Why Yahoo’s Search With Video Has Tremendous Consequences For Advertising

If you go to Yahoo and type in the word Pedigree in their search box you’ll be brought to a page with a blue panel running across the top. In that blue panel lies a key frame, which, when clicked on, takes you to a Pedigree dog food commercial.

Quite simple when you think about it.

What’s interesting is how it’s going to turn the ad business on its head.

How come?

Well, let’s consider the number of people that might type in “Pedigree” on Yahoo search. While I don’t know the number, exactly, I can guarantee you that Yahoo does.

Let’s be generous and say that it’s a hundred thousand.

Which means that a hundred thousand people came to Pedigree and basically said, “Give me more information”. Now while there are 81,200,000 results for Pedigree on Yahoo search, there is only one commercial in the blue panel across the top.

Was this commercial specifically designed for the context in which it will run? In other words, was it designed for people to come to it? Or, was it designed to get attention by interrupting what people are watching?

Two very different approaches are required depending upon whether it’s the advertiser’s intent (intrusive) that drives the interaction, or, the viewer’s (opt-in).

In this case, as is the case with all search, it’s the viewer’s.

As we have said in the past, content must be created in context of control. When the viewer knocks on the advertiser’s door and says, “Tell me more,” that requires a very different kind of advertising than the kind that was designed to cut through the clutter and grab someone’s attention as quickly as possible.

When someone seeks out the advertiser, the advertiser no longer needs to shout. What this means is that re-purposing advertising designed to work off-line will no longer work.

Which takes us back to the hypothetical one hundred thousand that knocked on Pedigree’s door. How much will Pedigree be able to spend on a commercial that will, at most, be seen by one hundred thousand viewers?

When we used to be able to reach 20 million viewers at a pop, the average commercial cost was about $375,000. That cost was justifiable because of the number of people who had the chance to see it.

“Might” is no longer part of the equation. In the digital marketplace, we will know exactly how many see it. And it’s by no means 20 million.

If the viewership is going to be only 100,000, or .005% of 20 million, does the production budget decrease proportionally? If so, then .005% of $375,000 is $1,875

This for an audience that has asked the advertiser to tell them more.

The irony is that as the viewing audience gets smaller due to viewer-control and the industry’s own more precise targeting methods, we have failed to address whether we will be able to afford to talk to these people with any degree of quality in the messaging.

There is an answer to this problem and we think it lies in basing part of the price of content creation on the value received from the commercial rather than costs projected to create the commercial.

In the past, a commercial’s value has always been subjective. Most likely held in higher esteem by those that created it, than those that it was created for.

In the digital marketplace, the amount of time that a viewer spends with a message is not subjective. We know when viewers opt-in to start watching and we know when they opt-out, or stop watching.

The short-term objective of a commercial is to interest the viewer in such a way that they stay involved for the entire length of the commercial. Long term, the objective is to sell more product. Arguably, the less that people watch what an advertiser has to say, the harder it is to sell the product.

What the digital platform measures is how long people are involved with what the advertiser has to say.

We believe that the longer they watch, the better the commercial will probably end up working for the advertiser. Which is why we feel that the longer that the agency can get people to watch, the more they should be paid for creating that particular commercial.

You could call it value-based pricing. By equating time-spent to money-earned, advertisers can start to make a commercial’s “value to the advertiser” objective.

Of course, this means making part of the cost of creating a commercial payable after the fact. Not a practice currently in vogue today.

But then, neither is Yahoo’s search with video. As the circumstances change, so too must the monetization models.

Which is why we think Yahoo’s search with video is going to create great havoc within the industry.

May we be among the first to say well done, Yahoo. Well done.

Why Fox TV’s New Remote-Free TV Doesn’t Work

As you may have read, Fox TV is going to a fewer-commercial strategy that they are calling “Remote-Free TV.” Clever name. But as the results seem to indicate, a misnomer at best.

Just because Fox has reduced the amount of commercials in some of their programming, it doesn’t seem that viewers are eliminating the use of the remote.

When Fox sold the idea to advertisers last May, Peter Liguori, the Fox entertainment chairman, said that fewer commercials would present fewer reasons for viewer to “grab the remote and change the channel.”

In return, Fox would charge a premium of 40 to 50 percent for the advertising sold on Remote-Free TV.

According to Jon Nesvig, president of sales for Fox Broadcasting, the format has worked “reasonably well.”

As we know that TV executives are prone to blow the smallest success out of proportion, “reasonably well,“ should not be assumed to be high-praise.

“It’s better” than other shows, Mr. Nesvig said, “but it hasn’t been as great as we were hoping.”

Really?

You were hoping that because you took one commercial out of the pod, running two rather than three or four, that consumers would stop and say, “Hey, wasting just one minute of my time, that’s much better than wasting one and a half minutes of my time. You bet I’ll sit around and watch.”

Sorry.

The thing that we have to keep remembering is that viewers aren’t skipping commercials per se. What viewers are skipping are interruptions to the program that they are watching.

Any length interruption is still an interruption.

The ultimate answer is to make it so that commercials don’t interrupt the viewing of the programming.

I know, I know. The argument to this is that then, people won’t watch the advertising, either.

Well, they’re obviously not watching advertising now. While most will tell you that 60 to 70 percent of the commercials are skipped on TiVo, their CEO, Tom Rogers, says that the number is actually closer to 90%.

Now compare skipping to searching. Search is the only successful new advertising format that has been introduced in the last 50 years. What are people searching for?

Product information.

Can that product information be contained in a commercial? I don’t see why not.

