News Corporation's international TV subsidiary, Fox International Channels, launched an unexpected assault on the European online ad market last week. It spent a reported £10m to acquire a 55% stake in UK online ad network Utarget.
Utarget's selling point is its capacity to run video campaigns, delivered via a "pop-under" website, enabling advertisers to run spot ads of up to 90 seconds. Combine Utarget with News Corp and Fox's vast knowledge of the TV market and the intention is clear: generating online ad revenues on a par with its vast TV ad revenues.
News Corp has a vast array of internet properties (see table), with MySpace just one example of News Corp having scale online. The problem has been offering advertisers tempting opportunities to go online. And that is the key reason behind Fox's Utarget deal.
Hernan Lopez, president and chief operating officer of Fox International Channels, says: "The real opportunity is supplementing the TV buy. There's always a limit to how many more people you can reach on TV. Online video can help with this."
The rebranded entity Utarget.Fox will now become a unit of Fox's global online ad network.Fox Networks, and will specialise in video advertising. The.Fox Networks business will handle all standard inventory.
One goal is to take control of much of News Corp's ad inventory. News Corp's largest website, MySpace, works with a number of ad networks - but that could change following the Utarget deal.
Phil Nott, general manager of.Fox Networks UK, says: "We will potentially be working with it (MySpace) in the future. It's rational for News Corp to do this - it's for their benefit. Fox International Channels is coming at it from a TV business heritage - it has the content and it's looking to bridge the gap between TV and online."
Phil Cooper, founder of Utarget, says that his company has a lot more to offer in addition to video sub-sites. "What we offer uniquely is 30 to 60-second TV ads, as opposed to just offering 15-second pre-rolls that exclude a lot of advertisers. The evidence is that News Corp is taking video advertising seriously."
News Corp has now bought into two of the most hyped online trends of recent years: social media (through its £355m acquisition of MySpace in 2005) and now video, through the Utarget deal.
The runaway UK growth of MySpace appears to be over, but the social network's user base remains steady at just under five million unique users a month. MySpace has done well to build a loyal user base in the form of music aficionados, which makes the social network look like a continued sound investment.
Video online has been similarly hyped. But for Julian Miall, joint managing director of online sales house Ad2One, there is little substance behind this hype. Arguably, the two biggest examples of consumer uptake of online video in the UK so far have been YouTube, a website filled with content unsuited to many brands, and the BBC iPlayer, a non-commercial entity.
Miall says that Screen, Ad2One's dedicated video network, is "ticking over", but commercial firms have so far failed to nail online video. "It's still not really that obvious where the video market is going," he says.
"The number of users interacting with video is still small and, from our perspective, the volume of available video inventory is the main issue."
Meanwhile, two of the most exciting commercial launches into the online video space have failed to live up to the hype.
Shares in Blinkx, the video search engine that listed on the Alternative Investment Market in May last year, are now trading at around a quarter of their original value.
Joost, which promised to liberate people from their TV guides, is reportedly scaling back its UK operation, having failed to secure enough compelling content.
Miall adds: "When it (internet TV) will come good is when (project) Kangaroo comes along and ITV, Channel Four and Five start pioneering in this space."
There are positive tales as well, however. Research commissioned by fast-moving consumer goods advertiser McCain through Yahoo and PHD found that purchase intent increased by 18% and brand favourability rose by 12% when consumers were exposed to both TV and online video ad campaigns.
While the UK's biggest commercial broadcasters get their act together, News Corp has taken a shrewd step that is likely to see it pick up more online ad spend.
There are still several top independent ad networks in the UK market and industry sources point out that further takeovers will likely happen soon. Having seen News Corp enter the fray, other media groups may be tempted to accelerate their video ambitions by making similar moves.
NEWS CORP'S WEB EMPIRE
UK unique users (000s) for Feb 2008
The Sun: 2,015
Times Online: 1,869
IGN Entertainment Gaming Network: 1,257
Propertyfinder (50% owned): 710
Fox Entertainment Group: 318
News Digital Media: 295
Fox Broadcasting: 272
News of the World: 263
Rotten Tomatoes: 204
The Sun Bingo: 175
Wall Street Journal Digital: 145
Fox News Digital Network: 119
Grab.com Network: 111
New York Post Holdings: 87
Intermix Media Network: 67
HarperCollins Publishers: 53
Source: Nielsen Online.