Havas Media Digital Upfronts POV May 2012

Havas Media Digital Upfront POV2012

2Digital Upfront POV 2012

Executive SummaryAs the internet continues to evolve, advertising opportunities will quickly follow; and now we arereaching a new plateau in online marketing — Digital Video. This coming of age has been broughtabout by significant leaps in the proliferation of devices, the leaps in bandwidth and now the creationof Original Programming to air on these platforms. To support this new era, each of the major digitalportals held what some viewed as very traditional upfronts, last month in NYC, mimicking whatthe TV networks have been doing for years. The question is: will these upfront meetings have thesame impact on the market and advertiser dollars as the television upfronts have traditionally had?

For some background color, the events were attended by both television and digital media budgetowners alike. It was great to see the beginnings of channel lines blurring, but with that blur comesquestions. What are we trying to achieve? How will success be measured? Sadly, there is no singleanswer for all advertisers, but one piece of information that will be key is “What is the consumer’sconsumption pattern?” Is it a lean back experience where they are watching “The Awesomes” onHulu that is streamed directly to their 50 inch TV or is it a Ted Ed, 6-minute clip on YouTube withthe consumer sitting at their desk? What you buy will definitely warrant different results.

The content ran the gauntlet from short form content like, “7 Minutes in Heaven” from Yahoo! todocumentaries like “A Day in the Life” from Hulu. The quality and the success of the content is stillthe biggest question, much like in TV — but failure will not be attributed to lack of trying. Each ofthe portals has made major investments in content.

The deals the portals are looking for also vary greatly. Some players are suggesting full season/yearbuyouts with very limited cancellation clauses, which also include the mandatory purchase of GradeB inventory at one end of the spectrum to, dare we say, “traditional” online buys with CPM andCPC rates. Your Havas Media partners will no doubt help you navigate these options, but there isdefinitely an air of “know what you are buying” before you sign that IO.

As media professionals, we always need to be on the lookout for new opportunities to diversifyour plans, connect with consumers in new ways and achieve bigger and better results with ourclients. So we are very excited about the opportunities that lie within this new programming. Withthat said, the lack of track records in developing and identifying great content is something to bewary of, especially when the contracts associated with that content come with very loose deliverycommitments and strict cancel policies.

Contents

The Authors 4

Overview 5

The Audience and the Ratings 6

The Range of Content Formats 7

The Devices 8

The Deliveries 8

Flighting and Underdelivery 9

Portal Support 9

The Upfront Presentations 10

The Content 11

In Closing 12


The Authors

Armin MolaviSVP, Strategic Planning

[email protected]

Adam KasperEVP, Partnerships and Investments

[email protected]

Tracey RienerSVP, Group Account Director

[email protected]


OverviewIf January 2012 was all about Pinterest, then April 2012 was all about the Online Original. Here atHavas Media, we've just concluded an exciting three weeks of Digital Upfronts, hearing from the likesof YouTube, Yahoo!, Hulu, and others. We’ve compiled the best of the best, some of our personalfavorites, and some important elements to keep in mind as you consider including these new mediaopportunities in your upfront planning.

This POV not only reflects the unique viewpoints of our strategists, but also the views of our NetworkTelevision Broadcast team and our Digital Partnerships group to provide you truly integrated insightthat takes into consideration all pillars of your media plans.

For those of us who have been on the digital side of the media landscape since Al Gore first inventedthe internet, it was extremely exciting to see all of the major digital players host their first real upfronts,all in the same year. While there have been digital “upfronts” in past years, we all agreed this wasthe year where there was a real critical mass to the offerings being put on the table. This coming-out party was made possible by a fantastic alignment between the proliferation of devices to con-sume video content, the ever-growing bandwidth to download that content, and a significant uptickin the quality of the content. Although millions of people will continue using YouTube to watch a catchase a laser pointer, there has been a significant elevation in quality of online content, thanks tothe talented producers of this new content. Prior to this year, many of them were known as mastersin other arenas of media, but will soon be recognized for creating high quality online content as well.From an animated drama created by Tom Hanks, to a music channel curated by Pharrell Williams,to an exciting partnership between MSN Xbox and ESPN, the list of talented celebrity producersand creators is truly impressive — particularly our team’s favorite, “The Awesomes” from Seth Meyers on Hulu.

