Can Hulu Make Subscriptions Fly?

Hulu is reportedly about to expand to a range of other devices, following in the footsteps of Netflix’s successful move to the iPad, Xbox, Roku box, Wii and now the iPhone. The price point that has been reported in the past is $9.99 per month. It’s not clear if that would eliminate commercials, however. My suspicion is no.

It appears from the recent Reuters report that Hulu will likely provider broader content access to subscribers:

Hulu, which generated an estimated $100 million in advertising revenue last year, will continue to offer newer episodes of shows like Fox’s “Glee” free of charge, but it will also charge viewers a monthly fee to see older episodes and other content, two of the sources said.

Given that consumers have long demonstrated a willingness to pay for movie rentals and cable TV, the market is arguably already conditioned, especially by Netflix, for the Hulu paid service. But given the fact that people already pay for cable there may be a reluctance to embark on another monthly subscription. Also the question arises: will Hulu expand what’s available to paying customers (as the Reuters article suggests) or will it remove some of what’s available for free, perhaps in addition to an expanded offering on the paid side. The former approach is more likely to succeed.

Mobile TV has failed in the US, because people are unwilling to pay for it. But Netflix on the iPad (and soon the iPhone) is a success. Why? It’s partly because of the brand and nature of the service and partly because of the broad array of content available on Netflix. Also the user experience Netflix created  on the iPad is terrific. Mobile TV has been very uneven.

YouTube wants to go into this area as well but it’s not clear that the site can make the transition. Past experiments with movie rentals have largely failed.

Hulu has developed a much stronger brand for “premium” content and I believe there’s at least some willingness out there to pay for what it has to offer. That same “demand” doesn’t seem to exist with YouTube, which also has less professional content.

One reason why this is interesting to me is because its a free model moving to a hybrid model. This is challenge even more acutely faced by newspapers as they try and negotiate a similar transition. However newspaper content has been massively devalued by the “commoditization” of news online. Only a few publishers are likely to be able to gain any meaningful subscription revenue from the PC Internet. Tablets may turn out to be a different story.

Then there’s the interesting angle that asks how these emerging services on TV and other devices will impact cable: Netflix + Hulu through a set-top box or Google TV (or a comparable service). There’s lots of pent up demand I believe to ditch cable for cheaper and more flexible services such as Netflix and/or Hulu on “all my devices.”

The cable companies will obviously try and block or pre-empt this scenario. Let’s talk in three years and see where we are.

Would you be willing to pay a monthly fee for an enhanced version of Hulu and at what point would you cancel cable?

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Yelp Now Selling Video to SMBs

Yelp has teamed up with TurnHere to sell video to local businesses. Here’s the Yelp post:

Today we’re excited to announce that Yelp advertisers now have the option to add video to their business profile page. I’ve personally viewed hundreds of these videos and I have to say that they can really help yelpers get a sense of a business’s ambiance, personality and specialties in a very short amount of time.

Here are the options:

• Premium Video:  Advertisers receive a 30-60 second custom video shot at their place of business by a professional filmmaker from the TurnHere network.
• Standard Video: Advertisers receive a 30 second video slideshow made from a series of photos provided by the business with music and custom voiceover narration.

Long time in coming. Seems like there’s lots of movement coming out of Yelp right now.

Apple & Google Battle for ‘The Master Screen’

And now for the battle of the living room . . . blah, blah, blah.

However, the report from Engadget today that Apple TV 2.0 (or 2.5) would be more connected to the iPhoneOS, run apps, have new features/content and, most importantly, be super cheap ($99) is pretty interesting:

A tip we’ve received — which has been confirmed by a source very close to Apple — details the outlook for the next version of the Apple TV, and it’s a doozy. According to our sources, this project has been in the works long before Google announced its TV solution, and it ties much more closely into Apple’s mobile offerings.

The new architecture of the device will be based directly on the iPhone 4, meaning it will get the same internals, down to that A4 CPU and a limited amount of flash storage — 16GB to be exact — though it will be capable of full 1080p HD (!). The device is said to be quite small with a scarce amount of ports (only the power socket and video out), and has been described to some as “an iPhone without a screen.” Are you ready for the real shocker? According to our sources, the price-point for the device will be $99. One more time — a hundred bucks.