But how many might opt-in to watch? Depends on how well the media agency was able to target the spot.

Just for argument’s sake, let’s say 10% opt-in. Now before you say, I can’t afford to advertise to only 10% of the viewing audience, Tom Rogers says that you already are.

The difference is that you’re paying for 100% of that audience now.

In a purely opt-in model, you only pay for those that actually opt-in.

Obviously, advertisers can keep spending money for the comfort level that wasted dollars seem to provide.

But in these recessionary times, that’s a pretty expensive way to feel all warm and fuzzy.

Instead Of Reducing Your Agency’s Fee, Why Not Make Them Earn It?

According to Advertising Age, 48% of marketers are looking at reducing their agency’s compensation this year, while 72% are planning to reduce their commercial production budgets.

On the one hand, it makes perfect sense. We are, after all, in recessionary times.

But, on the other hand, you have to wonder if cutting costs is the wisest way for marketers to save money?

In the digital marketplace, advertising is becoming more accountable, both on the media and creative sides of the bottom line. Instead of paying less, perhaps marketers should be discussing paying their agencies more?

The only catch being that the agency has to earn it.

Digital technology’s return path data supplies information that can hold an agency accountable while proving the worth of its efforts. If agencies are willing to put some of their fee into play by being paid for outcome rather than effort, marketers should be willing to pay more for success.

At least that’s the thinking behind the Viewer Time Spent Compensation model.

The way agency fees traditionally work is that an agency charges a fee for concept development. Usually, it’s an hourly fee times the number of people working on creating the concept.

Let’s say the concept is a 30-second spot.

Obviously, the more of the 30 seconds that are watched by the targeted audience, the better for the advertiser. So the more they should be willing to pay the agency that created it.

Digital return path data measures the amount of time spent with a commercial.

Viewer Time Spent Compensation monetizes this second-by-second data so that the longer the agency involves the viewer, the more the agency makes.

This allows advertisers to reward agencies for doing well rather than penalizing them because of the recession. By rewarding your agency for greatness, your agency will put their best people on your business. Reduce their fee upfront and whom do you think you’ll be getting?

As for reducing production dollars, the recession argument again makes perfect sense. Add to that a fragmenting viewing audience, and of course, you can justify fewer dollars for production.

But let’s not forget that a fragmented audience is also a more targeted audience. What fragmentation is really doing is eliminating the wasted media dollars a marketer is currently paying.

Now that the digital marketplace allows advertisers to better find those that are interested in their product, does it makes sense to cut production dollars, in other words, to lessen the quality of their message?

What marketers could do is use return path data to make some of the production dollars contingent on results. Again, it would require basing results on what can be measured – view duration.

Like with the agency, the longer the viewer is involved in the commercial, the more the production company will make.

Yes, but will production companies work this way?

No. Not all.

But the good ones will. Why? Because for the first time, marketers will be paying for their services based on how good they are rather than a day rate.

The average up-front savings for a marketer using Viewer Time Spent Compensation is anywhere from 25% - 40%. Yes, they may end paying more in the long run. But that’s only if the advertising actually did what it was created to do – involve the viewer.

Interestingly enough, we’ve already chatted with the top 10 production companies in the business about working this way.

How many said yes?

10 out of 10.

So what we would say to marketers is yes, go ahead and renegotiate with your agencies. But instead of de-motivating them with reductions, inspire them to greatness.

Tell them that the more brilliant they are, the more they will make.

If you don’t know of any agencies or production companies that will work this way, give me a shout.

I’d be glad to pass on their names.

Failure Should Not Be Lucrative

President Obama today capped the salaries of the senior executives responsible for our distressed financial institutions. He said that Americans are upset with “executives being rewarded for failure.”

I would think that the same would hold true for advertisers in regards to their ad agencies being rewarded for failure. How many times are TV commercials created only to be ignored by those they are targeted to?

Accountability, which is a four-letter word to most agency executives, is becoming more feasible in the digital world. Especially in regards to TV commercials.

The reason?

View duration is rapidly becoming a standard measurement across all digital platforms. What this means is that advertisers will know if the thirty or sixty seconds that they paid good production dollars for to be produced, delivered any return.

Was it a 10% return or a 100% return on production dollars spent? In other words, did viewers watch only 6 seconds out of 60 or 60 seconds out of 60?

Yes, you could call it a Return On Involvement on dollars spent. But a good Return On Involvement leads to a good Return On Investment when it comes to production dollars.

After all, a produced second that is watched is more valuable to an advertiser than a produced second that isn’t watched.

Now, take it a step further. What if advertisers demanded that their agencies be paid on this basis? In other words, the longer the agency involves the viewer in the commercial, the better the advertiser’s return on production dollars, so the more the advertiser would pay the agency for their efforts.

These performance-based compensation models – where the performance being measured is involvement - have been worked out. Up to now, advertisers have said that sales, not involvement, is the only performance that they are interested in.

But that was before view duration became so readily available. It’s going to be difficult for an advertiser to have the data that indicates that only 10% of their commercial was watched and still feel comfortable paying full fare for the 90% that wasn’t.

Especially if their CFO also has the data.

Agencies have always claimed that the commercials that they craft are so wonderful that viewers will be glued to every second. And, up to now, we had to take them at their word.

Well, it’s time for them to put their money where their mouths are.

Because in the digital world, failure will no longer be lucrative. Success, on the other hand, can, and should, be handsomely rewarded.

As President Obama said, “This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. But what gets people upset, and rightfully so, are executives being rewarded for failure.”

Amen.