Big-hitting and ever-popular shows such as The Simpsons and CSI now carry a higher advertising rate on the Web than they do on television. Is this the moment we have been waiting for – when the digital revolution starts to pay for itself?
I Have A Dream
It seems as though everyone, with the exception of the cable companies who need the status quo to continue in order to make money, is keen for online video to fulfill its potential and herald a new revolution in this digital age. There are just a couple of problems, huge problems at that, to overcome before this dream becomes reality.
One is for content creators and copyright owners to realize the world is one place connected by the Internet, rather than a fragmented jigsaw puzzle. Which means making Hulu viewable outside the States and the BBC iPlayer viewable outside the U.K. The other, even larger, problem, is how to make Web video profitable without scaring viewers away by charging the earth for streaming content.
Advertising Is Key
There is always the option for charging a subscription for online video, but it’s a highly unpopular option with viewers, and rarely if ever works. Which is why the vast majority of online video services, whether they are based on premium or user-generated content operate an advertising-based model. This ensures incoming revenue without the risk of scaring off viewers.
Revenue may be guaranteed but profit is not, as YouTube is currently finding out. Hulu, on the other hand, is doing particularly well and is expected to break even, or very close to it, this year. A recent piece of information about advertising rates emerging from a Bloomberg story shows how this is possible.
Higher CPM Rate
Top-rated hows such as The Simpsons and CSI now command higher CPM advertising rates on Web TV portals such as Hulu and TV.com than they do on traditional television. Companies will pay somewhere between $20 and $40 per thousand viewers reached on TV for a slot during The Simpsons, while it’s around $60 per thousand viewers reached on Hulu.
So why isn’t Hulu rolling in money? Because while there are roughly nine minutes of adverts during a single episode of The Simpsons on TV, there’s just 37 seconds of ads per episode on Hulu. Which adds up to advertisers getting a better deal on traditional TV than they do on the Web.
The key thing here though is that advertisers are realizing the potential of online video and the fact they can use it to reach viewers very interested in the show they are watching – so interested that they’ve searched it out on the Web. There’s often also a higher click through rate on Web advertising than there is on traditional television advertising.
This watershed moment actually raises more questions than it provides answers. Should Hulu increase the amount of ads it foists on viewers to better compete with TV? The higher CPM rate means nothing when there is such a differential between the number of slots used on TV versus the Web. And if advertising on Hulu did increase from its current levels, would viewers switch off and turn to piracy for their fix of their favorite show instead? It’s a fine line to walk.