It’s the price point that’s the most compelling part of this.

In a long post at SEL I tried to second guess and predict what the price of the Google TV Logitech box would be. I came in at under $300 (probably $200 – $250). If in fact Engadget is correct and we see a $99 Apple TV box it’s going to force a corresponding price reduction or adjustment from Logitech and/or any other Google TV hardware partners (though not Sony). It’s very much like the smartphone market: you can’t hope to sell a subsidized smartphone in the US for more than $199 these days.

I was at a UBS conference earlier this week where a speaker argued that TV was now irrelevant because of the cloud and all the other screens we use for content. I quite disagree.

The living room (or family room) TV is arguably the “master screen.” And it’s going to morph into a multipurpose media center that includes Internet access, phone/video chat, social media, transactions, local search, apps, games and so on.

Things like yellow pages search on AT&T’s U-Verse or the “Visual 411″ widget for Verizon FIOS TV are going to seem very primitive by comparison to what’s coming.

Indeed, it’s time to prepare for the coming of “Internet TV” in earnest.

YPG Promoting Video Advertising

Yellow Pages Group in Canada is making a push for video advertising — on third party sites (e.g., Yahoo.ca) on traditional TV and in newspapers.

The print newspaper ad promotes a free on-site shoot and low $77 monthly hosting price point.  Each of the ads show a phone number and point to a dedicated site promoting video advertising on Yellowpages.ca: GetFound.Yellowpages.ca.

On the site there is an image of a Yellowpages.ca profile page which hosts/houses the video but no mention print yellow pages that I could find.

The article (linked above) that alerted me to this campaign contains a quote from YPG corporate communications director Annie Marsolais, saying that it’s directed at non-YP advertisers:

While 40% of Canadians businesses have advertised with Yellow Pages, the campaign is aimed at the other 60%, said Annie Marsolais, director, corporate and marketing communications for Yellow Pages Group.

Consistent with YPG’s efforts to remake itself as a digital advertising company that happens to also publish a directory, it’s interesting to see the company emphasize and market a product without any reference print.

DexOne Boosting Video Ads

Dex One put out a release that says the company is making a bigger push with video:

Dex One recently made video a standard part of its online Enhanced Pack service – thus bringing video to Enhanced Pack clients at no additional charge. This enables these clients to have video, as well as prominent ad placement, logos and other images on DexKnows.com . . .

There are no hard numbers in the release but Dex I’m sure sees video as a potential differentiator for consumer-users of DexKnows and SMB advertisers. It may also be part of a retention strategy.

The most interesting part of the release in my view is the pricing discussion:

Dex One recently made video a standard part of its online Enhanced Pack service – thus bringing video to Enhanced Pack clients at no additional charge.

Making video a line item that has to be considered separately is probably a deterrent vs. saying “step up to the enhanced pack and you get video for free.” That makes it simpler to buy and sell.

There’s a fair amount of empirical and survey based evidence of video’s effectiveness and appeal but I’m wondering if anyone has direct experience as a SMB advertiser or on behalf of a client.

Mixpo Now Offering ‘Dynamic Video’ Ads

Video advertising platform Mixpo has partly shifted its business from a focus on local publishers and SMBs to larger advertisers and agencies. I just got finished with an update from Mixpo CEO Anupam Gupta who said that the business is now largely about “dynamic video” advertising, which can include but is not limited to local or geotargeting.

I asked Gupta to elaborate on what “dynamic” means in terms of Mixpo’s platform. He said it can take several forms:

• Dynamic overlays on video creative that can include text, email capture, social media links and so on. Those can correspond to location or other targeting parameters
• Short video add-ons or addenda to uniform or “national” creative (e.g., a short plug for a local dealer following a national car commercial)
• Entirely different creative/video depending on any number of variables, such as demographics or location (e.g., one type of ad creative for women another for men).

“The ads really come together at runtime,” said Gupta.

