As online video becomes the hot new sector for the IPO market — with the likes of Tremor and YuMe gaining traction — you’d think digital video is overshadowing TV. But if anyone thinks that TV will lose out to digital video anytime soon, they need look no further than this Sunday’s Super Bowl.
That conclusion was clear from internal stats out of Mediaocean — we’re the software platform for ad agencies, and we’re processing 42 of the Super Bowl ads this year, representing $219 million in spend. (Last year, for Super Bowl XLVII, we powered 41 of the ad buys at nearly $200 million.) This year, the average cost per spot that ran through our systems was $5.2M — a full 12 percent over last year’s average — with the most expensive price tag hitting $9M. That’s a numeric confirmation of what you already knew: Advertisers spend a lot — a lot — on the Super Bowl.
Given the hype around the death of traditional media advertising, the obvious question is, why would prices for a TV-driven media event go up? The reason they’re going up is the reason any prices go up: Super Bowl ads are scarce inventory that is only getting scarcer. It’s also an incredibly efficient buy. In an era of media fragmentation — where it is increasingly difficult to reach all of your customers at a single touch — massive TV events like the Super Bowl, the World Cup, the Grammys, or even primetime provide the rare opportunity of reaching massive viewership packed into a few neat hours. This means advertisers can reach hundreds of millions of rapt consumers with a single media buy. That’s a kind of scarce, valuable inventory you just don’t get online, which is why you don’t get exorbitant pricing for online ads.
To provide a quick comparison to online ads, Digiday pointed out last year that one Super Bowl ad was the equivalent of eight days of YouTube homepage takeovers, or 130 million Hulu impressions. Digiday also aptly pointed out that, at its most expensive around a year ago, digital video ads went for around $450,000. That’s a heck of a lot less than the nearly $5.2M a Super Bowl ad goes for today.
The fundamental structure of the Internet versus TV
At the end of the day, I don’t think this is just about the amount of eyeballs on the screen at one time. It’s about the fundamental structure of the Internet versus TV. The Internet is a medium with an entire infrastructure built around selling inventory one impression at a time — individual viewership is built in. That’s true largely because of how people consume online content: Most of the content is always there, and users consume it around their own schedules. It’s also true because ad pricing is based around individual-level metrics — like individual clicks achieved, individual users targeted, or number of individual views amassed.
This is not so with TV, where the fundamental unit of measurement — the rating point — is based on the idea of an entire household watching together, and millions watching at once. Thus, it’s TV — not the Internet — that is purpose-built to drive a media event like the Super Bowl. In fact, Nielsen recently reported that despite the rapid growth of Internet display-ad budgets, TV continues to reign supreme with a 57.6 percent share of all ad spending, and advertisers investing 4.3 percent more into the medium.
All that said, there are points of scarcity that do exist on the Internet that, down the road, might sow the seeds of a truly premium buy. They include:
- Livestreamed games. It’s no coincidence that the Super Bowl and the Oscars are the media events of the year: Nobody wants to miss the outcome of a competition (and risk finding out who won via Facebook or Twitter), so they watch the event live. We’re at early days of livestreamed sporting events and other competitions, but it’s definitely a game-changer to watch.
- Social networking. Networks like Twitter have begun to create something vaguely similar to a media event. The most popular one is the hashtag, which Twitter implemented, and which now has taken over Facebook and Instagram as well, as a social tool and an advertising tool. But no one is throwing a block party to watch a Twitter feed anytime soon.
- Need-to-know information. When there’s information that people are obsessed with knowing, and a limited number of sources for getting it, this drives up viewership. Catastrophes are a perfect example, which is why they have been a staple of TV news for decades. TV news can offer the combination of video footage and commentary that satisfies a sudden need for putting information into context. Of course, that’s changing. The Internet is very good at sharing real-time information (just look at Twitter’s watershed moment during the “Miracle on the Hudson”). Plus, the Internet is especially good at connecting users to updated data; properties that can own the mindshare of specific kinds of data are poised to be the scarce inventory of tomorrow — think of sites like Weather.com.
Meanwhile, programmatic buying is making video buying increasingly efficient. Eventually, we’ll get to the point where online scarce inventory brings audiences that match that of premium TV, on the one hand, and programmatic buying will be able to capture vast, valuable audiences with the efficiency of a Super Bowl spot. But that’s a long way off. For now, online content doesn’t match the immediacy of controlled media events like TV does, and we’re still trying to figure out how to deliver the efficiency of programmatic without commoditizing inventory.
As we figure that out, the critical path to the future of TV advertising is getting better channel-agnostic buying, in order to capture the media mix that crosses all the worlds. And for the foreseeable future, it’s also critical that the world of media tech doesn’t write off TV.
Bill Wise is CEO of advertising platform Mediaocean, which enables agencies and brands to manage $130B in worldwide advertising across traditional and digital media, and to integrate third parties under a central hub. Follow him @billwise.