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Dotcom Scores With TV Web Sites

1/19/2003 07:00:00 PM Eastern

While all that's left of many dotcoms are promotional coffee mugs, Internet Broadcasting Systems (IBS) has found a niche creating, running and selling advertising on TV-station groups' Web sites. Cox Communications, with 15 TV stations, is the latest to sign up, assigning its 11 sites to IBS.

Cox joins NBC, Hearst-Argyle, Post-Newsweek, and McGraw-Hill station groups and individual member stations WRAL-TV Raleigh, N.C.; WEWS(TV) Cleveland; and WISC-TV Madison Wis., as an IBS family member. The groups and IBS split the revenues and costs, with the financial specifics varying among the member groups.

IBS revenues have grown from $27 million in 2001 to $42 million last year and a projected $58 million this year. The company was profitable for the first time in the fourth quarter of 2002 and expects to build on that in the year ahead, according to CEO Tolman Geffs. The privately held IBS, though, won't give out the figure.

Convergence packages

Geffs attributes the company's success to acceptance by local advertisers of convergence packages that include TV spots coupled with a presence on the Internet during dayparts when their TV spots aren't running.

"Those packages are increasingly running, accepted and sought after by local advertisers," says Geffs. "It makes sense as a TV buyer to have an online component to reach the same audience during the day when the viewer doesn't have access to a TV."

When stations sign on with IBS, the company sends out a team of four to help set up the operations and train the editorial and sales teams at the stations. Some stations also bring in IBS employees to handle some of the editorial and sales functions.

At Cox, Geffs says, station editorial staffs will handle decisions on editorial content, ensuring that it is closely aligned with the on-air news product. But, at some station Web sites, IBS provides some of the news content and has more editorial control. Regardless of who controls what in sales and editorial, the cost is spread over multiple stations, offering economies of scale.

The key advantage, however, is that IBS, not the broadcaster, is responsible for the Web site.

IBS's major rival WorldNow has a client list that includes groups LIN, Meredith, Young and Raycom. According to WorldNow President Mark Zagorski, the top 25 station groups are pretty much split between IBS and WorldNow.

He says the unsigned groups usually have newspaper ownership and are committed to using newspaper product for TV Web sites, like Belo or Tribune.

Like IBS, WorldNow is reporting success among its clients with convergence packages. Liberty, with 15 stations, now drives 5% of its local sales via convergence packages. and the split within those packages is 50/50 among the on-air and online components. In addition, about 70% of the deals represent new TV business.

"We have 35 technologists, and all they do is come up with new developments for the broadcasters," says Zagorski, adding, "It's not the station's job to be involved in the technology space."

WorldNow has shifted its business model from revenue-sharing to one based on licensing its platform and/or acting as a sales consultant. In 2001 and 2002, Zagorski says, those stations with which it had a sales relationship (about a third of its customers) did $32 million in revenue. That number isn't directly comparable with IBS figures because IBS shares its revenue with its customers.

"We're now able to offer our sales consultancy to stations that aren't on our technology platform," says Zagorski. Revenue from the consultancy is expected to be 15%-20% of WorldNow's total this year and to grow exponentially in the future.

For all the new content and new marketing opportunities, the simplest value proposition for all the sites is that the Internet gives advertisers a way to reach night-time viewers during the day. Viewers' accessing local sites during the day has resulted in huge traffic, but none of it is reported because Nielsen isn't allowed to set up measurement meters in their workplaces. Geffs says Nielsen Internet measurements are 30%-40% lower than IBS's internal traffic measurements.

'TV at Work'

"We think of IBS as the 'TV at Work' company because our prime time is usually noon or 3 p.m.," says IBS President Reid Johnson. "So we've moved most of our resources into a position to serve the TV-at-work audience."

The use of the Internet at work coupled with broadband has created a shift in the market, and Zagorski says that, for the first time on a national basis, CPMs are creeping up as advertisers start tapping into rich media and other offerings like pop-under ads.

And such ads may be where the future lies. Johnson sees traditional advertising like banners always having a place, but the Web, he notes, is an interactive and visual medium, and ads with motion, animation, video and interactivity will be the major revenue source.

 

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