He also said that in the context of a single ad campaign agencies and advertisers can swap in entirely new ads on a daily or weekly basis, as the advertiser wishes. This is a huge, if somewhat hidden, benefit of the platform. Deal with the “bureaucracy” of the ad buy once and then substitute new or different creative at will.

He used Scott Brown’s Massachusetts Senatorial campaign as an example. Gupta said that within the same media buy the candidate substituted entirely different video ads to respond to changing issues in the campaign over time.

Gupta also told me that the platform can accommodate any form of targeting or multiple layers of targeting, and complements existing systems and technologies. In other words, you don’t do behavioral targeting within Mixpo, but Mixpo can be used to deliver dynamic video ads with third party behavioral targeting tools or data.

Mixpo works with existing display ad networks but doesn’t offer pre-roll. Gupta argued that this was a more cost-effective way of doing video online vs. pre-roll. He said that engagement with these video units is typically very high after a click initiating the ad.

We spoke about the iPad and mobile a bit. Currently Mixpo doesn’t do mobile but will be investigating and likely developing it very soon. One issue: its units are all Flash-based.

I asked Gupta about competitors and he said that the companies that he’s “hearing about” or being compared to are Tumri and Teracent (now part of Google) that offer dynamic display advertising, rather than other video platforms.

Report: Video, SEM Spending Growing for SMBs

WebVisible put out a terrific report on Q4 2009 trends regarding SMBs and SEM (following up on its Q3 report); it’s got GREAT data. I haven’t had a free moment to digest it until now. 

Here are some verbatim highlights:

• Average small business search spending surged in Q4 with the average small business advertiser spending $2,149 on search advertising in Q4 2009. This represented an increase of 30% over Q3 2009 and 111% over Q4 2008.
• Click-through rates (CTR) and cost-per-click (CPC) did not change significantly on the search engines on a quarter over quarter (QoQ) basis. Bing maintained the highest CTR while Google maintained the highest CPC.
• Conversion rates improved significantly for small business advertisers in Q4 2009 with 35.3% of clicks resulting in website conversion action, versus 32% in Q3 2009 and 26.6% in Q4 2008.
• Video capability was the fastest growing website feature for small business advertisers over the past year with 19% of advertisers showing video in Q4 2009, versus 5% in Q4 2008.
• UK small business advertisers spent significantly less than US advertisers in Q4 2009 at an average of $183 per advertiser. UK keyword portfolios were also much smaller at an average of 26 root keywords per advertiser.
• UK click-through rates (CTR) were significantly lower than in the US in Q4 2009 but varied similarly – Bing had the highest CTR and Yahoo! the lowest.
• The professional services of law and dentistry made up the largest percentage of advertisers at 9.4% and 6.1% of total advertisers respectively.

Here are a few of the charts that visually illustrate many of the above points (click to enlarge):

The two biggest conclusions here are that SEM spending grew dramatically as did video year-over-year.

YPG Search Engine Solutions: ‘Not about Clicks’

Canada’s YPG has launched a combined SEM and SEO product for SMBs called “Search Engine Solutions.” It features an effective Apple-Google-like video explaining the product and how it works:

The product is built around a customized rich landing page with a custom URL that will track “every single action taken” (it extends into mobile). The “leads page” offers call tracking and will also capture clicks, emails and other “actions” (using Telmetrics and AgendiZe I believe). The leads page will feature video and maps as well.

According to the release:

At the centre of YPG’s Search Engine Solutions offering will be the ability for advertisers to create a custom leads page with interactive mapping, driving directions, and ‘send to friend’ capabilities. Businesses will also have the option of setting up call tracking to help measure the number of calls received from YPG leads.

I actually thought that YPG had a version of this in market already. But I was wrong apparently — so very wrong 🙂

As with Yodle’s recent SEO product introduction, this reflects a move away from a pure SEM solution toward a more “holistic” offering for SMBs. And because video is a prominent potential feature of the leads page it should also help YPG sell video to advertisers.

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Note to YPG PR: in the future put a version of the video up on YouTube so that it can be embedded in blogs like this.

