YouTube stakes bold claim for $300m-plus of Oz TV ad dollars but must slash rates by 150% to get it

Paul McIntyre
By Paul McIntyre | 9 September 2014

Google’s online video juggernaut YouTube is making a massive assault on $3.5 billion TV ad market in its boldest play yet to position itself as a premium audience network.

Negotiations between Google and top media buyers are underway although the tech giant has issued non-disclosure agreements over its plans to offer advertisers access to millions of Australian YouTube subscribers across the top 5 per cent of its channels in return for revenue marketshare deals.

One industry executive familiar with Google’s plans said it wanted 10-20% of the $3.5 billion TV ad market although Google’s industry leader for agency sales, development and display activation, Lisa Bora, told AdNews last week TV was not the focus for YouTube’s new revenue push.

“I can't go into [budget commitments],” she said. “We are in the early days of discussion with agency partners. But overall it is about reinforcing the need to be where consumers are. We are not telling people what budget it needs to come from. We are reinforcing that there is a strong agency and ad market where both TV and YouTube can thrive and co-exist.”

But one media agency executive currently in discussions with Google said the tech giant was being “disingenuous” in saying it did not have broadcast TV as its target.

“They are coming at it aggressively and the notion they have not got TV in the crosshairs is a bit disingenuous,” he said. “They have big ambitions. They feel they’re due more like 10-20% of the TV market. They’re saying agencies should be doing that now.”

With TV generating upwards of $3.5 billion, a 10% share means $350 million is at the lower range of Google’s expectations for YouTube – at 20 per cent it’s a market shaking $700 million assault.      

“We are reinforcing the need for our agency partners and advertisers to be where the eyeballs are,” Bora told AdNews last week. “They need to reach what is currently a very fragmented market across screens. Google Preferred solves that fragmentation.”

Indeed, not all media buyers say YouTube’s revenue ambitions mean it was about hacking exclusively into TV’s turf.

“I don’t see why we need to frame it as coming from TV,” another agency exec told AdNews. “Maybe it won’t come from TV. Maybe it comes from display? Maybe it will come from other media. I don’t agree why you need to necessarily sacrifice TV to fund this. It might come from the total media budget.

“The strategy does sound attractive. It helps to solve one of the problems with YouTube – it has massive audience volume but how targeted is it? Fundamentally they’re going to create genres of channels like sport and entertainment. By breaking down YouTube into key genres they’re giving us access to video content with [audience] data and an agreed CPM [audience cost per thousand].”

But the CPM rates are another sticking point for some buyers. In YouTube’s audience sweet spot of 18-39 year-olds, one buyer said Google was asking for rate premiums 150% or higher than TV in its current push.

“On reasonably broad demographics they’re at a 50% premium [to TV],” he said. “On 18-39 year-olds, if regular TV is in the order of a $20 CPM, they’re between 150% and 200% higher than that. It’s not acceptable. I’m assuming it’s the starting position to the [Preferred] program.”

He said rate “parity” with broadcast TV “gets your interest because [YouTube] does deliver incremental reach. Until there is parity and we get better confidence in the quality of content, it’s still test and learn.”

Another senior agency executive was particularly bullish on YouTube and online video ads in general, making a bold claim that TV broadcasters could “go the way of newspapers” in 18 months.

That’s an inference to the dramatic decline in ad revenues which hit print mastheads four years ago.

Others are less convinced about that prediction and timeframe but it appears abundantly clear a shake-up battle for TV ad dollars and more fragmentation of the media mix is coming fast.

Some say even Facebook’s new video ad strategy could emerge as the first real online competitor with scale to YouTube. And Zuckerberg's baby is adding a video counter.

According to the New York Times, the cultural and popular music sage that is Beyonce posted a video clip recently to Facebook and hit 2.4 million views in a few hours compared to a few thousand on YouTube over the same time frame, asking questions of YouTube’s hitherto unchallenged position as the social video sharing queen.

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