There’s an online TV storm a brewin’

March 27, 2009

I wrote earlier this week about how Hulu is now streaming as many views as Comcast does via VOD. But what I didn’t take time to include is the dark side of online TV shows. The fact that many networks are pulling down some of their top shows (e.g., The Mentalist and It’s Always Sunny in Philadelphia.), and how the ads on these wildly popular shows are not all selling.

So I took the time to compile all the evidence that an online TV show storm is brewing and did an analysis for Forrester clients that was published earlier in the month. The great news is that Forrester recently recognized its 10,000th Twitter follower and to celebrate, they let him choose a Forrester report to make available to all of Forrester’s Twitter followers. This individual (@jpthomp on Twitter) chose my report about the coming online TV show backlash. That means good things for all of you, go to the following link to register to get a copy of the report (thanks, jpthomp!). http://snipurl.com/emg3g 

When you get a hold of the report, you’ll see that I envision a lot of experimentation with online show availability throughout the rest of this TV season and possibly even throughout the rest of the year. And with online TV shows failing to sell out their ad inventory, some naysayers inside the major networks are going to be arguing for much more aggressive anti-online measures. We think it will take some time, but online TV can be brought back around again as the recession matures and as executives realize that online TV is not a separate kind of TV, it’s simply the extension of existing TV experiences across multiple platforms. In the report, we sum up the call to action this way:

OUR PLEA: INTEGRATE ONLINE TV INTO THE TOTAL VIEWER EXPERIENCE

If you expect us to end with a summary of all the reasons that online TV shows are the future of TV and a plea to preserve this threatened species, prepare to be disappointed. We said online TV was the most important thing to happen to the video industry not because it was the future of TV in and of itself but because it would help move us quickly into the future of TV, something Forrester calls OmniVideo; this is a state in which consumers can watch TV shows and movies on any platform they want, controlling what, when, and where they watch. In this future, not only will consumers be satisfied, but producers and distributors will make more money than they do today. That’s why we now plead with the industry to quickly learn from the mistakes they’re going to make in the next few months and get back to fully supporting online TV shows — not as a separate business but as an integrated consumer experience that complements and enriches traditional TV.

Check out the report yourself, see what you think. Let’s buckle our seat belts and see what happens over the next few months.


Hulu breaks 300 million view barrier

March 26, 2009

This week, Hulu released comScore’s latest VideoMetrix chart that shows the site broke through the 300 million views in a single month barrier. This barrier is significant for a few reasons: 1) it’s higher than I thought it would be, so I’m humbled; and 2) it’s roughly the same number of streams that Comcast does each month in its onDemand system. To illustrate both points, let me quote myself from last October when Hulu reached a meager 150 million views:

This is phenomenal, it’s precisely the year-end target I had for Hulu in December. Now I have to ratchet that up to 200 million. To go from 0 to 200 in under a year is remarkable. Consider that in its best months, Comcast VOD streams 300 million video views. That’s a big number. Hulu will be at the level some time next year. Without having to invest in VOD servers the way Comcast did. (See my original blog post for more.)

Let me reproduce the VideoMetrix chart (source: comScore, February 2009) so we can do some analysis.

comScore Video Metrix February 2009

Quick note for those new to this kind of stuff, “aHulu (Hybrid)” refers to the fact that some portion of Hulu’s views come from its syndication partners like AOL and MSN. That means any Hulu views that occurred there are not counted there, instead they count back at Hulu. We don’t have any solid estimates of what portion of views are coming from Hulu.com itself vs. its syndication partners, but I have a hunch it’s shifting more toward Hulu over time as Hulu has attempted to brand itself more aggressively.

Looking at this chart, we can do some fun math (I know, not two words you’re used to seeing together). We can see, for example that the average viewer is watching Hulu about 16 minutes a week, far ahead of everyone but YouTube (which accounts for the lion’s share of the Google Sites line). That means the average viewer might watch a show every other week, which indicates the beginning of a habit. Hulu beats everyone else in minutes per stream, at 6.7 minutes, comapred to 3.5 for both Google and CBS. That’s obviously because Hulu people are watching full-length content. Most interesting, though, is the fact that Hulu now accounts for 5% of all online video viewing minutes. The only other site that has more than a single percent of viewing minutes is YouTube, which accounts for 29% of viewing minutes.

Yes, YouTube still rocks the house. But Hulua is clearly the second most important US online video provider. 

And it has only been in business for a year. I’m starting to regret boasting about the fact that I never saw Hulu as a YouTube killer the way some people did when it was first announced. While it’s not technically a YouTube killer (these numbers attest to that), it’s certainly a YouTube distractor since it actually has a model for making money from these views, which  YouTube does not. 

 


Online TV show ads in peril?