Update: Silly me, it already exists:

YouTube Video Rentals a Modest Success

The NY Times reports on YouTube’s Sundance-related video rental experiment:

YouTube said last month that it would dip its toes into the digital movie rental business with five independent films tied to the Sundance Film Festival. The company said the five films, which were available for 10 days, received a combined 2,684 views.

At $3.99 per rental, YouTube netted $10,709.16.

The Times suggests this isn’t really anything to crow about, while the quote from YouTube is that the test “exceeded our expectations.”

I suspect that YouTube will press forward with this model and seek deals with studios and rights owners. YouTube could develop a viable and potentially lucrative on-demand video rental business (online and on TV) if it can gain access to the content.

Netflix, for example, probably had more than $1.7 billion (roughly) in revenue last year. That’s a meaningful chunk of change for YouTube to go after. Think also about how Google TV ads would/could be integrated into such an offering.

Kaiser Report on Kids Scary for Print Media

The Kaiser Family Foundation has released its annual report on kids and their media use. There was a lengthy article in the NY Times about it yesterday. The report and related presentation are free and they paint a scary picture for most traditional media, except for TV (although TV is down) and, surprisingly, radio.

Not surprisingly, Internet (especially social networking) and mobile are key areas of focus of these kids. And 84% of them have Internet access at home, many in their bedrooms. The press release summarizes the high-level findings. Here are a few noteworthy charts from the report:

While TV dominates media usage, there is considerable media multi-tasking during TV use (read: people only partly paying attention). Print media are just — to put it bluntly — screwed unless as these kids mature they spend more time with print. Don’t bet on it. Finally 25% of computer time is spent with social networks.

There are lots of implications for publishers and marketers, although there’s no discussion of advertising in these slides or in the larger report. Where are marketers going to be able to most effectively market to young people in the US? On social networks, in games, on mobile phones (SMS) and radio to some degree. Magazines may offer some effective marketing opportunities in selected cases. However, online “share of voice” is going to be tough; there’s lots of clutter and noise. Thus mobile may turn out to be the most effective tool for reaching youth accordingly.

TV is going to offer mixed results; it’s the largest audience (though it continues to fragment) but people aren’t paying attention to ads for the most part.

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Related: Owners of digital readers actually read more books:

Among active readers who own an e-reader, about 48% reported reading more books as a consequence of having such products, as compared to those who do not own an e-reader where only 15% reported reading more books (44% vs. 23%, respectively for magazines); 36% percent of the books read by people with e-readers represent incremental consumption—meaning more than one-third of the books read on e-readers would not have been read in print

YouTube Testing Video Rentals

You knew the day would come . . . YouTube is testing its audience’s willingness to rent movies with five films screening at Sundance:

And so, we are excited today to announce our partnership with the Sundance Film Festival to make five films from the 2010 and 2009 festivals available for rent for U.S. users on YouTube starting this Friday and running through Sunday, January 31. In addition to these five films, a small collection of rental videos from other U.S. partners across different industries, including health and education, will be made available in the weeks ahead.

The price is reportedly $5 per film.

Some people will, most people wont pay to see these films. But I would assume that YouTube will gain enough validation for this model to push forward. Cut to three years from now: YouTube is a bona fide iTunes and Netflix competitor, available via TV (either directly or via many set-top boxes).

More pain for cable TV providers to look forward to. (And think about the ad targeting that Google will bring — already brings — to YouTube videos.)

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Related: Hulu is likely to start its own premium-content, fee-based experiment soon as well.

Jivox Adds Interactive Widgets to Video Ads

Video ad platform provider Jivox put out to two releases today, one details the company’s growth and various milestones over the past year. Among the verbatim highlights from that release: 

• Rapid adoption of video ad platform: Jivox is now being used by over thirty media groups to offer online video ads to their clients, including 8 of the top 50 media companies in the U.S. and 3 of the top 4 newspaper groups.
• Expanded distribution network: Jivox now offers advertisers distribution to over 1,000 web sites, growing the reach of its network to 85 million unique monthly visitors.
• Larger brand advertisers: Building on the success of its service for smaller advertisers, Jivox is now delivering campaigns for many large brand advertisers, including AAA Insurance, General Motors, Nokia, Microsoft, HP, Wienerschnitzel, Sony and Samsung.

