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Advertising in
Distributed Content Markets
Topics
I.
Online advertising and video growing
dramatically
II. Big Flies in the Ointment
III. Advertising Models in P2P
IV. Where has all the content gone?
I. The future of online advertising
Global Advertising Spending
Ad Media
Newspapers
Magazines
Television
Radio
Cinema
Outdoor
Internet
All Media
2005
$119
53
151
34
2
22
19
$399
2006
$124
55
162
35
2
24
26
$427
2007
2008
2009
$125
$129
$132
56
58
61
170
183
192
36
38
39
2
2
3
26
28
30
34
42
48
$448
$478
$505
ZenithOptimedia Oct. 1, 2007
• Advertising will grow at 4.8% CAGR,
outpacing GDP growth of 3.5%
• Internet will grow at 20%
• Web eclipses radio in 2008, according to
eMarketer
• Internet will eclipse newspapers in US by
2011 according to Veronis & Schuler
• Search and video advertising will propel
internet ad growth
Web beats
Radio!
Warning:
Radio Uniform,
Internet
fragmented!
US Video Advertising: Expect Huge Growth
Compound Growth:
- Advertising 5%
- Internet: 20%
- Video Ads: 56%
• Video advertising to grow
to $4.3 billion from
today’s $775 million.
• Will become 11% of
internet advertising from
2% today
• Taken together video and
search will fuel
advertising growth
• Video includes all forms,
including embedded ads
in video content
Summary: Search &Video Drive Net Ad Growth
Sept. 2007
(Nielsen)
4:1
$16.2
$18
$14.2
$15
$12.2
11:1
$12
$10.2
$8.3
$7.0
$9
$5.1
$6
$4.1
$2.9
$3
$0.2
$0.4
$2.0
$1.3
$0.8
$0
2005
2006
2007
Video
2008
2009
Search
2010
2011
Inclination to Experiment in New Media
% Ad Budget Targeted to
New Media:
% Spend
% Respondents
Source: eMarketer, AAF, February 2007
Video Ad Click Thru Rates 5x of banners
DoubleClick March 2007
0.59%
Consumer
0.53%
Automotive
0.49%
Entertainment
0.42%
Tourism
0.39%
Technology
0.36%
Government
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
Banner ad CTR average 0.12% run of
network
0.70%
II. Big Flies in the Ointment
Measurement
• Panels vs. Server Logs
• Style.com - server: 1.8 m,
panels: 400k-500k (Comscore,
Media Metrics)
• Forbes.com – server: 11.6 m,
panels 5.8m-7.5m
• Served ≠ arrived
• IAB: No More Panels!
• Web 2.0 makes this worse since
page views aren’t refreshed
• Data being returned from these
new ad formats is not uniform
• Makes return on spending
calculations difficult for media
buyers
Formats
• Differing formats and
behaviors make it difficult for
advertisers to deal with new
forms of advertising
• ABC.com, NBC.com, etc.
have different formats
• Causes advertisers to
reproduce ads for each
service, reducing ROI
• Services should agree on
formats and behaviors
• STARTUPS: Don’t Invent
New FORMATS!
• Still leaves the data uniformity
problem
Lack of standards increases buying & settlement
friction, thereby reducing market liquidity
III. Advertising Models in P2P
It’s a two-sided market:
• Ad supported P2P services must understand
they are a “two-sided market”
• Two-sided markets are not well understood (not
conventional supply and demand)
• There is always a platform in the middle that
must ad value (buying, settlement etc.)
• The inducements the service provides to
consumers and advertisers must incentivize the
right behavior
Ad-Supported vs. Pay
(FTI believes ad-supported models will perform better than this)
eMarketer: Internet video audience will grow 45.8
percent from 107.7 million in 2006 to 157 million
by 2010.
• Predictions for
online video are
that paid will
slightly exceed
free, ad supported
models.
• Consumers dislike
ads, but in
general dislike
paying more.
• Free adsupported models
allow
experimentation in
deep catalog.
