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’

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.”

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