More important and interesting is the material from the second release: 

Jivox, the leading provider of interactive video ad technology for online media companies and advertisers, today introduced custom interactivity features in the platform that turn online video ads into interactive applications to drive user engagement and direct response. Using Jivox, creative agencies and advertisers can now add their own custom Flash or HTML applets to video ads so that users can interact with the ad without ever leaving the player. Jivox has also extended the interactivity available in Jivox’ in-banner video ads to in-stream video ads. Media companies will now be able to embed Jivox’s “in-stream ad plug-in” into a content player to easily serve a video ad in-stream, with full interactive and analytic capabilities.

What this means is that third party agencies and advertisers can plug-in their own code/widgets on top of video ad units. Here’s what it looks like on an ad for Roundtable Pizza:

These modules or widgets make online video ads much more social and/or interactive in obvious ways. This is also a “quick and dirty” way to localize online video advertising: take a national TV ad and cut it for online, then add a store locator and local coupons, etc.

Eventually we’ll probably see this functionality on TV itself. And certainly next up for these units is mobile. Social engagement platform AgendiZe also has the ability to layer interactive widgets on top of display or video ads as well.

I spoke with Jivox CEO Diaz Nesamoney on Friday about a number of things including the company’s ad network, which is apparently doing well. That ad network was the original differentiating feature for Jivox, which launched at a time when there were seemingly dozens of online video competitors focused on the SMB market. Since then a few companies have fallen away or behind and others have emerged as leaders. In that latter group I would place Jivox, Mixpo, SpotMixer, Turn Here and Spotzer (not in any particular order). 

Just as Mixpo has moved away from an exclusive focus on SMBs, so has Jivox (as the release bullets above show) and the company is now working with a range of national advertisers.

Leno vs. Conan: The End of an Era

I don’t like Jay Leno and don’t watch Conan’s Tonight Show (except the William Shatner clips):

I’ve only been following NBC vs. Leno vs. Conan at the most cursory level. But it strikes me that this very embarrassing, public episode represents a bookend of sorts to the era of network TV, which began in the 1950s and is now definitively over.

Leno was moved into prime time in part to save money (vs. an hour-long dramatic show). That logic was driven by declining ad revenues from fracturing audiences. TV is still the largest single mass medium by far but online is gaining:

As people desert TV because of poor quality shows and content, there’s pressure to produce cheaper shows (most of which are crap). That crap in turn alienates audiences, who flee TV and that exacerbates the whole cycle.

Conan will get $30 or $40 million and likely wind up on ABC or Fox in the fall. Leno will return to his old slot only to fail. President of NBC Entertainment Jeff Zucker will be forced to resign over the whole fiasco.

It’s Here: The Internet on TV

What’s now more clear than ever is that the Internet will soon be everywhere: on mobile devices (as is already true), in cars (see Ford) and, finally, in the living room. I’ve been wanting to write something for a long time on the Internet on TV and its potential impact on cable companies. CES makes it unavoidable.

Internet content is coming to TV very quickly:

• Samsung to launch app store that lets you tweet from your TV
• Yahoo! Brings the Internet to More Living Rooms Around the World
• Skype Supports High-Definition TV and PC Video Calls
• Opera Software and GooMe Interactive deliver the best Web and home media experience on any TV
• BBC to allow internet through TV

Netflix is now available directly to TV and indirectly through many set-top boxes. Microsoft in its keynote at CES last night spoke a fair amount about Internet or PC content on TV (as well as social media features of Xbox Live).

Cut to three years from now: all new TVs feature some built-in Internet capability. Those that don’t offer it can be paired with one of several set-top boxes that bring the Internet and Internet-type services to TV.

What happens to cable cos? They become the next in line to lose revenue and see subscribers abandon ship.

Most of what’s on TV is simply garbage and people are increasingly frustrated with paying $60 or more per month for it. Bundles that provide Internet, TV and phone may save subscribers because there will be huge inertia around making changes under those circumstances. In addition, unique content not otherwise available online (e.g., sports) may encourage some people to hold on to cable TV subscriptions.

