NBC uses some awfully optimistic traffic estimates in pitching its NBC-IN online effort to affiliates, but analysts think the bottom line may be accurate anyway.
NBC projects that the average NBC-IN viewer will visit the site four times more often than the industry average. It also says that the site will launch attracting 5% of each market's total online audience--a higher user percentage than such established sites as Disney.com, CNN.com and MSNBC.com.
Given those assumptions, NBC projects that its affiliates in top 10 markets will see local online advertising and sponsorship revenues reach about $225,000 in its second year. NBC also projects stations will receive an additional $23,000 in revenues from online transactions originated in their market.
The projections are part of the pitch that NBC is making to its affiliated stations, which was obtained by Electronic Media.
Unveiled last month, NBC-IN is the network's online service geared toward affiliate Web sites. NBC will sell national advertising spots within the service, while stations sell local spots. The network provides all national content, but the sites are built around the station's local identity.
Bill Bass, an analyst with Forrester Research, said that many of the underlying assumptions of the NBC-IN plan were unrealistic. However, he said, the bottom-line revenue projections from NBC are realistic, and in some cases may be under what a station will actually perform.
"I may quibble with the assumptions," Mr. Bass said, "but don't think that these dollar figures are unreasonable."
As part of the NBC-IN affiliation agreement, stations will get 25% of net revenues from online sales generated within their market, while being required to promote their NBC-IN affiliated Web site with 10 on-air mentions and five 10-second on-air promos a week.
The NBC projections rest on a series of business model assumptions made by the network. Among them is the projection that a local NBC-IN Web site will reach 5% of its total-market Internet users, growing at a rate of 5% each quarter thereafter.
That would place NBC-IN well above the 1.7% Internet market viewership that NBC.com got between September and December 1996, according to PC Meter.
By comparison, according to PC Meter, Disney.com averaged 4.8% viewership over that period, and MSNBC.com averaged 3.9% viewership.
But NBC officials stood by the aggressive viewership projection, maintaining that NBC-IN's content and on-air promotion will translate into online eyeballs.
NBC is also projecting that the average viewer will access NBC-IN once a week--PC Meter's average is one visit per user per month--view eight pages per visit in the first year and stay an average of 40 seconds per page.
Marty Yudkovitz, president of NBC Interactive, acknowledged that the assumptions were aggressive and said the future of the Internet is still largely uncertain.
"Nobody can predict whether the Internet is going to be this decade's Hula-Hoop or the dominant form of media for the next century," he said. "But these are not pie-in-the-sky projections."
NBC also assumes that in a station's first year with NBC-IN, it will sell its local online advertising space at a $20 cost-per-thousand rate and sell out 50% of its local ad space--figures Mr. Yudkovitz called below the CPM and sell-out rates of NBC.com, although he declined to be more specific.
By the third to fifth year with NBC-IN, the network assumes a CPM for those online ads at $28, with 100% local sell-out rate.
Mr. Bass takes exception with many of those projections. For example, he said, the expected viewership rates are too high, and he projects that the sell-out rate for online ads in 1998 will run at about 30% not the 50% NBC-IN is projecting.
But despite the overly optimistic assumptions, the bottom-line revenue projections are "very reasonable," Mr. Bass said, in large part due to the low CPM rates NBC-IN assumes.
NBC projects that an average affiliate in market No. 10 will earn $48,000 in online advertising revenue from NBC-IN in its first year. The network also expects that transactions between users and third-party content providers, such as rent.net or auto-buy-tel, will bring an additional $5,000 in transactional revenue.
By the second year, that projection jumps nearly 400 percent to $225,000 in local advertising revenue and $23,000 in online transactions.
For a smaller station in market 100, NBC projects first year advertising revenue from NBC-IN will be $7,000 a year with an additional $1,000 a year in transactions. By the second year, the station will sell $31,000 in local ads and get $3,000 in transactional revenue.
The NBC-IN service plans a soft launch with NBC owned-and-operated stations and some affiliates in September, with a full-scale launch in December.
Besides the NBC stations, LIN Television's NBC affiliates are also on board, giving the system 29 percent coverage.
Greg Spring is Los Angeles bureau chief for Electronic Media.
Copyright May 1997, Crain Communications Inc.