Are television budgets under real threat?

As AOL launches Be On and YouTube just gets bigger, should conventional TV people be worried, Alasdair Reid asks.

With consummate timing, two major figures from the digital economy chose the same day to announce the death of conventional TV. Sort of.

Actually, Tim Armstrong, the chief executive of AOL, didn’t quite go that far. He was talking after the relaunch of Goviral, AOL’s video service, under the new name Be On.

It will look rather more like a conventional online TV platform than its predecessor – and, of course, Armstrong believes it can increase its share of the ad market at the expense of rival media.

"TV dollars haven’t even really started to flow yet," he said when reporting a 23 per cent uplift in net profits for the first quarter. "I’d expect 2014 to be the year for video."

But if Armstrong was trying, largely successfully, to steer clear of reckless hyperbole, Eric Schmidt, Google’s executive chairman, clearly felt no such need for similar restraint.

Asked to predict when internet video would supersede TV, he stated, in characteristically fanciful mode: "That’s already happened."

Well, it has, up to a point. As Campaign has pointed out on many occasions, broadcast TV is proving remarkably resilient; and, in any case, a good deal of the growth in online TV advertising comes courtesy of the on-demand services of heritage broadcasters.

Google’s YouTube also continues to grow – it recently surpassed the milestone of a billion unique users a month. And yet it remains a relative minnow when you look at the bigger picture. In the UK, on average, we each watch just over four hours of television a day; and, although accurate like-for-like figures are not available, our YouTube consumption is almost certainly less than a tenth of that.

In other words, the likes of AOL and Google have much to be modest about when it comes to the video advertising market. They will argue that online video advertising revenues will inevitably grow; and growth may be bolstered by (again, rather contentious) evidence that viewers engage more deeply with online video ads. Also to be factored in is the notion that younger people tend to watch more online.

So, are these digital giants about to make inroads into conventional TV budgets?

 

No Ian Clark, chief executive, Hypernaked

"Quality content fuelled by massive budgets at commercial broadcasters will ensure TV adspend is not under threat. There is, however, a place for branded content – such as Foster’s Funny – to coexist alongside [conventional] TV."
 

No Ruth Cartwright, broadcast director, Maxus

"I’d encourage clients to view content [per se] as the key driver of any media decision. What you can’t avoid, though, is the power of TV in reaching the masses. [For that reason,] TV budgets are unlikely to be eroded to any great extent."
 

Maybe Marco Bertozzi, executive managing director, EMEA, VivaKi Nerve Center

"TV budgets are being held to account, rather than under serious threat. The future will be on-demand. [Established] broadcasters can still benefit, but competition will grow from broader on-demand channels and opportunities."
 

No Chris Wright, joint head of investment, Initiative

"TV’s strength [is unique]. Other channels can deliver audio-visual messaging, but not on the scale of TV. Econometrics proves that conventional TV advertising delivers the greatest short- and long-term return on investment."

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