It’s clear, however, that the TV is becoming just another screen that provides access to content and, increasingly, online services.

So the combination of Hulu + Netflix + YouTube, iTunes, combined with Facebook, online gaming, email, search, etc., will represent more than enough “entertainment” to satisfy most people. Goodbye cable!

The dispute between Fox and TimeWarner cable is indicative of the battles to come as everyone scrambles for more revenue. And such battles will likely fuel increasing cable bills to consumers. That in turn will only exacerbate what I’m describing.

Other thoughts . . .

Yahoo!, Samsung and others are creating widgets or apps for TV, making the approach similar to mobile.

Here’s an interesting, related story about AT&T selling local ads into U-Verse cable TV:

AT&T plans to begin offering local ad insertion opportunities for its U-verse TV service this year, a top company executive said Tuesday. The real estate will resemble what cable operators offer advertisers for local spots on cable networks they carry.

For U-verse, marketers apparently would be able to thread ads into homes in the approximate 120 markets in 21 states that the telco TV services. Large markets include Houston and Atlanta.

This is very much like Comcast, which has a large local sales force. AT&T already provides yellow pages content on U-Verse but local publishers generally should plan for the day when TV becomes a meaningful distribution medium for local (online) content and advertising.

The Internet on TV is not here in the same way that mobile is today. But it’s coming.

This Was a Transitional Year

In retrospect we may see 2009 as a kind of critical transitional year for advertising and media as well as the Internet and mobile. I’ve argued 2009 is/was the long-awaited “year of mobile.” 

Here’s what I said at the end of last year about what would happen this year:

1. The one big trend is mobile. The Internet gets much more mobile with millions more routinely accessing content, social networks, etc. “on the go.” There are more laptops now than desktops and netbooks are selling very well. There will also be a range of interesting new connected mobile devices. All of these developments have a range of implications for site design, business models and location awareness. Absolutely everyone in the local segment needs to mobilize now or in 2009. This is all real — right now.
2. Beyond mobile, desktop location awareness is much more pervasive: Browser, OS, etc.
3. The “inventory product infrastructure” becomes more widespread and this has major mobile implications too.
4. I would also say that 2009 will be a very interesting year for traditional TV. Nielsen says that TV viewing is at an all time high but TV “engagement” is not. Younger people are not watching as much TV and are much more engaged with the Internet and mobile. (I was  on a ski lift this week with a 20something texting as he rode up the mountain). When the “digital switch” happens in February in the US, there may be several million people caught off guard. It’s the TV industry’s “Y2K moment.” Some people may simply walk away from conventional TV.

• Other than that there will be M&A activity . . . and many startups don’t survive.
• All the SMB marketing migration will continue: video and online marketing adoption, etc. But no big breakthroughs will happen; it’s all incremental growth.
• Print media including newspapers and yellow pages continue to suffer and see usage losses.

What are some other things that happened that you think were significant or will in time prove to be significant? All the Google local initiatives: 10 Pack, 7 Pack, Local Listing Ads I would throw in as significant developments for the local segment in particular this past year.

Is Content or Distribution King?

The much-rumored purchase of NBCU by Comcast is now public. The company has paid $30 billion for a controlling interest in the company. According to the NY Times report:

The agreement will create a joint venture, with Comcast owning 51 percent and G.E. owning 49 percent. Comcast will contribute to the joint venture its stable of cable channels, which includes Versus, the Golf Channel and E Entertainment, worth about $7.25 billion, and will pay G.E. about $6.5 billion in cash, for a total of $13.75 billion. For now, the network will remain NBC Universal, but ultimately Comcast could decide to change the name.

The strategy according to the joint statement issued by Comcast and GE is media “anytime, anywhere”:

Comcast Chairman and Chief Executive Officer Brian Roberts said, “This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding.  In particular, NBCU’s fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business.  Today’s announced transaction will increase our capabilities in content and cable networks.  At the same time, it will enhance consumer choice and accelerate the development of new digital products and services.

