Is online video advertising competing with TV?

An increasing number of companies understand the benefits of offering pertinent online information and services to their corporate and individual customers. Thanks to such online activities, businesses gain from lower operating costs and customers are more satisfied with the relationship they have with the company. However, numerous companies have not yet tasted these benefits, all too often simply because customers do not know that such services exist or do not understand their value.

For the past thirty years, TV has been the media of preference for advertisers who wish to reach a mass audience. Everyone agreed that TV offered an excellent cost-benefit ratio with respect to reaching the general public quickly. However, in recent years, the time consumers spend in front of computers is increasing drastically compared to the time they spend watching television. In 2003, 26.8% of Americans aged between 18-24 confirmed that they spend more time online than they do watching TV. Among individuals between 25-64 years old, the proportion of people that spend more time using the Internet is between 39% and 43%. [1] This shift in consumer behaviour is a growing concern for advertisers and broadcasters. Following disappointing results from TV ad campaigns, the Association of National Advertisers (ANA) actually made this matter the topic of their most recent annual Television Advertising Forum.

The members of the ANA were surveyed and the results show that many member companies are now wondering what portion of their marketing budget they should reserve for television. 45% of ANA members anticipated moving money away from TV toward other media. [2] New technologies that make it possible to record TV shows without the commercials are making more than a few executives worried about the future role of television. In fact, Steven J. Heyer, President and COO of Coca-Cola, publicly questioned whether TV advertising would remain the most efficient method for reaching consumers. [3] This raises an important question: which media stand to gain a share of the advertising investments previously reserved for television? Undoubtedly, an increasingly larger portion of advertisers’ media budgets will be invested in the Internet over the course of upcoming years, for a number of reasons.

First of all, contrary to magazines (-2.1%), newspapers (-1.4%) and television (-1.1%), use of the Internet is on the rise (+9.6%). [4] In their search for new experiences and interactions, consumers are turning to the Internet more and more. With this media, they have more control over their actions whereas television restricts them to being passive viewers. Since the Internet is used frequently and has fairly long exposure times, it offers good advertising opportunities.

Secondly, different methods for presenting online advertising have been developed. Among the most innovation types is a recent format that, in addition to giving advertisers a broadcasting method similar to what is seen on television, surveys show that consumers find it less annoying than TV advertising. [5] One of these initiatives is a video format launched on the market a few months ago that proves to be faster than traditional streaming. This technology makes it possible to view full-screen advertisements similar to TV commercials via the Internet. The New York Times Online tested the technology and received positive reactions from its clientele. [6]

The video/Internet combination also offers a very good ratio of brand awareness for the cost of each time unit. Instead of having a passive role, Internet users subscribe to receive these videos and can be redirected toward surveys, promotional sites or pages that invite them to take action. These videos were widely used over the past few months, particularly by numerous automobile companies including Honda, [7] BMW [8] and Lexus [9] .

One must certainly not jump to the conclusion that the Internet will replace television. Nevertheless, the Internet is acquiring greater importance and the technology already enables advertisers to target their clientele better and be more creative than they could be with television. [10]

[1] “Time Spent with the Internet and Television, by age group,” BURST Proprietery Research , Jan. 2003.

[2] Paul J. Gough, “Advertisers Anticipate Less Money For Network TV, More for Internet and Cable,” MediaPost’s MediaDailyNews , March 11, 2004.

[3] Gary Hamel and Lloyd Switzer, “The Old Guard vs. the Vanguard,” Wall Street Journal (Eastern edition) , New York , Feb 23, 2004, pg. A.17.

[4] Verolis Suhler Stevenson, “Augmentation/diminution de l’utilisation annuel des principaux médias par rapport à l’année précédente,” July 2003.

[5] http://www.online-publishers.org/ir_031504.html#research1

[6] Ibid.

[7] http://love.honda.com

[8] http://www.bmwfilms.com

[9] http://msn.lexus.com

[10] Brian Steinberg and Suzanne Vranica, “Five Key Issues Could Alter The Ad Industry,” Wall Street Journal (Eastern edition) , New York , Jan. 5, 2004, pg. B.1.