Online Video's Sexiest Category: Staid Old Package-Goods Players

P&G, Unilever, Reckitt and Kraft Contribute to Sector, Doubling Outlays

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NEW YORK (AdAge.com) -- Who knew online video would become so proficient at selling soap? In a down year overall for online advertising, video actually grew 41% in 2009, according to eMarketer, in no small part because the consumer-package-goods category doubled down on the medium and became the largest category in online video in 2009.

Package-goods firms are famously close-lipped about their marketing spending and enforce similar silence on their agencies and vendors, but a survey of ad networks and publishers reveals unanimity: CPG has become the biggest category in video, unseating automotive, which was dominant in 2008. Indeed the largest spenders in video are starting to resemble the largest spenders in TV, such as Procter & Gamble, Kraft and Unilever.

Reckitt Benckiser publicly wagered $20 million on its video campaign last fall, and executives with knowledge of the matter said it plans to more than double that expenditure in 2010. (Reckitt denies this and declined to comment further.) But Reckitt is far from the largest spender in online video, and while there are no $100 million video advertisers, that could change in 2010. Unilever, for example, places video ads across the gamut from Hulu and network sites like CBS and ABC to the portals and video ad networks and is planning to spend significantly more on the medium in 2010.

"To me, it is where the consumer is," said Ritu Trivedi, managing partner at Mindshare Interaction, responsible for Unilever's media planning. "It gives you a palette everyone is used to -- sight, sound and motion. They engage with it a lot more than words. You can talk about hair products much more easily in the video format than in text."

It's a big change for a category that was one of the slowest to get started on the web. It's also pretty good news for what is still a tiny category of online video advertising. Online video will struggle to get to $1 billion in spending in 2009, according to eMarketer, but others believe the actual number is quite a bit smaller, particularly if you just include in-video ads like pre-rolls, which are the kind CPG marketers prefer.

Still growing up
Consider: The video world outside of YouTube gets about 4 billion views a month, according to Nielsen. Even if all those views are monetized at a rate of $10 per thousand viewer -- a fantasy CPM scenario -- that's $400 million, and the most robust estimates for YouTube anticipate it will bring in about $250 million in revenue this year.

Still, CPG marketers have come to dominate the small category and appear to have every intention of growing it. Video ad networks Tremor Media, Yume, BBE and Brightroll report that CPG is their top category in both number of impressions and dollars spent. CPG creative accounts for 15% to 30% of all ads managed by ad server FreeWheel, which serves 1 billion impressions a month across networks and on professional content on sites like YouTube, CBS and Sling.com.

CPG marketers generally use video for two reasons: to extend a TV buy and own a show online as well through Hulu, Fancast or CBS, or to use their existing creative and go wide with video on portals and ad networks.

"I definitely think that CPGs have embraced digital video as an extension or a replacement for some of their broadcast dollars," said John Nitti, senior VP-digital director at Zenith Media, whose clients include Nestlé.

Rebecca Paoletti, director-video at Yahoo, said CPG had long been a strong category for the portal, but became its largest when automotive fell apart in 2008. Yahoo has been matching video viewing with Nielsen's HomeScan panel to determine what, if any, impact a video view had at the supermarket. Package-goods marketers "are not going to buy video for the sake of buying video, they want to buy the video [that] is having an actual impact on purchase," she said.

Making an impact
Given the state of TV, video is looking even better for CPG marketers, who like the fact that they get instant data on who's watching and know that online their ads won't be skipped. Return can come in a lot of forms, such as a click, time spent watching an ad, or brand lift based on the 40 years' experience running on TV.

"They have been running on TV for so long, when they spend online they can see the difference," said Yume Co-founder and President Jayant Kadami. "It's pretty easy for them to correlate."

Comparatively, however, online budgets are miniscule and no one is contemplating a big shift. "Most aren't saying, 'Let's shave off 10% of our TV budget and run on ad networks!'" said Chris Allen, VP-video innovation at Starcom USA.

Right now, most of what CPG marketers are doing is repurposing their TV ads online, but Mindshare's Ms. Trivedi said some are considering investing in made-for-web creative, like two-second bumper ads. Consumer adoption of web video is growing at a 40% annual clip; as the video market grows, online CPG dollars will grow with it.

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