So this would seem to be a great marriage of “carriage” (distribution) and content and the “anytime anywhere” media concept also seems right for a bold, new multi-platform world. It’s worth noting that this combination is potentially much more potent than TimeWarner and AOL were. However an AP analysis suggests that Comcast is weighting content over distribution as the future of its business:

Comcast Corp. is buying control of NBC Universal from GE largely because Comcast wants to own more movies and TV shows. The point is to give it a position of strength if fewer people sign up for its cable TV services and watch more video online.

I would tend to agree that cable TV subscriptions will decline over time as people get the Internet on TV and use the Internet to consume TV and movies, unless bundling and aggressive pricing with other services (phone, Internet) keeps people hooked in.

But think about this: on the Internet distribution has become more important than content; consider the Google vs. News Corp. debate . . . or Google vs. YP publishers. Or perhaps it’s more accurate to say that some categories of “content” have become commoditized (general news, local business listings) and thus distrubtion is more important in those situations. Branded content remains in demand.

So one view of this GE-Comcast deal, as the AP article argues, is to value content above distribution. Clearly both are required for success. But what do you think? Is branded content more important than disribution or vice versa?

TV As Internet Device: Do We Want It?

A minority of viewers already get Internet access and content on their TVs through an IP hookup or set-top box. Akin to that Netflix is doing lots of streaming deals with set-top box makers. Yahoo! has its widgets initiative, and so on. There’s lots of activity in the space. LG, Samsung and Sony all have Internet-enabled TVs on sale this holiday season.

While I was in Best Buy this past weekend I saw two prominent “Interactive TV” displays for Samsung and LG. Here’s the LG display.

It’s very clear that once Internet content (broadly defined) is available to mainstream audiences on TV it will create an interesting new market that is in some ways parallel to mobile, because it will need to change to accommodate the limits and capabilities of the device — in this case a large screen “10 feet away.”

It will also eliminate the need for many to subscribe to conventional cable TV, although they’ll need an IP connection from some source. This also potentially marginalizes TiVo or other cable DVRs because it offers broader content and it’s all on-demand. In this world we also quickly get the convergence of online and TV video advertising. Pre-roll that runs on YouTube runs on my TV if I’m watching a show or content on YouTube “in the living room.” And what about Hulu? That’s even more like conventional TV today. Will Hulu ad rates go up, will there be interstitial ads? Will there be an ad-free subscription model?

Think about: Facebook on your TV . . . Skype . . . Google Street View . . . interactive/social shopping on TV. Think about new “social programs” where people watch and chat at the same time. Then there’s gaming and how it might evolve. Very interesting stuff to consider.

Cumulatively all these changes will radically transform advertising for “television,” which could result in a massive decline in traditional ad rates and revenues. And that in turn will affect production budgets, the nature and quality of programming and so on.

YouTube and Hulu’s Rise

In the US Hulu is now the number two video site after YouTube. This reflects the divide between UGC video and “network” or professional video. YouTube has all kinds of jewels as well as lots of crap (although it’s trying to move toward Hulu), whereas people go to Hulu for “catch up” (DVR) TV and to see clips from shows they know and like already.

Considering the competition that existed when Hulu arrived, Hulu’s rise is impressive. And a paid model is coming. 

‘Web TV’ Provides Yet Another Platform

There are a host of companies out there that are trying to bridge online video and TV. Companies such as Mixpo, TurnHere, Jivox and Google TVAds all contemplate a two way street where video ads move freely between TV and online. Netflix is now streaming movies through gaming consoles and set-top boxes. In addition the company will be streaming movies directly to select Sony TVs.

Similarly Clicker (and competitors) aims to straddle the worlds of online video, TV and movies by being a comprehensive programming guide. And pointing to a future that may be only three or four years away from critical mass, many TV makers are integrating Web-access capability into their sets. USAToday has a feature on that today:

Big TV manufacturers including Sony, Samsung, LG, Panasonic and Vizio say that they’re poised to revolutionize television this Christmas shopping season: They’re about to launch the first major marketing push for a new generation of sets that can easily integrate Web content with traditional TV news and entertainment — without the fuss of connecting the TV to a set-top box.

