Understanding the Potential of Online Video Advertising

MediaWorks Viewpoint: Hernan Lopez, Fox International

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Hernan Lopez
Hernan Lopez
During soft times, needs and wants are reexamined. And when it comes to advertising investments, the line between both is famously thin. But it is precisely in those times when companies that spend wisely can capture market share at a lower cost.

While speaking to a group of media directors recently, I asked, "Which one medium would you take to a deserted island: TV or internet?" I wasn't surprised to get a unanimous show of hands for the internet, up from half only a few years ago. Make no mistake, this simply reflects the perception that you can now get some TV over the internet, plus the ability to send an e-mail asking to be rescued at the right time.

But then I said, "Now imagine you come back from this island and you're given the account to advertise it as a tourism destination: Which one medium would you use, TV or the internet?" Predictably, a large majority of hands went up for TV, causing the very puzzled faces I expected.

Online will catch up
The inconsistency is understandable. TV continues to be the best medium when it comes to communicating a message that speaks to both the brain and the heart. But premium online video is already a viable complement, and while it doesn't have the scale to compete with TV, the answers to the first "deserted island" question suggest that some day it will. And so it would be a good idea for all of us on both sides of the fence to understand the medium better.

At Fox International Channels, we are trying to do just that. In early 2008 we bought utarget.Fox, the largest premium online video network in Europe, and we're rolling out its products in our 33 offices around the world. What we've learned so far is fascinating, yet it merely scratches the surface.

We all know the two largest factors that determine whether a single ad impact works: (a) Does it reach the person that is ready to buy? (b) Is the message relevant and credible to that person? Thus, if our target was just one person, we would only go after him with a carefully tailored message, and only when we know he's ready -- what salespeople do all the time. But if all marketing worked that way, a $50,000 CPM would be average.

In practice, our target often includes millions of people, and so we balance the savings of reaching lots of them at a lower cost against the chance of reaching some of them with irrelevant or untimely messages. The math overwhelmingly favors mass media, especially TV.
As chief operating officer of Fox International Channels, Hernan Lopez spearheads business development and online ad networks for FIC. He also directly oversees Fox's basic and premium channels in Latin America and the U.K., serving as president of these divisions.

A happy medium
Online video introduces for the first time a happy medium: not only do you have sight, sound and motion but you can set a "frequency cap." You can create "fences" around segments of your target and show them different creative executions, based on how they have reacted to previous ads. You can infer which consumers are ready to buy.

Imagine, for instance, that an internet visitor clicks on three different banner ads promoting cars in the same week. That user's car lease is probably up, narrowing down the target by 95%. A cross-analysis of the category, "people who have clicked on this have also clicked on ..." suggests he's likely to prefer sports cars to SUVs. You then show him an elaborate online video ad for a sports car, narrowing the target further by 60%. That $50 CPM has suddenly turned into the equivalent of a $1 CPM.

Premium online video works hand-in-glove with TV. While it may not be yet a "need" on a media plan any more than cable TV was in the same age, i.e., when Ted Bates developed "the 5% solution" in the '80s, it will get there faster than many expect. Those who embraced that medium early on were better prepared in the '90s and today, when they had no choice but to truly master it.
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