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Online Video Advertising is hot. See the latest video hub initiative announced last week  by The Wall Street Journal. What implications does this have for the Hispanic market? A review by Portada’s editorial team.

  1. What is at stake?

Without a doubt the TV advertising market dwarfs the size of the online video advertising  market, yet the latter is growing exponentially. As audiences massively adopt the online medium, TV consumption habits migrate online. In fact teenagers, more so Hispanic teenagers, are already viewing much more online video than traditional TV broadcasts. TV broadcast advertising’s share of the overall ad market is bigger in the Hispanic market than in the general market. Even small market share gains by Hispanic (online) media properties can amount to substantial revenue increases. The beauty of this is that any media brand-destination can implement online video (magazine publishers, newspapers, radio etc…).

The Broadcasters are not standing still either. Last year the two Hispanic broadcast behemoths Univision and Telemundo formed two online video partnerships. Telemundo partnered with YouTube to launch Telemundo and Mun2 channels on the Google owned online media property. Univision announced a partnership with  video streaming website Hulu.

There are efforts on the way to better compare GRP’s (Gross Rating Points-TV's traditional reach metric) to online CPM’s (Cost per thousand impressions) to make it easier for advertisers to understand the reach online video can provide to them.

For online publishers the incentive to sell online video advertising is very high. Online video advertising (“pre-roll” and “post-roll”) can get CPMs as high as US $50. However, CPM's can be much lower depending on the online media property that delivers them. There are two main tiers or segments in terms of content or pricing.

2. So the price range to sell online video is very wide?

Exactly. One tier is so-called Web-TV, which consists of putting major TV hits online. These hits already have a strong brand name and can fetch CPMs in the US $40 and US $50. New entrants into the online video space most of the times can only get CPMs in the single digits. The channels of these content producers and distributors (e.g. Mitu or TuTele on the Hispanic side)  often are hosted by YouTube. YouTube also sells advertising into them. Most of the times with an ad revenue share agreement of 50% share plus some expense cover for YouTube. So these online video producers often end up with CPMs close to US $1. The exception to that are branded integration deals where the publisher tends to get a higher share.  

3. So Google’s YouTube is aggregating a ton of online video content?

That is right.  In the U.S approximately 108 million people watch YouTube any given day. On average they watch 1.3 billion videos a day.  In other words, on average, each user watches between 10-13 videos per day.

YouTube is a tremendous platform able to compete in terms of reach with any TV network. There is one caveat though, YouTube’s audiences are very fragmented in terms of the videos they actually choose to see. Take into account that YouTube hosts at least 60 million videos  (Already in 2007   YouTube consumed as much bandwidth as the entire Internet in 2000).

It’s no wonder that Google’s YouTube is investing US  $100 million in original content to be showcased on YouTube. The more quality online video content is available, the more advertising dollars YouTube  will be able to reap from it. YouTube’s content producing efforts also include the Hispanic market.   “We are launching YouTube channels with Ben Silverman and Sofia Vergara and Jesse Terrero among others. We are very focused to continue growing our audience engagement”, a YouTube spokeswoman tells Portada. 

       4.  But the migration from Broadcasting Ad dollars into Online Video Ad dollars seems to be relatively slow..Why?

One of the reasons is that there is no sales infrastructure for digital advertising as there is for Broadcast TV. As Giuliano Stiglitz, CEO Orange Advertising Americas, said at our recent Portada Latam Summit: “First, there needs to be a change in the way publishers position themselves in the market. Second, agencies need to adapt and be able to buy online audiences the same way they buy TV media.”   Sanford Bernstein senior analyst Todd Juenger said premium-video-focused companies like Google, Yahoo and AOL lack the essential ingredients to sell out big portions of their commercial inventory at one time, a la traditional TV’s upfront.”

5.   Isn’t that why the NewFronts were created?

Exactly, in  their quest for grabbing a piece of the growing online (video) advertising market, major digital media properties such as Hulu, MSN, AOL, Yahoo and YouTube,  participated at the NewFront in NYC in May. Now in its fifth year, the NewFront is a content marketplace promoted by digital advertising agency Digitas that connects brands to content creators, their projects, and their latest ideas.
There was only one NewFront presentation by a Hispanic – pure play: MiTu.
an online video network targeting the Hispanic population. The new bilingual network fronted by executives from programming company HIP Entertainment Group launched on YouTube last spring. It features about 30 channels of lifestyle and entertainment content aimed at both Spanish- and English-speaking Latinos. HIP Entertainment Group President Beatriz Acevedo who also serves as head of MiTu, explained that MiTu produces original- premium content and also has a network of contributors. These contributors  publish their own content on their YouTube channels while Mitu sells advertising into them.

However, “while the Newfronts are a laudable attempt to draw attention to the hundreds of millions of dollars being spent on premium content, we believe they will fail to create a buying/selling dynamic like TV (at least for now), because either there is no scarcity, or the medium isn’t important enough to advertisers that they care if they get shut out, or both.”, Sanford Bernstein Juenger concludes.


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