Here are some key highlights of what is exciting us:

• Top notch content creators/producers/stars: Anthony E. Zuker (creator of CSI), Mario Batali,Eva Longoria, documentarian Morgan Spurlock, filmmakers Jan Avnet (Black Swan, Risky Busi-ness), Jennifer Garner, Michael C, Hall, Amy Poehler, and Rainn Wilson.

• More clarity on ratings: There has been a significant uptick on accountability of who is actuallywatching the content, something advertisers have been aching for, thanks to OCR (online cam-paign ratings) which Hulu and AOL touted very loudly.

• Portal integration: Yahoo!, AOL, and MSN have all made significant efforts to connect the dotsbetween the new content and other areas of their platforms — ABC News Partnership, HuffPo,and Xbox, respectively.

• Key executives at the helm: Leaders with broadcast advertising backgrounds, like Lucas Watsonat Google/YouTube, will provide key advertiser buying insight that the digital portals all need.


What we would like to see evolve:

• Too much of a good thing: TV Networks will launch 8-10 new primetime shows a season and support them through advertising, press junkets, etc. Can the portals support all of theseproperties they are launching to improve the likelihood of success?

• More clarity on ratings: There needs to be a standard for the industry, otherwise it will continueto be too arduous a task to compare opportunities.

• Findability: TVGuide has always been there to help consumers find shows; there is no easyway to find online shows and schedules.

One important point of clarification, for this POV, is that we did not include non-original contentopportunities. For example, properties like MLB.com and MLB.TV offer advertisers excellent opportunities to reach audiences on many devices, in an environment that we as advertisers arefamiliar with.

Before we get into a recap of all the content that’s now available for consumers and advertisers, let’srun through a list of what you should be considering BEFORE you start picking specific content areas.

The Audience and the RatingsOnline video has become a part of our daily lives. This no longer applies solely to teens. Everyoneis watching video, because it has pervaded every aspect of our online experience — embeddedin emails, tweeted from platforms like Twitvid, posted to our Facebook streams. Here are a few keymetrics to keep in mind regarding online video viewers (Source: Pew Internet):

• 71% of both men and women watch online video regularly

• 80% of internet users between 30-49 watch online video regularly

• At least 71% of consumers in all income levels watch online video regularly

• Minorities are outpacing Whites by 10 percentage points (79% v 69%)

• Parents are significantly outpacing non-parents by 20% percentage points (81% v 61%)

So clearly, everyone is watching — but as an advertiser, don’t believe all the hype.

Everybody loves Google. Its search platform is potentially one of the greatest resources developedin the last 20 years, let alone the last century. That said, the data that Google releases regardingonline video needs to be examined critically. Per youtube.com, over 60 hours of video are uploadedevery minute, 4 billion videos are viewed a day and 3 billion hours of video are watched each monthon YouTube. These are very exciting and eye popping statistics; however, the vast majority of thatcontent is not a part of their YouTube partner program and is not eligible for paid video advertising.Quite frankly, given that Google is not releasing the statistics for viewership of their YouTube Partner Program, we can only make a conservative estimate on total viewership.


One extremely important question that everyone must consider regarding the audience is how theratings are being developed. Unfortunately for all of us, there has yet to be a standard instituted inthe industry — but the IAB is focused on developing such standards this year. So far in our discus-sions with the media partners, we have heard the following ways to size the audience:

1. Consumer self reported — At some point in their interactions with the platform, the consumeris telling them age, gender, zip code and so on; either through profile page or registrationprocesses

2. Inferred demographics — This is the same targeting that is often used for display retargetingcampaigns — the platform infers your age and gender based on content you visit

3. Third party data — Some of the partners are leveraging third party data sources, e.g., Blue Kai

Obviously, format #1 is preferred — but 2 & 3 are far from undesirable — especially given that mostmarketers are already using those methods for other components of their digital campaigns.

