ESPN, Scripps Networks and MTV, along with major Internet portals, are all selling online video in the upfront market, banking on the fact that advertisers have allocated dollars for broadband and know online video inventory is scarce. With broadband penetration expected to reach 60% by the end of the year, advertisers clearly feel they have to be in this market-and are addressing it as they make their TV buys.
"Most of the deals we do with top 25 TV advertisers are done in a [TV] upfront environment," said Steve Moss, senior director-national field sales of portal MSN. "They come to the conclusion that they need to be investing in broadband and that may come to them early in the fiscal year when they traditionally plan advertising."
Broadband upfront deals are priced on par with TV, ranging from $15 to $25 per thousand viewers, media buyers said. But the cost can go much higher. CPMs for ESPN and Scripps Internet video ads are higher than spots on their linear networks, sales executives said, because of a greater demand and because broadband video guarantees impressions based on actual viewership numbers-unlike TV's estimated ratings.
"On average [our] pricing is 50% higher," said Danny Fishman, exec VP- sales and business development at publisher iFilms.com, which shows broadband videos exclusively. The shortage of video inventory helps keep the cost inflated, but the price stays high because "we can guarantee views," Mr. Fishman added. When a publisher doesn't deliver the views promised, it is standard operating procedure to provide make goods, buyers and sellers said.
Ed Erhardt, president-customer marketing and sales for Walt Disney Co.'s ESPN/ABC Sports, estimates broadband video will be a part of more than 20 upfront deals with different advertisers-double last year's demand. At Scripps Networks, Jeff Meyer, senior VP-interactive sales, says three out of five advertisers are asking for streaming video in their upfront discussions, as opposed to one out of five last year. Greg Smith, exec VP-director of insight, planning and data intelligence at Carat Interactive, said that the number of his agency's media clients participating in broadband deals has increased from roughly 5% last year to about 30% this year. "It is now considered a safe investment," he said, adding that "we see dollars come almost exclusively from TV budgets."
Mr. Meyer of Scripps Interactive agrees. "In streaming video, there's much more of a TV mentality driving it, and often the budgets for streaming are coming out of broadcast, rather than traditional online," he said. Scatter dollars come from either TV or interactive budgets.
Much of the blossoming Internet upfront market is driven by brands worried about TV's audience fragmentation and looking for those viewers online. Take Kellogg Co. for instance. The Battle Creek, Mich., cereal marketer, knowing that there's a lack of online video content appropriate to kids, is in talks to sponsor the showing of newly made Looney Tunes cartoons on 10 children's Web sites including Kaboose.com and Bolt.com, as well as cable stations, said an executive close to the deal. Thirty-second commercials will run before the two-minute animation shorts online. The cartoons are licensed from Warner Bros. Executives at Publicis Groupe's Starcom, which is handling the media buy, would not comment, saying only that the terms of the deal are not yet firm.
And it's not just repurposed TV spots being sold, but full-on integration. At the Scripps' video magazine Living.com, for example, General Motors Corp.'s GMC has created Internet video advertorials, with their vehicles incorporated into how-to clips, such as one that explains how to change out closet doors.