Wible's Weekly - Social Media, Second Screens, and Digital Video Advertising - Janney/MediaEntertainment

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Social Media - U.S. Social Media advertising revenues is projected to grow to $11 billion by 2017, driven by video and mobile social ads, according to a study by BIA/Kelsey. The increased use of native ad formats, such as Twitter Promoted Tweets and Facebook Sponsored Stories, will lead advertisers to rethink their campaign strategies. IDC predicts that social networks are gaining control over the mobile display advertising market, and have already overtaken mobile ad networks. Mobile advertising is expected to grow to $7 billion in 2013, up from $4.5 billion in 2012. when social networks were responsible for 52% of the mobile display revenues.

Second Screens - Over 83% of FB users logged on to their accounts while watching TV, while 67% of Twitter users did the same, according to a survey by CreditDonkey, a financial education website. Women were more likely to engage in social networking while watching TV. The survey also found that 44% of smartphone users named social networking as the most popular activity on their devices, followed by entertainment (33%) and working (11%). This data fits with our thesis of second screens potentially inflating C3 ratings, while ad engagement potentially declines.

Ultra HD - The price of Ultra HD TV sets is coming down substantially, particularly for "smaller" size screens. Sony announced pricing for its 55" and 65" 4K displays ($5,000 and $7,000, respectively). This price level makes the Ultra HD sets significantly more accessible for regular consumers and should help adoption, particularly with the amount of content growing. Sony is introducing a separate Ultra HD media player in the fall of 2013, which will come with 10 feature films and video shorts in true 4K resolution, along with fee-based access to a library of 4K content from Sony and other distributors. With more available content and lower-priced sets, we believe the market for 4K could accelerate in 2014, although broadcast and MVPD distribution is likely to be further out.

Digital Video Advertising - Ad agency executives expect the digital newfronts to result in over $1 billion of ad deals, in part driven by the desire to hedge against shrinking ratings and increasing CPMs in TV. The newfronts are also increasingly incorporating formats other than video, as companies such as ZNGA participate. An alternative to the newfronts is the increase of real-time bidding (RTB) for online video advertising. Forrester is projecting a 71% increase in 2013 RTB spending to $686 million. RTB growth will be driven by more diverse pricing mechanisms, use of RTB for optimization, desire to complement traditional reach/frequency campaigns with target, engagement-oriented campaigns, and automated/programmatic RTB buying. We see the growing newfronts as a sign that digital is serious about competing for ad dollars with TV, although we do believe the large volume of inventory and metrics are better suited to RTB-type buying.

Tony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup Investment Research—most recently covering the Broadcasting and Entertainment Services industries.
Tony can be reached at twible@janney.com.

Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Disclosures may be reviewed at Wible's Weekly.

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