Hulu, TV.com Getting Higher Ad Rates Than Their Network Counterparts

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Hulu, TV.com Getting Higher Ad Rates Than Their Network Counterparts

Networks like A&E, Scripps, and possibly even CBS are ready to test whether the much-hyped TV Everywhere concept will serve as a lucrative business model for online video, but there is news that premium video sites like Hulu and TV.com are finally starting to deliver ad rates that are greater than what the networks would get for their shows on air. Running an ad during The Simpsons on Hulu, for example, costs about $60/CPM, Bloomberg reports; running the same ad during prime-time on TV costs about $20-$40/CPM—or over 60 percent less in some cases.

For some sites, garnering these higher CPMs is nothing new—and to be clear, the quality of the content (and the site) determines whether they get the higher rates. But the fact that prime-time staples like The Simpsons and CSI are getting better CPMs online than on air is worth looking into. Content providers (and advertisers themselves) have long justified sky-high rates for prime-time TV ads, on the basis that such ads deliver unparalleled reach and branding power. TV ads still beat online video ads in terms of reach—just over 7.5 million unique viewers live streamed CBS’ NCAA championship game, for example, compared to the 17.6 million that tuned in on-air—but what about user engagement?

That’s where the shift in perception—at least from an advertiser standpoint—seems to be taking place. “The reason people are paying such a high premium for these ads on the Internet is they do have a captive audience,” David Poltrack, CBS’ chief research officer, told Bloomberg. “You know you have eyes on the screen.”

Sites like TV.com and Hulu also tend to show fewer commercials per episode, which reduces ad clutter, but caps the amount of revenue they’re able to generate. So, plagued with less inventory (and smaller audiences), content providers are still struggling with the overall shift in viewership from TV to the web—since even with the higher CPMs, the revenue they generate from online content isn’t enough to replace what they’ve traditionally brought in from TV.

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Tameka Kee

@GeekyChic Jun 25, 2009 2:33 PM ET

Photo: thms.nl

Posted In: Advertising, Media & Publishing, TV, Social Media, Video, Technologies / Formats, Broadband, Companies, CBS, CBS Interactive, NBC Universal, News Corp., Fox, hulu, tv.com

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Tameka Kee

@David @Dorian Good points. I think the big issue is combatting the perception that TV audiences are just inherently more valuable than online viewers.

Of course a Super Bowl ad is worth millionsâbecause youâre getting millions of people tuning in, and theyâre captivated.

But if research is showing that average TV viewers arenât captivated during prime-time, then why should the ads automatically warrant such a high price? If viewers are more engaged online, then the online ads should be valued accordingly.

Dorian Benkoil

I wonder if there's more confidence, too, that the ad is actually seen? That people watching online actually see the ad, or at least aren't channel surfing or walking away during it.

Also, since the pods tend to have only one ad, and only 30-second breaks, people are more likely to stat with it than drift away. (Research from Scripps, for example, has shown second-by second research about how people tend to literally tune out after an ad has run 15 seconds at he beginning of a pod.)

thelostagency

I think is accurate based on my recent blog post about online market share and how it can relate to profitability

http://thelostagency.wordpress.com/2009/06/24/media-depends-on-broadcast-revenue/

While the higher Ad rates may sound strange with a smaller audience, if you point out the ability to track, report and measure the campaign result in real-time that is worth the money. Hulu has the potential to kill the previous we throw money and wait for the phone to ring campaigns. It has the ability to offer CTR, and potentially demo & geographic data live to clients.

I think the issue of not being able to replace typical broadcast revenue is compensated by low content delivery costs.