AdGrinder

After a lot of work, we are happy to bring you our 2.0 version of AdGrinder.  

This version takes a lot of risks.  It is a completely new way to look at the market - both the advertiser and the content creator/content aggregator.  It enables all those who want to be involved - content creators, aggregators, ad agencies, ad networks, advertisers, marketers - to get involved at their own level of comfort.

Yesterday AgAge published the article <a href=”http://adage.com/mediaworks/article?article_id=130252″>Ad Skipping? Just Wait. It’s Going to Get Worse</a>. Within it, the concept of a &quot;network DVR&quot; was discussed, specifically as devised by <a href=”http://www.cablevision.com/”>Cablevision</a>. Craig Moffet is quoted as saying &quot;In short order, effective DVR penetration could now jump to north of 60% of cable households (that is, all digital cable subscribers) with an even larger increase in DVR outlets per home.&quot;

Not only will DVRs begin to accelerate household penetration, and chew into VOD (thereby further upsetting the major networks), but they’ll also open the world of non-traditional, downloadable and/or streaming content in a more easy to digest (i.e. sitting on the couch) way. We are already seeing RSS feeds and <a href=”http://www.amazon.com”>Amazon</a> downloads being made available to TiVo boxes and other DVRs, so we should assume that they’ll be available to network DVRs in short order.

Disruption. How do the networks survive?

In AdAge’s article <a href=”http://adage.com/digital/article?article_id=130273″>Ad Networks Appear to Drive Down CPMs</a>, the obvious is stated: that middlemen cut into revenues. However, what the article truly brings to light is the fact that when using ad networks <b>in addition to</b> an &quot;in-house&quot; sales team, the ad network revenue only accounts for 2% of revenue when taking 25% of inventory. That’s not a good number for publishers.

The article didn’t mention whether they examined video advertising, but one may safely assume the numbers are either currently close, or will be soon.

As an video producer, do you prefer to pass along the sales of ads to networks? Or do you prefer to do it yourself? … Or, are you trying to combine the two?

Over on NewTeeVee the post Video Ad CPMs: It Pays to Be a Pro appeared last week. Although I commented on it, I think there should be more discussion around video ad CPMs, and what type of content such CPMs will lead producers to create. According to The Diffusion Group, the following should occur over the next few years:

• CPMs for professional long-form video are about $40 now and predicted to rise to $46 by 2013.
• CPMs for professional short-form video are roughly $30 now and expected to hit $34 by 2013.
• UGC vids currently get $15 CPMs and are seen rising a little, to $17, by 2013.

Now, let’s break those numbers down to what a producer (or studio) is likely to see. I’m going to assume numbers for Daytime Network programming, as I think that’s the initial point most internet-distributed shows will aim to become financially successful. YMMV. So, from Daytime Ratings for July 14-18 we get:

Daytime Lineup averages - Week of July 14, 2008:

       Total Viewers          Women 18-49 (Rtg/000s)
CBS    3.47 million        ABC    1.3/841,000
ABC    2.88 million        CBS    1.1/725,000
NBC    2.31 million        NBC    1.0/669,000

Top 5 Daytime Programs in Women 18-49 (rank based on rating)

Program                    Net                 Rtg/000s
The Young & the Restless   CBS              1.6/1.02 million
General Hospital           ABC              1.4/945,000
One Life to Live           ABC              1.3/843,000
The View                   ABC              1.3/843,000
All My Children            ABC              1.1/733,000

Source: NTI, Live + Same Day via ABC Press Release.

Nielsen TV Ratings Data: ©2008 Nielsen Media Research, Inc. All Rights Reserved.

Given the above a “Decent” show should anticipate about 3 million viewers.

Long Form: With a $46 CPM, an episode of “Decent” will bring in $138,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $97,000 being placed into the hands of the production team for long-form content (30-60 minutes in length). Most cable-tv shows — those that appear on Spike TV, CMT, TLC, etc. — cost at least(!) $75,000 to produce an episode. Therefore, a production company can anticipate making roughly a $12,000 profit per episode with a single ad placement. We can safely assume that there will be three to four video ads played during a 30-60 minute episode, which would increase the profit to roughly $290,000 per episode (using three ads; $386,000 for four).

Short Form: With a $34 CPM, an episode of “Decent” will bring in $108,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $76,000 being placed into the hands of the production team for short-form content (3-10 minutes in length). Most online producers have spoken about $1,000 to $3,000 per minute to produce a show. Therefore, if we assume an average length of 6 minutes 30 seconds and $2,000 per minute, we wind up at $13,000 per episode to produce, and a $64,000 profit per episode.

UGC: I’m willing to go so far as to include in UGC high-quality online production, such as Epic-Fu and TikiBar TV, which I think is a stretch…but so be it. With a $17 CPM, an episode of “Decent” will bring in $51,000. If we assume that an advertising network, video distribution site, et. al., will take 30% of the revenue, we wind up with roughly $36,000 being placed into the hands of the production team for UGC content (1-5 minutes in length). As mentioned previously, most online producers have spoken about $1,000 to $3,000 per minute to produce a show. Therefore, if we assume an average length of 3 minutes and $2,000 per minute, we wind up at $6,000 per episode to produce, and a $45,000 profit per episode.