February 13, 2009

A few weeks back I asked you for evidence of whether online advertising was showing signs of growing or shrinking. I got some feedback, but none of a smoking gun. Then I spent a few sick days watching a lot of Hulu on my TV screen. I mean, a lot. (I even took a brief look at that Heroes movie with Henry Winkler and Sally Fields that keeps showing up in my recommendations queue for obvious reasons. Talk about a very obvious database-matching exercise gone awry.)

If you haven’t watched Hulu lately, check it out. Are you seeing as many PSAs as I am? I didn’t know the Air Force had so many ads to show. And I didn’t know there were that many eco-friendly organizations as I’ve met lately on Hulu.

I’m even talking about top shows like The Office or House. Is it possible they aren’t selling out their inventory on these great shows? Gratefully, I was spared the flood of PSAs once I started catching up on Battlestar Galactica (BSG). Sponsored by DirecTV, BSG affords a perfect example of online video advertising done right. Yes, DirecTV sponsors the whole show, but each ad is different. Featuring John Michael Higgins in the fictional board room of a generic cable company in panic, these ads deliver. They’re so funny they actually make me wish that satellite TV wasn’t headed for the sidelines.

But brilliant touches like these are few and far between. Again, I’m asking you: is online TV advertising in danger of failing to support this fledging new medium upon which so many millions of us have become dependent?


Looking for evidence that the online video ad market is tightening

February 4, 2009

Daisy Whitney’s New Media Minute is out this week and in addition to discussing the basics of fair use (a supposed “safe harbor” in the world of YouTube video production that won’t, in fact, turn out to help as many people as hope it might), she opens with a brief discussion of how online video producers are starting to back away from producing online videos on spec. Instead, they want advertisers signed up from the get go — the way that Electric Farm Entertainment (EFE) NBC produced the NBC-distributed non-hit Gemini Division, for example. (Amended to reflect Brent’s comments below,5 Feb).

See Daisy’s video below for more details. This could mean the market is maturing. It could also mean the market is getting tougher and people don’t want to spend in hopes of later payoff. For my part, this is causing me to finally step out and address the big question that has been hanging over online video since the market crashed in October: Is the market for online video advertising tightening? Are advertisers — once eager to spend a 50% premium on a CPM basis to reach ABC.com or Hulu.com audiences — going to pull back from this medium simply because cuts are coming across the board? I say this in an environment where broadcasters expect a bloodbath on the upfronts later this year — the same upfronts where a lot of online video sponsorships are presold (think Sprint + Heroes). 

It’s time to collect the evidence. What are you seeing? What conversations are you party to where people are cutting back on online video? Or are you hearing people get smart about it and realize that an online buy is still less-cluttered and more-targeted than other TV buys? I’d love to hear specifics, anonymous or not. Have at it.

Vodpod videos no longer available. 

 


Making money from user-uploaded video: Auditude, MySpace, and MTVNetworks

November 3, 2008

This is an important announcement, but it’s one that’s hard to understand if you don’t follow this business every day — I found that out last week when trying to speak to reporters who were having trouble with this. One reporter who gets it is Jessica Guynn of the LA Times. Her piece on Auditude, quoting me, ran today

The basic explanation goes like this: A viewer captures a clip of a Colbert Report segment and posts it to MySpace. Auditude’s system checks the clip against a massive database of clips and properly identifies the video as a Colbert Report segment from Thursday, October 30. Auditude checks that content against MTV Networks’ list of content that can be monetized, finds it is approved, then matches an ad to it based on who has paid to sponsor the Colbert Report. When that video gets viewed on MySpace after that, viewers see the clip, with an overlay from MTV Networks promoting the show’s website and airtimes, this is followed by a brief “sponsored by” overlay from the advertiser. MySpace gets to please its visitors, MTVNetworks gets promotion for its popular show, an advertiser gets an interested viewer, and some money greases everybody’s palms, from MySpace to MTV Networks to Auditude. Win, win, win and win.

The prior solution didn’t work. It involved trying to discourage posting of copyrighted materials by taking them down quickly but also by providing the same content in high quality directly from the content owner. For example, Tina Fey’s hilarious interview with David Letterman on October 17th to talk about Fey’s Sarah Palin impersonation, was posted by CBS the day after. It has since earned 156,339 views. But the presumably illegal posting from a random viewer of the same interview went up the night before (the same night as the interview) and has since generated 588,934 views, nearly four times as many (with a much lower quality clip).

Taking those successful videos down means they don’t do anyone any good. Making money from them is a better idea. 

This is really needed for the user-posted video market which up until now had no hope of every making real money. I say real money because advertisers don’t want to touch all the video genuinely created by average people, because: 1) it’s often inappropriate, and 2) no one knows how well it engages viewers. In contrast, professional content like the MTV Networks clips that often make their way onto MySpace are advertiser-friendly. Once we can monetize those millions of video views, there’s a chance that revenue will rush into that vacuum, helping the market hit its online video advertising goals

Long-term, this becomes a standard approach. More networks will sign on to work with MySpace, they do all their learning and experimentation. A few will also work with YouTube (probably CBS, which has always had a cozier relationship with YouTube than the rest) in the meantime. At some point, best practices evolve and YouTube lawsuits get resolved and this becomes a standard practice.


