Video ads are generating billions of dollars, but not for news organizations

As a new revenue stream for newspaper organizations and other legacy media, video advertising has so far resembled a meandering creek more than a swift river.

From my Minnesota boyhood, I learned that you can walk across the headwaters of the Mississippi on a 10-foot path of stepping stones. And I continue to hear that video has the potential to be huge. But five years in, video advertising matched to news seems mostly a mighty disappointment.

So what went wrong? And can it be fixed, as forecasts call for robust overall growth in video ads in 2012 and the years beyond?

I asked Chris Hendricks, longtime digital chief of McClatchy, if video has indeed stalled out. “Stalled might be a little strong but growth is very slow,” he said.

The basic problem, Hendricks added, is that individual news clips do not draw heavy traffic, and only the biggest sites have enough traffic cumulatively to get advertisers excited. Video clips within digital classifieds are stronger, he said.

Gordon Borrell, whose consulting firm monitors local digital advertising market by market, had a similar summary. Borrell figures there will be $2.4 billion in video advertising in 2011, $2.8 billion (a deliberately conservative estimate, he told me) in 2012 and $4.5 billion in 2016.

However newspaper organizations are getting only an eighth of that action currently, and local broadcasting just slightly more. The rest? “It’s all pure play Internet companies.”

For example, if you were a nurse looking for a job, you might find in a recruitment ad a one-to-three-minute video clip about the hospital as well as the particulars of the position.

A second reasonably successful strategy, deployed by some newspapers and local TV stations, Borrell said, is to create a shopping directory and then try to upsell individual stores a video to go with their basic listings. He has been bullish on advertorial formats for several years.

Legacy media have the local sales force to compete for the growing business, but, Borrell said, “my big fear is that things are still controlled by the newsroom,” so the focus stays fixed on news videos. His company’s “whole approach is to find out from advertisers where the money is going — and it’s not local news.”

Questions linger too about consumer acceptance of “pre-rolls,” which typically precede the clip you want to watch. It all depends on how eager someone is to watch the story and how long, entertaining or irritating the ad is.

Clark Gilbert, president of Deseret News Media, one of several legacy companies transforming itself aggressively to digital platforms, said that one recent experiment did not work. The company tried placing pre-rolls before some photo galleries and found that traffic plummeted, he told me.

Are there signs of hope?

Borrell and Randy Bennett, digital strategy specialist at the Newpaper Association of America, both mentioned a vendor syndicate, CineSport. In 70 Major League sports markets, it supplements game clips with brief interviews with a newspaper’s beat writers on the news of the day.

Because the service is networked, the clips can also come from other cities. The Philadelphia Inquirer’s site, for instance, ran a clip of the Boston Globe’s baseball beat writer talking about Bobby Valentine being hired as the Red Sox new manager.

The clips are drawing strong traffic and ad spots that target the young male sports demographic.

Gannett’s new digital chief, David Payne, has a broad background in television websites, but he came from a video advertising start-up, ShortTail media, that has a novel approach.

Rather than pre-rolls, the video ads drop onto a home page or article page, filling the entire screen. They come with a close button, whose activation can be delayed by a few seconds. Thus no one is forced to watch a full 30-second ad, but even those who hit “close” as soon as they can have a quick impression.

I was unable to schedule an interview with Payne and would not assume that the ShortTail technology will be key to Gannett’s video advertising strategy. But it is noteworthy that the company now has a digital chief with deep knowledge of the field.

The Associated Press pioneered Web videos in the mid 2000s when few local news organizations were producing their own. I got a mixed picture from AP executives on where that business now stands.

“Overall it is a great business for us,” said Bill Burke, global director of online video products. The AP is selling subscription packages to a U.S. and international clientèle, same as with its news feeds. And the service is investing in several upgrades to the technical quality of produced video and livestreams.

But Burke concedes, “the challenges on monetization is a serious limitation.” Ideally “at least 50 to 60 percent of clips would run with ad videos,” Burke said, but his research on a range of Web videos (not just AP’s) shows that on some sites as few as 5 to 10 percent do. And as with banners and other Web ad formats, many of the placements come from ad networks buying deeply discounted remnant inventory.

Burke’s counterpart on the news side, Kevin Roach, said certain kinds of clips do best in viewership. Breaking news video, especially when posted quickly, is good. The stronger the visual element the better. (We spoke on the day of 80-mph windstorms in the West).

And the hot newer category is social/viral, Roach added — “what everyone is talking about.” Both said that YouTube has become one of AP’s strongest outlets (even if news is secondary to clips from entertainment programs and cute homemade offerings).

And as my colleagues Regina McCombs and Al Tompkins continue to highlight, there are any number of examples of compelling video and multimedia storytelling.

What to watch for with video ad spending

To my mind, the video advertising story is the legacy media digital challenge in miniature. The biggest players — CNN, MSNBC, the Today Show — do fine. But drop down to the middling traffic of a metro paper or local TV site, and the numbers, the mixed demographic of news audiences and soft rates conspire to make a business model that has failed to launch.

I see a potential for mischief in the related but much larger arena of mobile/smart phones. Already mobile news views are on a fast growth curve, sure to continue for at least several years. But will advertising associated with that content keep pace with the flood of search-and-shop apps, freestanding from news content?

That is to be determined and to be contested, but I fear business success for legacy media in the new platform is far from certain.

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  • http://twitter.com/LouisAmestoy Louis Amestoy

    There are several factors for news orgs when it comes online video: lack of flexibility; lack of communication between news and sales; and not pursuing what works. The flexibility issue is due to the fact that so many news orgs are suckered into expensive proprietary solutions (Brightcove, NDN and others) that offer little chance to grow beyond their site. Go where the audience is and those pure plays, specifically YouTube, are looking for trusted content sources. While the money may not be great, it’s better than no money, which is what most news orgs earn off of online video.

    More importantly, this week is an important lesson for all companies as CES is clearly demonstrating the rise of connected TV that will allow users to bypass traditional cable and satellite in favor of broadband delivery. This is a very real turn and there’s increasingly strong evidence that viewers are increasingly turning to VOD — through a service or through their own DVR usage. There will be a fundamental shift in viewing and a wider array of content offerings. Traditional news orgs need to re-think their video strategies to serve this potential audience, because the living room will be the win when it comes to “online video.” In fact, living room and mobile. If you’re strategy is to serve to the desktop user, you’ve already lost.