Online video advertising revenues still a fraction of TV

In a fragmented media market, one thing hasn't changed: advertisers continue to look for eyeballs. And that means following Canadians in their online video viewing. Online video advertising revenues rose 27 per cent last year, the Interactive Advertising Bureau of Canada reported last week, reaching $92 million in 2012, and forecasts by companies like Brightroll Inc. and PriceWaterhouseCoopers say the segment will continue growing. Still, you would have to multiply that $92 million thirty eight times to reach the level of Canadian advertising revenues for television in 2012, which, according to Statistics Canada, was $3.5 billion. Online video advertising in Canada is “certainly growing. There’s no question about that,” Chris Williams, president of the Interactive Advertising Bureau of Canada, said in a telephone interview. According to the Television Bureau of Canada, online video ad revenues have risen every year since TVB began recording the data in 2007. At the same time, TV ad revenues are falling. After rising from 2003 to 2008 and again in 2010, TV ad revenues fell in 2009 and 2011, according to the TVB. One of the challenges online, though, is that it's more competitive advertising environment than television broadcasters may be used to. Broadcasters “are making some money” with online advertising, said Duncan Stewart, director of technology, media and telecom at Deloitte Canada, though it’s a “highly fragmented environment with multiple beneficiaries.” Stewart agreed that online video revenues are so small in comparison to television that it’s impossible to see, at this time, whether they are starting to cannibalize television ad revenues. Worse for the broadcasters, it's far more uncertain whether they can make up for declining television ad revenues with online video ads. “You’ve got a lot of players,” Clark Fredricksen, vice-president of research firm eMarketer, said in a phone interview, also pointing out the fragmentation of the U.S. market. “You’ve got YouTube, you’ve got Hulu, you’ve got all these video ad networks that have enormous reach on the Internet, but ultimately don’t earn that much revenue.” In the United States, there are six to nine companies sharing about $66 billion US in television ad revenue, compared to “hundreds of companies all vying for a piece of this small, $4 billion market,” Fredricksen said. PwC’s global entertainment and media outlook for 2013-2017, which pegged 2012 Internet video ad spending in Canada at $141 million US, expects that number to rise to $649 million US in 2017. Despite the projected growth, the sector is lagging in Canada compared to some other countries, the report said. “Canadian broadcasters have been relatively slow to embrace online distribution, so have not driven the market as broadcasters in Europe have,” the report said. “Without major ‘champions,’ video ad growth has been slower, particularly as the country does not have the scale that its neighbour the US does.” Lisa Coulman, a partner with PwC’s entertainment and media group, said in a telephone interview that one area for companies to focus on should be “an engine that matches the consumer to the content that they want to view, and that then allows them to view it wherever they want to view it,” such as recommendation engines like that of Netflix Inc. Broadcasters should also focus on the “second screen”—the mobile phone or tablet—and on engaging the consumer, she said. They can align “the advertising and the engagement of the consumer back through the second screen so that the advertisers, and ultimately the distributors, can understand better how advertising is working to engage the consumer,” Coulman said, allowing better collection of consumer data. Compared to the U.S., Canada is behind on the metrics available to advertisers, she said. “If someone goes and consumes content on their mobile device, it’s very hard for advertisers to know that. So they’re behind in looking at good metrics to show that people will consume content across platforms and what impact advertising has no matter how that content is consumed,” Coulman said, adding that broadcasters can also focus on strategic alliances, such as partnering on apps. Better audience data and targeting is a key benefit of online video advertising, added Williams of the IAB. Advertisers can know important metrics such as whether viewers are watching the spots or when they turn them off. Online video also allows advertisers to target a different market than television, Stewart said. People who don’t watch much traditional TV tend to be wealthier, more educated, younger, and with full-time employment. Traditional TV advertising may not reach “what is from an advertisers’ perspective, an extremely attractive demographic which are young people who have jobs and make lots of money,” Stewart said. “Over the longer term, we may see this kind of split, where you advertise certain goods to certain demographics on TV, and other goods and other demographics you do not attempt to address through traditional TV. Instead, you use online,” he said. How to make better money from popular, online video content being watched on many different platforms is a burning question for broadcasters, Fredricksen said, and its answer will become more critical. Fredricksen pointed to the advertising shift to online in the newspaper industry, marked by a tipping point where newspapers “took a nosedive.” It's not impossible that something similar could happen to television, though it's difficult to say whether a tipping point is far off, or on the industry’s radar now, he said. “I wouldn’t say that the state of the marketplace today precludes something similar happening in the video sector,” Fredricksen said. “It would only take one platform, one product, to change the face of the market.” Internet video and television advertising shouldn’t be compared as if they were in a race, said Bob Reaume, vice-president of policy and research at the Association of Canadian Advertisers, when speaking about Internet advertising revenue statistics released by the IAB last week. “Advertisers certainly don’t look at it that way,” he said. “You cannot equate advertisers’ decisions to spend $3.5 billion on television to their decision to spend $92 million on video on the Internet. It’s apples and oranges.” Online video, he added, accounts for just under three per cent of advertising spending on the Internet. “There will come a day when it’s a substantial part of the Internet,” he said. “At that point, we can make some general comparisons to television.” —With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Online video advertising revenues still a fraction of TV

Broadcast | September 24, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Online video advertising revenues still a fraction of TV

Broadcast | September 24, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Heritage and Justice ministers to appear before CHPC to address charter concerns

Local news funding needed in C-10: Bell

Cogeco accuses Wildbrain of “glaring abuse” of CRTC process over Part 1

Helped by Fizz, Quebecor reports strong Q4 earnings

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us