The Range of Content FormatsMuch like television, there is a wide range of video content available for consumers’ viewing pleasure.Beyond that, there is an even wider range of quality in that content. Not so long ago, there may havebeen up to 60 channels available to all of us, with the Public Access channel representing just one ofthose 60. In today’s online market, the proportion is exactly the opposite. For every few hours of qualitycontent available from any of these partners, there are tens of thousands of hours of user-generatedcontent that most advertisers wouldn’t touch. For example, as we were finalizing this document,a video entitled “Bacon Milkshakes,” in which two teens recklessly drive to a fast-food joint, waslisted as a “Top Video” on YouTube. Would you advertise on that video? We didn’t think so.

Once you clear the decks of the vast majority of user generated content (UGC), we can startlooking at three clear categories of online video content:

• UGC cream of the crop — Arguably, the most successful of the YouTube Creators, based onsubscriptions alone. However, we couldn’t reference any of the top five due to questionablecontent, including inappropriate language, illicit drug references, etc.

• Streaming live content — Whether it’s because your kids are watching Spongebob on the 50-inch or you’re on the go, you want to watch content such as the Red Sox game live onMLB.TV or their top notch iPad app.

• Online originals — The newest arena for the portals and also their key area of focus for the up-fronts. This was the thrust of almost all the upfront presentations, with MSN as the exception.Each of the players has procured quite a bit of content that they will be serving across all of theirdevices. Also important to note, is that original content housed on the portal will almost alwaysbe available on the creators website, including the sponsorships.


There is absolutely a place for sponsorship of UGC within many client media plans, although wequestion executions such as Bertucci’s placement of a video on “How to chop herbs” that pre-rolleda video entitled “How to spot a pothead”.

The DevicesWhen you bought a TV spot in the 1990s, you were pretty certain what that viewing experiencewould be like. The 2000s brought us TiVo and other DVR devices with ad-skipping capabilities,which complicated matters but still allowed for campaign planning. In today’s environment, with thegrowth of online video, the context in which your target consumer could be viewing your ad couldn’tbe more uncertain. Are they watching it on their personal computer, in their home office, or gasp! atwork? Is it being streamed from their iPad to their 50-inch via their AppleTV? Or are they watchingit on their 3.6-inch Android phone on the bus, while commuting to work? Each viewing modalitywill come with pros and cons to advertisers, so advertisers need to understand what’s right fortheir brands.

The DeliveriesIn TV, we ask, “what commercial pod? What position in the pod? And most importantly, did it getdelivered?” These very straightforward questions can always get answered. Sadly, again there areno online industry standards in place. Here’s a rundown of all the different permutations:

• Placement — Pre-, Mid-, or Post-Roll? Pre-Roll is the most widely preferred as one would argueyou would have the highest level of consumer engagement, followed closely behind Mid-Roll.However, many editorial/news type programming are selling Post-Roll, as in “your ad will run atthe completion of the desired content.”

• Companion banner — Predominantly associated with streaming content on the network sites,e.g., NBC.com, a flash banner is served in conjunction with your video placement. The key benefit here is that many marketers leverage this real estate for a clear call to action and somemedia partners can dynamically serve different creative to different audiences.

• Day part — For the most part, this aspect of network and cable TV buying is not even a part ofthe equation with online video partners.

• What’s an impression? — Again, no standard here — does the advertiser pay for the impressiononce the video starts? Completes?


Flighting and UnderdeliveryWe all have targets and objectives. To achieve them, we need measurable plans that deliver certainreaches, weights, frequencies, etc. While all of the online properties are making guarantees, thequestion becomes at what flighting? For example, one opportunity we recently looked at for a clientoffered 70MM impressions across a 12 month commitment. There are no current estimates onwhen those impressions will hit. Clearly this will have an implication on forecasting across client organizations.

Beyond the deliveries themselves, what happens with underdelivery or cancellations? We knowwhat the networks offer — similar content, mostly likely an uptick in points as a make good, etc. Inour preliminary discussions, the answers are not only muddy — in some situations the proposalsare not good at all. One partner suggested replacing pre-roll impressions from original content withstreaming video in-banner display units. Clearly, this is not an apples-to-apples swap. Given thenewness of these deals, advertisers must consider all components of the buy.