When looking at video ad CPMs, you must also take into account the cost to produce and distribute the content, as well as your means to produce. If you have a $100,000 budget to produce content, which would you choose? One (possibly two) Long Form shows? That’ll net you between $386,000 and $772,000. Eight (possibly ten) Short Form? That’ll net you about $575,000. Seventeen UGC videos? That’ll grab you $765,000.

In the end, there is more than likely a business model in each category, it’ll just be up to the producers to create compelling enough content for the allotted time in order to gather a decent viewership. What do you think?

When talking to people about online video advertising, we often need to define the terms of pre-roll, post-roll, mid-roll, overlay, et. al. This is simply an education process, and is to be expected (especially when talking to those who are completely unfamiliar with online video). Often the discussion leads to “what’s the difference?”

If you’re unaware, it’s fairly basic. Pre-roll advertising consists of a video ad that displays before the video content a viewer has requested to see. Post-roll advertising displays after. Simple, huh?

Yet, for an online video advertiser, the difference is huge. In a nutshell, here’s why:

• Pre-roll advertising is for branding efforts
• Post-roll advertising is for marketing efforts

The reasoning behind the thought above is that a viewer has come to see specific content, say a video from I Make Things. So, if an ad displays before the episode, a viewer is unlikely to take action, i.e. click, on the ad (since he came to see the episode of I Make Things, not the ad). The opposite is the case for ads that display after the episode. Since the viewer has seen what he wanted, he is now ready to do something else…maybe even want to learn more about a product or service, or GASP!, buy something. Fairly logical when you think about it.

From an industry perspective, pre-rolls receive a higher clickthrough rate (CTR) [the action of a viewer clicking on an ad]. However, we believe something’s being overlooked here: viewers are “trained” to click on a video to start or stop it. Therefore, we believe the CTR on pre-rolls is inaccurate because viewers are clicking on an ad because they are trying to stop the video because it’s not what they wanted. We have actually observed this behavior.

What do you think?

“Out in the woods
Or in the city
It’s all the same to me
When I’m driving free
The world’s my home
When I’m mobile”

- The Who (Going Mobile)

Pete Townshend knew what he was talking about. Mobile is big, and mobile has a place for all of us. There are a million people out there with ten million opinions on the future of mobile content and mobile advertising. Here are some of ours:

- It’s just getting started. We have not yet scratched the surface as to how mobile content will affect our lives and our mobile devices. Ideas on standardization, file formats, length of content, text versus video advertisements; these are all things that different companies are pushing in different ways.

- There is money in them hills. Making mobile content and advertising work is a reliable eventuality. Why? The money. Millions of cell phone users, and millions more on the way. All of them with different tastes, different interests and different levels of technical sophistication. This means different types of content and untold numbers of advertisers who see the mobile platform as a place to build their brand or market their service. (There is a huge difference between branding and marketing. We’ll get to that in future posts.)

- The devices just keep on coming. iPhone, Blackberry (I use the Curve myself), Nokia N95. Different phones with different capabilities means different levels of enjoyment in accessing mobile content. Screen size variations, levels of display clarity, keyboard functionality for interactive uses - there is no standard, and that’s not a bad thing. It means that there is room for varying levels of content and what the end user (the viewer) can do with it. But if you can have advertising displayed to your phone, how long will it be before your cell phone bill is paid for by advertising displayed on your screen before you make a call? The more capable your device, the more enjoyable the experience can be, the more the advertiser is willing to pay to get you to see what they have to say. In other words, you might benefit financially in the long run from upgrading your phone. Luckily, there will be a ton of devices to choose from.

We believe in mobile, which is one the reasons AdGrinder pushes your ad to mobile content. The naysayers are simply being too myopic. Just because you haven’t found a way to monetize mobile, does not mean mobile won’t be monetized.

What do you think? Let us know.

Keep on Grinding

Such a great concept, isn’t it?  And how good it feels to say out loud.  AdGrinder is live, its public, and it’s making ads!

We’re thrilled with all of the attention AdGrinder is getting and the response from people who have seen it (especially those who participated in our private beta and gave us invaluable feedback!) and those who have used AdGrinder to get the word out about their business or event.

One of the most interesting things in listening to people’s response to using AdGrinder is how they give us new ways of using the service.  Whole new markets and opportunities have emerged for us just by listening to our beta users’ feedback.  

We have a lot to do here, and we are up to the task.  We will updating the blog very often, and look to all of you for comments and helping to build the conversation.  Some have asked what is the conversation being had?  As we see it, it is about best practices and practical advice.  How do you see it?  More on that in a future blog post.

Until then - keep on Grinding!
Josh and Tony 

As 2007 has come to a close we’re ecstatic to start 2008. We’re particularly excited to launch our first preview of the Ad Grinder service on January 14th. So if you’d like a peek, just tell us: