Are the NewFronts Big Business? Media Buyers Sound Off

Execs From UM, Starcom, Mindshare and DigitasLBi Offer Their Expectations

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For UM Chief Investment Officer David Cohen, this year's NewFronts began way before the official start date approaching on April 27. It was February when he had his first meeting with one of the 34 digital-video publishers that will soon mount big presentations to advertisers, hoping to secure TV-style upfront commitments to their programming.

"It's starting earlier than ever," Mr. Cohen said. "We have been having meetings for the past two months that are increasing in regularity. The pre-preview, the preview, the meeting before, all leading up to these two weeks."

What began as a curiosity in 2008 has become seriously engaging for marketers and their ad agencies, but the NewFronts are also continuing to morph as unusual new kinds of deals emerge and certain gaps between digital video and TV grow smaller.

The Digital Content NewFronts, as they're properly called, originated as a way to spur advertiser interest in the emerging digital-video market, and that they have done. Last year one agency received phone calls at 2 a.m. from clients trying to get invites to presentations the next day. And roughly 100 brands from major marketers -- large multibrand companies like Nestlé -- signed NewFronts deals with YouTube, according to the Google-owned video giant, including 30 that had never advertised on YouTube before.

But it remains unclear whether the NewFronts are yet big business. U.S. advertisers will spend $7.77 billion on digital video this year, according to eMarketer estimates, up 30% from 2014. While the NewFronts have spurred some of that spending, most of the deals are struck at other times of the year. That's in contrast with TV, which secures commitments for the majority of its prime-time schedule every summer before its new season begins.

Less than 20% of digital-video ad spending will come out of the NewFronts marketplace, said Mindshare Chief Strategy Officer Jordan Bitterman, who co-founded the NewFronts while at Digitas. "I think you're seeing big spending coming out of the NewFronts," he said. "It's just not committed in an upfront way."

The flow of money to NewFronts presenters last year "probably did not meet expectations, but this is a long play," said Starcom President of Investment and Activation Amanda Richman. "You can't judge success one year at a time."

The play now, however, appears to include a shift away from the idealized, TV-like deal and toward a hybrid of how TV is packaged and digital is bought. Advertisers have proven cool to signing fixed upfront arrangements for digital series that don't guarantee viewership (which they're offered when publishers aren't sure how many views they might get) or sponsoring series that don't premiere at an opportune time for the brand. Instead they're looking for more time-flexible deals and leeway in case a publisher is unable to deliver the viewers it has guaranteed.

One agency exec said NewFronts presenters are now sometimes willing to negotiate on a kind of sliding-scale structure, where an advertiser doesn't promise to spend a certain amount of money in exchange for access to select inventory. Instead, as the advertiser spends more money with a publisher over time, it's able to unlock certain benefits such as inventory that's unavailable through typical buying."It's a 24/7/365 marketplace today that demands more publishers be flexible on their terms," Ms. Richman said.

AOL seems to have recognized that shift. "We are moving from a NewFront season to a NewFront year," said Allie Kline, CMO of AOL Advertising. "The notion that anything in our media ecosystem is going to be fixed by time, consumers have broken that up."

AOL's offering to marketers this year will be "not just your typical sponsorship model," she said. "That's certainly still an option, but we're providing agencies and brands with a much deeper sense of flexibility around how they craft what they buy." She declined to elaborate.

Last year's most successful NewFronts presenter was YouTube, according to agency executives. It won over advertisers with a TV-style package called Google Preferred, which bundled the top 5% of YouTube channels into content categories that advertisers could only access through an upfront commitment.

Google Preferred was an "interesting first step" to packaging YouTube's content in new ways, said Adam Shlachter, chief investment officer at DigitasLBi. "But that wasn't necessarily about aligning with specific shows, as much as aligning with specific audiences and genres," he said. "It's an approach more analogous with what happens in the world of cable, which helps," because that's a model clients understand.

Pricing remains an issue for some. Mindshare's Mr. Bitterman said NewFronts presenters seek deals that typically translate into a brand paying $25 for every thousand impressions, while cable-TV audiences can be had for around $15.

Mr. Cohen concurred, but said prices were coming much more in line with the competition. "It's not exactly there yet, but it is very close to being an easy swap-out, from a price perspective, for some of those cable dollars," he said.

And though TV continues to cast a shadow over the NewFronts, "it's trending more toward a convergence story," Ms. Richman said. Last year's TV upfront was unusually weak; networks blamed a variety of factors, including their growing digital rivals.

Digital-video sellers will be right there in buyers' ears this summer as TV tries to get its own deals done. While NewFronts presentations take place weeks before the big broadcast networks make their elaborate upfront pitches, NewFronts negotiations don't typically get going until broadcast does, too. That demonstrates TV's continuing central role in many marketers' plans, but there was a time when buyers would complete their TV deal-making before considering digital. That's less and less the case.

"Negotiations with digital are occurring at the same moment as those with broadcast," one agency executive said.

The same dynamic is repeating outside the upfronts and NewFronts during the rest of the year. "What used to be a very linear sequence of TV first and then digital is becoming a tighter window of being always in market, always having new content opportunities, always having new audiences," Ms. Richman said.

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