Another extremely important topic to discuss is how this inventory will fit into your Media Mix Modelling(MMM) efforts. MMM methodology always stirs up quite a bit of discussion and the inclusion ofonline video will be no exception. For some formats like Hulu, especially when streamed to the bigscreen TV, one would want to lean towards TV-like inclusion. But what about a pre-roll on YouTube?That video impression is more targeted than TV with less waste and some would argue, the user ismuch more engaged in that pre-roll than in a banner ad or a print ad. We are recommending toclients that you need to consider both viewing modality and desired communication objective whenassessing this new vehicle.

Portal SupportWith every new television season, each of the TV networks will turn out 8-10 new primetime shows,all of which are designed and developed to succeed on their own; but no matter how good the content is, there is incremental support provided by the networks. This support includes traditionalspots during top rated shows to intrigue the future fans of a show to press junkets, significant OOHand so on. For example, NBC’s mid-season add of “Smash” was support by almost $100 MM ofadvertising, etc. and that has star power like Angelica Houston and Debra Messing. How can theseportals support all of this content? Obviously the content creators themselves will be promoting thecontent, but we doubt that will be nearly sufficient.


So far, the most substantial and concrete news we have heard is Google’s $200MM commitmentof streaming video and Google Display Network (GDN) inventory. While we know the inventory willbe extremely targeted, $200MM split across 18 sponsorship opportunities that are for sale withover 100 different shows; that $200MM will get spent quickly. Hulu, Yahoo! and AOL do have anadvantage over Google in this regards because each does have a Portal doorway that can be usedto advertise the content. We should all just assume that Yahoo.com will quickly become a key partof their promotion strategy, with over 37MM users hitting that page per day.

The Upfront PresentationsThe objective of Hulu, AOL, Yahoo!, Google and MSN presenting “digital upfronts” or “brandcasts”to the advertising community a few weeks before the traditional network upfronts was to grab aMUCH bigger slice of the “television/video” budgets out there. The properties brought out all sortsof talent to appeal to the senior executives’ age group to promote their many, many, many, (maybetoo many??) programming options. Yes, they are digital companies at the forefront of technology,offering content on every device available, but they are now looking to be seen as content playerslike the big guys, the “old school” broad and mass reach “television”. According to the digital players,mass reach (TV) is akin to dropping cheese out of an airplane and hoping to hit someone who lovescheese, while digital content can specifically target only the cities and individuals where cheeselovers live and offer them the perfect cheese offering. While digital technology does allow this andis uniquely positioned for more specific targeting, the new platforms these players are offering arepriced to reach the masses, so the equation seems a bit off.

In their presentations, Yahoo!, AOL, YouTube and Hulu all focused on premium original content,ranging from long(er) form (e.g., Hulu’s “Battleground” and Yahoo!’s Anthony Zuker’s “Cyberged-don” — a digital motion picture told in weekly shorter “episodes” ) to short form on Yahoo!, YouTubeand AOL (2 minutes to 12 minutes). MSN really showcased their cutting edge advertising platformopportunities across Xbox (with live TV-like ad’s that include app-level interactivity and metrics) andpotentially Skype. MSN wants the ad world to see them as the place with the #1 audience reachacross the US with simple, scalable solutions across multiple platforms. They all spoke to and willcontinue to focus multiple screens, the importance of mobile, interactivity, and social.



And Finally, the Content… From a network television buyer’s perspective, it was enjoyable to see these presentations. Theyseemed looser, more cutting edge, and dare we say even less polished than the network presen-tations — we found it refreshing. Some of the content looked top quality and worthy of a large-scale audience (like “Battleground” on Hulu, or Hulu’s “The Awesomes” animated superheroprogram by Seth Meyers, which will be timed just right to tap into the HUGE popularity of the“Avengers” audience) and some of the programming is very targeted and niche.

