transmutation, it'll never be profitable to spend digital quarters to earn digital dimes.

But that just leads to yet another "out of balance" problem when it comes to buying video views. Because these are CPC deals, you pay when the click-through happens, not when a video is completely consumed. As we've seen, even with our committed viewers, there can be significant drop off in the first few seconds – that's why we don't count a view until the program has been completely delivered. And when it comes to clicking on an ad, that drop off can be upwards of 60-70%.

Not to worry, says the video industry, and legitimized by the IAB. If someone watches for 3 seconds, we consider that a "video view" – even if those viewers never actually see the advertising message embedded into the video.

When I tried to explain this to my CEO friend, this was his response.

"I see your point….but the pricing is what it is. If you were to buy a CPM ad unit from YouTube or anyone else the effective cost per view would be (very) high. We are buying CPM in bulk and arbitraging back to you on a cost per view basis. Right now we are mostly selling to ad agencies that are pretty accustomed to buying media. As we get smarter on buying views I'll knowledge share with you."

Wow, so you've been able to find ad agencies that are willing to buy video on a $200 to $300 CPM pricing for what is effectively three seconds of watching a video. I guess the greater fool theory still works when it comes to buying video views. But from where I sit, this is no way to build a business.

In the end, I just couldn't see clear to paying quarters and making dimes. I'm comfortable with the numbers we're promising, and if we run into any issues, I guess we'll just do a make good. But at least my customer can be confident he's getting what he paid for.

Oh, and if any of you agencies out there that are "pretty accustomed to buying media" want a better deal, drop me a line. I'll sell you a far better placement and far better results for less than a dime that'll outperform those quarters – any day of the week.