Upfronts 2013: Fishing for TV Ad Dollars at the Digital NewFronts

More content available, but scarcity of top-quality fare inspires higher pricing

Complete Coverage: Upfronts 2013

For years, some media buyers have suggested it would be a good idea to kill off the upfront and the annual frenzy in which a year’s worth of TV ad time is sold in a few weeks over late nights and cold pizza. Yet the upfront, for all its flaws, survives.

Now the best minds of the Internet world have moved into the streaming video business, challenging the TV networks for those coveted advertising dollars. And their method for selling that ad time? Their own version of the upfront, with a series of presentations aimed at getting marketers to buy in early to projects for the coming year.

The second annual Digital Content NewFronts will be held next week in New York. This year, the Interactive Advertising Bureau will host the weeklong event, with 18 Web and media companies presenting.

“Digital wants to change the world, and then they copy the big thing from the existing world,” says Eric Berger, executive VP of digital networks for Sony, whose Crackle network will be presenting.

A big benefit of the upfront format is that it’s familiar to media buyers. And Internet companies are rubbing their hands together because the number $1 billion in sales is being bandied about this year in terms of upfront sales for digital video. But they would like the biggest bite possible of the $18 billion that gets booked in the TV upfront.

Bringing Internet companies into the conversation when video budgets are being allocated is smart business for media buyers, according to Todd Gordon, U.S. director of MagnaGlobal. “I think limiting our conversation to only the broadcast networks or the traditional TV players limits the competitive set,” Gordon says.

0422 Upfront Central DigiFronts lineup2
Familiarity Breeds Contentment

A familiar format for the DigiFronts might not be necessary, but it probably helps the Internet media companies send a message.

“Some of it is planting a stake in the ground and saying we’re huge, well-resourced, big media companies and we can put on a big show and show you we’re developing a ton of original content,” Gordon says. “I think it’s them making a big statement that they want a bigger share of the overall pie, and this is one way of getting attention.”

“We look at it first of all as a showcase for all the brands that are under the roof of CBS Interactive,” says Jim Lanzone, president of CBS Interactive.

Though this is CBSI’s first year presenting in the DigiFronts, “we in past years have done a substantial portion of our sales in the upfront as part of the television upfront,” Lanzone says. Some of CBSI’s advertising deals are done side by side with the CBS Television Network.

Digital companies say there are positives to selling sponsorships of their programs in an upfront cycle.

“I think it’s important for the industry to be able to plan, invest and grow our businesses. This sort of buying time period is very important,” says Matt Diamond, CEO of Alloy Digital.

Buying digital upfront works for media buyers too—sometimes. “There are places where inventory is scarce in video and it’s advantageous both from securing what you want and also in terms of price to make those deals early and long-term, so we’ll selectively consider that,” Magna’s Gordon says.

While marketers admire the way they can track digital advertising’s role in making a sale, the prices of many forms of digital advertising have been under pressure because the business is easy for start-ups to enter, there’s a huge amount of advertising inventory and because trading desks and automated buying systems tend to treat content like a commodity.

Many of the companies participating in the upfront see themselves in the premium content business and say there is a scarcity of that type of high-quality programming.

“The more premium the content, the more advertisers want to be a part of it,” says CBS’ Lanzone.

But is digital comparable to TV content? “It depends on the property,” says Gordon. “I think in general it’s a great complement to TV. It tends to be lower clutter, it’s higher engagement. It reaches lighter TV viewers in general. So we see online video as being really complementary.”

Alloy also looks to resist video that could be seen as a commodity. “We’re very selective. It does us no good to go down that slippery slope,” says Diamond. “So for us, it is scarce, and we think that’s important discipline.”

Measure for Measure

In the beginning, digital video was priced as a premium to TV on a cost-per-thousand-viewers (CPM) basis. “As usage has increased and supply has increased, the pricing has come down to levels that are competitive or better with their equivalent in TV,” according to Gordon. Digital video also keeps TV prices in check. “In general, a more competitive market with more options for where you spend your money is a good counter to the inflation,” he adds.

Marketers are looking for metrics to support their investment in digital video.

“They want to see high completion rates and they want to see high engagement and time spent with the advertising. And fortunately, that’s been something we’ve been able to do with our platform,” says Berger of Sony. “Brands feel they can get those three metrics completed and they feel that they can associate with premium content.”

Crackle earlier last month introduced a new ad unit called the cRoll that brings Internet-like interactive commercials to smart TVs. When people click on those ads, they spend more time with them. “What we found is if people bought a 30-second ad that, on average, people were spending an extra 60 seconds on top of that with what we call earned media with the ad unit. So they ended up getting 90 seconds, three times what they paid for,” Berger says.

But it’s also important for Web video to be able to measure itself the way TV does, if it wants money from TV budgets.

Berger says Crackle has been working with ComScore to measure connected TV viewing of digital video. ComScore already measured online and digital viewing. “Therefore you can get unduplicated reach across all three platforms. You can tell exactly who the unique customers are,” Berger says.

Crackle is the first to get these numbers from ComScore, but Berger adds, “We assume others will come on board soon.”

With all the activity in digital, should the TV networks be nervous?

“It’s a tough business. Everyone should be nervous,” says Gordon, noting that digital video is one of the fastest-growing areas in terms of media spending. “The fight for audience and obviously the fight for ad dollars is extremely competitive.”

E-mail comments to jlafayette@nbmedia.com and follow him on Twitter: @jlafayette