Google came out with a bang with the YouTube announcement of $100MM in investment to create100 content “channels.” The majority of their programming is short form (5 minutes or less) and islooking to appeal to a younger (18-34) audience (under 49 for sure). They are offering the 100channels under 18 “content genres” that cover everything from comedy, short film, animation, cutting-edge music and news, pop culture, sports, and content that will appeal to thrill seekersand urban tastemakers. They feature talent as diverse as Dakota Fanning, Jay-Z, Tony Hawk, andMadonna.

The originals launch in three waves — January, April, and July 2012 and while designed for a USaudience, they will likely have a broader international appeal. There will be a ton of content andsome of it may make a splash, but without something like a “TV Guide,” how do viewers find it? Asa plus, Google does have Lucas Watson from P&G. He will be a huge asset in the years to come,as this (potentially 5-8 years from now) will be the destination for quality “snackable” original content.Lucas knows what advertisers want for content and need regarding accountability and we hope hewill be able to infuse that knowledge into their offering.

AOL is offering 14 channels of premium content and beneath these channels will be hot topics covered with curated playlists of short form content. Their content genres will target men, women,the affluent, millennials, and moms with content that covers topics from business, news, style andhome to autos, health, pets, and parenting. With the addition of these premium channels, they willhave 20,000 AOL Originals and 300,000 total videos.

Hulu presented themselves most like a television network, perhaps because they exist as a platformfor television programs with original episodic content (Yahoo! as well). But only Hulu offered TV-likeepisodes at 22 minutes long (much like a half-hour sitcom). A few to highlight: “Day in The Life”from Morgan Spurlock (original profiles of famous folks from a different angle), the shorter form “SeeJane Date”, which is a “choose your adventure” meets “The Hills” reality show that is digitally inter-active. They also are offering travel guide shows, entertainment short-form programs like “AccessHollywood”, animated motherhood series from Eva Longoria and “My Side of the Sky”, which profilesa high school that caters to extreme sports lifestyle.


Yahoo! has the strength of news (with ABC partnership) and finance covered, but their focus was onmen, with new originals from Jeff Goldblum, a stunt show, and KaBoom; as well as women-focusedprogramming, and comedy for adults. The Women channel features fashion news with talent likeRebecca Minkoff, Michael Yo, and Cat Deeley. The comedy channel looked most interesting with aspoof of The Bachelor with Michael Ian Black and Ken Marino, as well as a funny short-form interviewshow called “7 Minutes in Heaven” where the host Mike O’Brien (of SNL) interviews celebrities in acloset. The interviews are a funny and original take on the standard cookie-cutter interviews, andalways include Mike requesting a kiss at the end.

In summary, there is a vast array of original content now or soon to be offered. The quality will varygreatly (as it does on TV) and anyone from your six-year-old to your (hip) grandparents will find something to watch. But we have to ask at what point is there too much available in an alreadysplintered media marketplace? Everyday people (not in our business) hardly know what is on TVacross 95+ networks let alone 1,000 more online “channels.” Not all professionally produced originalcontent will work or stay online (or on air), but in the vast and never-ending opportunity of the worldwide web, these and other to-be-determined content providers can keep throwing ideas againstthe wall and there will be viewers for almost anything (just ask the creators of “Bacon Milkshakes”).

In ClosingWe love that 2012 was clearly the “Coming Out” party for the Digital Upfronts and there are definitelysome great highlights in there…but given the newness of the channel, advertisers need to be readyfor uncertainty in many different forms — those who take the chance could be handsomely rewarded.

Please work directly with your Havas Media account team for more specific information on contentand opportunities relevant to your brands. General questions can be directed to:

• Armin Molavi, SVP, Strategic Planning, [email protected]

• Adam Kasper, EVP, Partnerships and Investments, [email protected]

• Tracey Riener, SVP, Group Account Director, [email protected]

Oh, and one more thing…

Hopefully next year’s digital upfront presentations will be scheduled in the same week. TV may be“old school” in the eyes of some, but we hope they understand we all have busy schedules!

Business

Havas Media Digital Upfronts POV May 2012