There’s an interesting analogy to mobile in that Web content (via widgets or otherwise) on a TV, from 10 feet away, is quite different than on a PC. Navigation and search paradigms will need to be developed to accommodate the user experience for the device. In addition, the possibilities for engagement and commerce are also interesting and somewhat different than on the PC.

I won’t go through all the “imagine if you could pause the show and buy Taylor Swift’s shoes” scenarios. But the possibilities are pretty interesting for publishers of all sorts, as well as for social media. Lycos awhile ago developed the visionary but ill-fated Lycos Cinema, which created a social-TV experience: chat with video online. As I said previously:

However the little known Lycos Cinema points the way toward one almost certain future experience: social TV (with live chat). Watch shows/movies with your friends. It will bring back “appointment viewing” (as opposed to time shifting) in a new and different way.

Within 3-5  years (or sooner) however all the content you can get online you’ll be able to get on your “living room monitor.” Yahoo had the right vision of the future with its original articulation of “GO” — my content on any device: TV, online, mobile.

I’ve also wondered many times how social networks, gaming and mapping platforms would play out on TV:

I think on TV environments like Google Earth and Virtual Earth will have real traction and prove to be a way to translate the Internet into the living room. They and the virtual worlds will have more bandwidth and perform better for users than they could online. And I believe — say within five to seven years — we’ll see a convergence of commerce/advertising, video, community and local/travel in these environments. The big screen and a big pipe permit a lot of interesting configurations.

The “Internet” on TV is pretty exciting and represents a potentially radical evolution of how consumers interact with the screen in the living room. Lots more to come on this subject.

YouTube Pre-Roll and Cost-Per Engagement

The other day I was surprised to see a Geico car insurance commercial (couldn’t find today) as pre-roll on YouTube. But now I understand it’s part of a test program that allows users to skip the ads to see which ones are working. In most pre-roll video ads you cannot bypass the commercial (think Hulu) and are compelled to sit through the entire thing. But Google is testing a new approach that may yield a video “cost per engagement” model. MediaPost explains:

Google will begin testing “skippable” pre-roll ads in videos on YouTube Wednesday that could lead the Mountain View, Calif. search engine toward a new advertising model. The small sampling, which runs indefinitely, will allow people who find the videos to click on the link and skip the ad, which takes them directly to the content. The ads will run on videos from content partners, which have already opted into the test.

The goal to move the industry toward more engaging high-quality ads requires a lesson in human behavior. The test that determines if and when people watch the video clips will provide Google with insight into the type of person who may skip an ad, what type of ad they might skip, and what piece of content does better than another. Google also will look at whether some ads are skipped in a specific portion of the session. Does the person skip the ad in the first video versus the third during a 30-minute time slot while on YouTube? . . .

[Product manager Phil] Farhi says Google eventually sees a model where the advertiser only pays for a completed view of the ad. Quality and user signals would determine the correct place in the video to serve up the ad.

The idea of letting users freely skip pre-roll is fairly radical. Most users won’t watch most pre-roll video ads. Most TV advertising is built on the premise that people must be compelled to watch ads, which partly gave rise to TiVo and the DVR. But if the ads are interesting enough people will watch them and even virally promote them (online). 

This move coincides with one toward “addressable advertising” at Google, having just added Nielsen (former Claritas) “Prizm” segmentation to its TV Ads offering: 

This partnership brings more layers of audience data to our existing targeting tools. In addition to demographic and interest dimensions from Nielsen and Equifax already available in our targeting tools, advertisers will now be able to layer on PRIZM segments to find their audience on TV through Google TV Ads. PRIZM categorizes US households into 66 unique segments, using attributes such as lifestage, income, social group, home ownership, employment, and education . . .

How does it work? Advertisers simply select a PRIZM cluster in the Google TV Ads interface, and receive recommendations on which TV networks, dayparts, and programs are popular with that cluster. Advertisers can then add the media they’d like to target and air ads within 24 hours of building a campaign.

These movements portend not only the “convergence” between TV and online video advertising (which parallels audience user behavior) but a dramatic shift in how “TV advertising” is bought, measured and billed.