Happy Birthday, Hulu.com! I knew you’d make it

October 29, 2008

It’s not really a birthday party, since this is only the anniversary of Hulu.com’s beta launch. Which is all the more amazing considering how far it has grown in a year — when half of that year was conducted in private beta. Since its official launch in March, Hulu can now boast that in September nearly 150 million videos were streamed.

This is phenomenal, it’s precisely the year-end target I had for Hulu in December. Now I have to ratchet that up to 200 million. To go from 0 to 200 in under a year is remarkable. Consider that in its best months, Comcast VOD streams 300 million video views. That’s a big number. Hulu will be at the level some time next year. Without having to invest in VOD servers the way Comcast did.

That’s right, folks, Hulu is here to stay. And <bashfully> I have to admit I called it. A year ago today, I published a report called Online Video Syndicator Hulu.com Overperforms At Beta Launch. I said:

Today Hulu.com, the NBC Universal and News Corp. online video joint venture, launched a private beta test that beats our expectations of what the company would achieve. It syndicates video, enables sharing, and does it all with top-notch content and a design flare reminiscent of Apple. If Hulu can keep expenses down, the company stands as a threat to competing online TV companies like Joost, as well as old-line cable companies and telco TV entrants.

Specificallly to cable companies, I warned:

itemCable companies and telco TV providers can begin the fear watch. By delivering a solution that advertisers want, syndication partners are happy to implement, and consumers will easily lap up, Hulu has assembled an experience directly comparable to that offered by cablecos and telco TV companies. Think about it: You have first-run TV shows, classic TV reruns, and movies from the back catalog. All you need is a pay-per-view option for new releases, and you might as well call Cox Communications, Time Warner Cable, or any of the rest and cancel your TV subscription while simultaneously opting for the fastest Internet connection they can possibly offer. That tells us what Hulu will offer next.

The warning is only stronger now as Hulu has even more content than it had back then and even more advertisers lining up to pay a premium on a CPM basis to participate. I hate to say I told you so…

Ironically, Comcast is a beneficiary of the Hulu experience since Hulu is the engine behind most of the content available at Fancast.com, Comcast’s online TV portal play. 

What about you? Are you a Hulu.com junkie yet? Are you doing just TV or have you browsed any of the hundreds of movies? I’m hooked on both. I’ve watched over 3 hours of video just on Hulu this week alone. That puts me squarely in the most engaged online viewer category and I have Hulu to blame.


Google uses brain science to prove overlay ads work

October 27, 2008

Although this study was released last week in hopes of bolstering the case for video overlay ads, it actually comes across as a confession to the market: CPMs on overlay ads are not as good as Google/YouTube wants them to be. Now I’m not poking fun, because that’s generally the case with a new form of online advertising, especially one that’s competing with TV-like 30-second spots running on Hulu.com, which advertisers understand and are ready to spend big bucks on. But overlay ads are not popluar with advertisers yet. 

Google’s solution to this dilemma was to work with NeuroFocus, a recently acquired part of the Nielsen family, to measure how people respond to overlay advertising at the deepest level possible: in the brain. Or in the trail the brain leaves behind, namely the peripheral nervous system. It’s a topic I’m way into, but I’ll spare you the nerdy details. This is similar to work Innerscope Research is doing, which I blogged about before

If this is all too spacey for you, you better get used to it. You’re going to see a lot more of this going on as advertisers and content providers want to show that they are engaging people. Funny how we used to trust Nielsen audience numbers for that, and were comfortable assuming the rest. Not anymore.

The science is actually solid, in case you doubt that. It’s just not very scalable because each person involved has to be hooked up to a machine, so it will likely remain specialized and custom (don’t expect any NeuroFocus nightly ratings anytime soon). Innerscope reduces that burden a little bit with vests that make measurements relatively unobtrusive and communicate results wirelessly. But that still means there’s a cap on the likely number of participants that can be in a study.

What do you think about measuring the nervous system for engagement? Would you wire yourself up for a study like this? Have you?


Speaking at Ooyala webinar on onilne video syndication

October 22, 2008

It’s coming Thursday, October 23rd, at 11am PT/2pm ET. Go to this page for the details of how you can participate. Thousands have been invited, I hope you’ll be there.

I’ll be speaking for 20-30 minutes about online video syndication, one of the secrets to making sure your content gets seen everywhere — or making sure your advertising message will engage the maximum number of viewers possible, depending on whether you’re the marketer or the content provider.

