Wary of YouTube
The proposition from the folks behind News Corp. and NBC's brand-new online-video project looks like a winner to advertisers, which have been crying out for online-video content but wary of the consumer-generated clips that have dominated on other sites. And while the yet-unnamed venture set to launch this summer has been rumored for the better part of a year, lining up the ad partners was a rapid-fire process.
General Motors Planworks got a call from NBC around 5 p.m. on Wednesday about the opportunity and closed the deal in just a few hours through a call with the automaker's media czar, Betsy Lazar, and four e-mail exchanges, said Curt Hecht, chief digital officer at GM Planworks, the Publicis Groupe buying and planning shop dedicated to General Motors. Another advertiser, Esurance, got the call from NBC around the same time and made the quick decision, with its media agency, MPG's Media Contacts, to jump on it. (Media Contacts has two other clients, one of them Royal Caribbean, that signed on March 22.)
Shortage of inventory
One reason these marketers moved quickly is this joint venture solves one of online video's biggest problems: the dearth of high-quality online-video content for marketers to buy.
The online-video market is still small compared to the $65 billion TV-ad market -- eMarketer estimates peg the online-video market at $775 million this year. Meanwhile, ComScore's January numbers indicate nearly 123 million people in the U.S., or 70% of the total U.S. internet audience, viewed 7.2 billion videos online. YouTube.com was the most popular streaming site, with 992 million video streams.
That marketers signed on to the opportunity so readily (as opposed to the time it took them to dip their toes into user-generated online video), underscores the importance of editorial adjacency for marketers. Google's YouTube has attempted to fit advertisers into its site with some sponsorship deals, but marketers often worry their ads will appear next to videos that may be inappropriate, because of either rough language, bawdy humor or overtly sexual themes.
"The idea is to align yourself with high-quality content with the thought that it will have a good rub-off on your brand," said David Cohen, exec VP and U.S. director of digital at Universal McCann, which buys media for Intel, another launch advertiser. "Purchase intent and brand favorability come from association of the content with which you align yourself."
The deal comes just a week after Viacom filed a $1 billion lawsuit against Google and YouTube and days after Apple introduced its iTV product, intended to bring internet video to TV screens. Under the joint venture, News Corp. and NBC Universal will create an independent company to cull their TV and film content, distributing it on a stand-alone site as well as through partners AOL, MSN, Yahoo and MySpace, which combined reach 96% of the U.S. internet audience. More media companies may join the venture as content partners, and there are talks other equity partners could be added. "For us it was a natural" since GM and its media agency have good relationships with all of the media outlets, Mr. Hecht said. The online-video site will allow GM to leverage the programmers' professionally produced content and the scale offered by the digital outlets. "This was a no-brainer," Mr. Hecht said. "These are all companies we like and do a significant amount of business with."
NBC and News Corp. will contribute to a marketing and promotional budget and will be throwing another ad-sales entity into an already crowded marketplace, since the new company will have its own ad-sales force.
Working out ad units
Thom Campbell, Intel senior media manager, said the company is still working out the details of its charter ad membership, but ad units will include pre-roll spots and sponsorships around "entry points."
"Sure there are risks, but they are tech-driven risks. And that's not just our backyard; that's our whole house," Mr. Campbell said. As for comparisons to YouTube, he said: "The biggest difference is this is actual entertainment content from entertainment companies. There will be consumer-created content of course, but it's almost a consortium of companies that own the content. ... It's much more legitimate."
While nobody's counting out user-generated video as a piece of the future marketing mix, how marketers fit into it in a scaleable way has yet to be cracked. Quality content with scale is what has marketers really excited. The content will be distributed on a primary site as well through as those of the four major web properties, Yahoo, MSN, AOL and News Corp.-owned MySpace. That means the site will give NBC TV programmers access to a larger pool of consumers than it had on NBC.com. Ed Montes, MediaContacts' exec VP-managing director, U.S. operations, said he can't think of a previous example where an advertiser could get that kind of scale next to professionally created online-video content.
"Traditional marketers tend to say online video is great, but it doesn't give you massive reach," he said. "[With the joint venture] we're marrying those two things." The commitment is likely to be a small piece of marketers' media mixes, with initial figures ranging between a couple hundred thousand dollars and $1 million, but the opportunities for marketers to experiment will be valuable. The ad model isn't yet hammered out, and marketers are hoping to help play a role in defining it.
"We have to begin to experiment and find the most effective way to maximize monetization and, more importantly, provide viewers with great experiences," said News Corp. President-Chief Operating Officer Peter Chernin. "It's great to be able to control your own destiny." As opposed to farming it out to YouTube, perhaps?
When asked what this new site will offer that YouTube does not, GM Planworks' Mr. Hecht said it wasn't a matter of any shortcomings of what will, no doubt, be one of the new site's major competitors. "This is clearly a statement about a new business model."
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Jean Halliday and Beth Snyder Bulik contributed to this report.