Four ad-supported models in digital content
1.Viral links initiate streaming with ads
(YouTube, widgets)
2.Closed P2P with ads (Joost, BBC)
• In-stream ads or
• Client-side caching
3.Open P2P Teasers – not full content
(Media Defender, Intent)
4.Open P2P Advertainment (Comedy
Time)
P2P Advertising Pros & Cons
•
•
Pros:
– Potential to reach the greatest
audience
– Delivers long-form content
cheaply making ad-supported
content possible
– Client enables reliable ad
measurement
Cons:
– Still largely misunderstood by
content owners and
advertisers
– Unlike streaming, requires
DRM
– Requires a client
P2P is virtually required
under ad-supported
models with long-form
content….
Movie Download
Ad Revenue*
Bandwidth Cost
Gross Margin
%
*30 ads at $20 CPM
Client
Server
P2P
$0.60 $0.60
($1.00) ($0.10)
($0.40) $0.50
-67%
83%
Where Has All The Content Gone?
Legal P2P networks are plagued with obstacles
to good content:
• Suspicions about P2P
• Exclusive rights windows and ownership
confusion over digital rights
• Networks who want to stream it themselves or
take most of the ad revenue (Joost gets 10%)
• DRM virtually excludes Macs in most cases &
18-24 population is 50% Mac
• Content owners focused on pay models in the
case of downloads – NBC is the exception
However, Ad Models Beat Some TV Models
Compares Favorably With Studios’ Barter Cable Model:
Studios Barter Syndication Economics
Barter Economics - 2MM Viewers
Total 30 sec. ad spots
48
Studios' Share of Minutes (50%)
24
CPM Rate
$4.00
Internal Sales & Dist. Costs
-10%
Revenue per Viewer
$0.09
Revenue for 2MM Viewers
$172,800
Analysis developed by MGM
Closed
MyWireP2P
Media*
MyWire Revenue To Studios
Total 30 sec. Ad Spots
30
Studios' Share (100%)
30
CPM Rate
$18.00
MyWire Commission
-35%
Revenue per Viewer
$0.35
Revenue for 2MM Viewers
$702,000
Summary
• Video advertising will grow enormously
• P2P most cost effective delivery method for
advertising models
• General problems of ad measurement and
format standardization hinder adoption
• Content rights also hinder adoption, but
economic incentives will overcome these
• Ad-supported P2P could dominate
• Will find its way to TV displays in two years
Contact Us:
Bruce Benson
Senior Managing Director
New York, NY
[email protected]
(646) 453-1289, office
(208) 988-1613, fax
(203) 606-3854, cellular
Mr. Benson is a senior managing director in FTI’s Economic Consulting practice and is responsible for leading FTI’s
work in the entertainment and media industry. He has more than 20 years of professional experience in all aspects of
media and technology. He has consulted in a broad range of areas including strategy and market planning, economic
analysis, operational effectiveness, intellectual property management and IT preparedness.
Mr. Benson is a recognized expert in media and advertising and has helped some of the world’s leading companies
achieve their strategic goals, including Sony Entertainment, Microsoft, Bertelsmann, Viacom, Young & Rubicam, Ogilvy,
Harper Collins, NBC and Pearson. Mr. Benson has pioneered various new forms of digital distribution and advertising
over the internet, and co-led conferences with key Harvard strategists on intellectual property management and
copyright law. He has given over 100 speeches and presentations on digital distribution, the changing economics of
media, and intellectual property management. Mr. Benson has submitted various patents on electronic book delivery,
the internet delivery of ad-supported video content over peer-to-peer networks, and the anonymous financial settlement
of virally distributed content.
Mr. Benson has led over 200 projects with clients and as a media executive both in the US and overseas. These
projects have focused on strategic planning, revenue optimization, operational effectiveness and cost containment,
internet distribution and large-scale IT project management.
Prior to joining FTI, Mr. Benson managed SAP’s entertainment & media industry where he led the development of their
intellectual property management platforms and grew the sector’s revenue over 300%. Prior to SAP, Mr. Benson was
CEO of iWeb, a global internet advertising company. Before iWeb he was EVP of Corporate Strategy at Young &
Rubicam, SVP at Sony Music and a Partner at Price Waterhouse leading their entertainment & media practice in New
York. Mr. Benson has served on the boards of various technology startups helping them devise and execute their go-tomarket strategies.
Mr. Benson has his BS in Mathematics from the University of Houston.