I’ll also be sharing the mic with Bismark Lepe, CEO, and Sean Knapp, CTO, of Ooyala. They’ll be explaining what Ooyala is doing to help advertisers as well as content providers do what I’ll be talking about. Sounds like a good fit!

If you come, come ready with some questions about the growth of online video advertising (I’ll be sharing the forecast I recently blogged about), and the formats that are likely to dominate for now. Should be a great conversation. Talk to you then.


Will online video ads hit $989 million this year?

October 14, 2008

In October 2007, my very smart colleague Shar VanBoskirk, a principal analyst serving Interactive Marketers, authored our 5-year interactive marketing forecast. For the first time, she was able to break out online video separately from display ads and other interactive marketing avenues.

I won’t give away her hard-earned insight here beyond saying that in 2007, our forecast pegged the online video advertising business at $471 million, at least half of which — in my estimation — came from the 2007 advertising upfronts, where the networks aggressively bundled in online advertising to keep the broadcast ad numbers from flattening.

This forecast for 2008 put the number at double that — $989 million, close to the magic threshhold of a billion. Throughout the year I have been asked whether we think the assumptions of the model have held up. My answer is no: some assumptions fell below expectations and others came in above, chiefly: 

  1. YouTube hasn’t monetized its traffic effectively enough yet. This magic vein of cash has yet to be properly tapped. We saw an interesting interim announcement on how YouTube can add some cash through click-to-buy, but it’s really advertising that can bring in the dough once YouTube figures out how to make money without Viacom asking for all of it in the form of damages. Result: online video ad revenue not as big as you would hope.
  2. Online TV is bigger than expected. Remember, watching TV online is something that in 2006, only 10% of online video viewers did. By the end of 2007, it was 24% (see the report “What It Really Means To Watch TV Online”), a number we did not have in time to feed Shar’s forecast. Looking at the increased supply of online video — most of it from Hulu.com which increased supply both in amount of content and the breadth of distribution — that 24% number should double this year.  

The point is that even though YouTube didn’t come through for us, online TV has certainly more than made up for it, largely because the CPM on those shows is so awesome, ranging from $30 – $60 on a CPM basis. 

As a result, we stand by this number. As part of the validation exercise, I went through the following logic (which is summarized in the context of other valuable online video statistics in my Online Video FAQs):

  • In a typical week, 109 million hours of online video are watched.
  • If every hour of video has an average of 10 ads in it (video or companion banner), that means that just over 1 billion video ads are served each week, a run-rate of nearly 57 billion ads a year.
  • To hit our forecast of $989 million, the average CPM on the 57 billion ads run has to be $17.45 

The big assumption here is the number of ads per hour. For long-form content, 10 seems a tad high as a 45-minute episode usually has 6 ads. But add in another 2 ads for the whole hour and the possibility of a few pause ads and companion banners and the 10 assumption is reasonable. 

The real question is the CPM. For long-form content, that’s easy. For short-form content, overlay and companion banner ad CPMs can fall below a buck if sold as remnant inventory on an ad network. What do you think? Will online video ads hit this mark? Why or why not? What evidence do you have or signs do you see? I’m interested in your comments.


Engaged online viewers revealed in Veoh-commissioned research

October 8, 2008

As promised, I have some notes from last night’s Veoh Networks event where we debuted the research results from a study commissioned by Veoh and executed by Forrester Consulting, the consulting arm of Forrester Research.
See the press release on Veoh’s site for more detail on the study, which Veoh intends to release next week in its entirety after sharing it with its clients and partners this week. Big thanks to Edwin Wong at Veoh for leading the effort from his side. There’s also more detail from the SmokeJumping blog, posted by Brent Harrison who was also integral to getting the study going. From the release:

The study found that Engaged Viewers (viewers who watch more than an hour of online video a week) make up nearly 40% of all online video viewers and watch nearly 75% of all online video. Of these Engaged Viewers, those who spend the most time consuming and sharing long-form content:

  • Are more likely to watch videos all the way through
  • Pay more attention to online video more than they do TV
  • Interact with and rate the videos they watch more frequently
  • Are twice as likely to recall in-video ads and post-rolls than non-Engaged Viewers
  • Agree more readily that advertising is fair and helps pay for their free experience
  • Consider banner ads and ads that come in between videos (mid-rolls) most effective

The details are even more interesting, and I had the chance to share them with a group of content programmers, ad executives, and other online video enablers. It was a very worthwhile project, given that I could zero in on deep online video viewing behaviors that our own comprehensive Technographics surveys don’t usually allow me to probe.

Especially interesting was the set of in-depth interviews we conducted to supplement the 1,013 surveys. I learned a lot about how online video is taking over people’s lives from those interviews.

I can best summarize the mountain of qualitative insight with this single comment from a 42-year old participant who said, simply:

I can get what I want, when I want.

I couldn’t agree more.