One day last year, Jessica Nelson was surprised to find her toddler, Aiden, watching videos online in which people opened box after box of new toys, from Kinder Surprise chocolate eggs with trinkets inside to all manner of Disney merchandise.
“The next day we saw him watching more and more and more of them,” said Ms. Nelson, who lives in Toledo, Ohio. “He was pretty obsessed.”
She and her son, who turned 3 on Monday, had entered the world of “unboxing” videos, an extremely popular genre on YouTube where enthusiasts take products out of their packaging and examine them in obsessive detail. This year, according to YouTube, people have watched videos unveiling items like toys, sneakers and iPhones more than 1.1 billion times, for a total of 60 million hours.
The videos’ ability to captivate children has led toy makers, retailers and other companies to provide sponsorships and free toys to some of the most popular unboxing practitioners, who in turn can make a lucrative living. Hasbro and Clorox have ads that YouTube places on the videos.
That’s how many videos people watch on Facebook every day, according to company comments after it reportedthird-quarter earnings today–and it’s double the number just seven months ago. More than anything–Facebook’s45% ad revenue growth notwithstanding–that’s why companies that make their money on television advertising should be worried.
Granted, it’s easy to put too much stock into even a figure as eye-popping as 8 billion a day. Facebook counts any videos watched for as little as three seconds. And nearly all those videos are nothing like television shows or movies. Instead, they’re short videos of your child’s first steps along with trailers for actual shows and movies. So this is not yet prime time advertising as brand marketers think of it.
But what the 8 billion daily video views shows is that Facebook has arrived as a place where people are happy to watch videos of almost any kind–some 500 million people daily, in fact. Not only that, they’re doing so on the mobile devices where advertisers know they need to reach people–especially the younger people with disposable income–who have begun drifting away from linear television. …
What that means is that people on Facebook will now view video ads, the most lucrative kind of ad online or off, as a natural if not universally loved complement to the videos they’re already watching. At some point, ad spending on television–still the largest single place for marketers’ budgets–seems bound to shift at least in part to video ads. …
It’s clear that Facebook is now a force to be reckoned with in video advertising, something that seemed unthinkable just a couple of years ago.
By many accounts, President Barack Obama handily won the 2012 election partly thanks to his campaign’s use of data to supercharge voter outreach, fundraising, and TV ad buys.
Now, the two-year-old company formed by the campaign’s chief analytics officer and some of his team, whose operation was known as “the Cave,” is bringing that data science to bear on the cloistered world of television advertising. Today, Chicago-based Civis Analytics, which helps non-profit companies and corporations corral and analyze their disparate data, is announcing what it calls the first ad planning software that uses big data analytics to apply to television the kind of precise ad planning and targeting used to target online ads. …
Civis founder and CEO Dan Wagner says the company, which counts Alphabet (formerly Google) Executive Chairman Eric Schmidt as an investor, chose television for its new market not just for its sheer size but also because it works on relatively fuzzy data. “The underlying science in media planning hasn’t changed since the 1970s,” he says. “Chief marketing officers are fed up with the lack of credibility and accountability over a channel that accounts for a huge proportion of their budgets.” …
But most important, according to various reports, one most recently in Variety, Apple is currently exploring anew how it might boost Apple TV’s prospects by entering the growing fray in original video programming. Earlier, there were persistent reports that Apple would offer a Internet-based bundle of existing TV programming. But it’s believed that rights issues and a reluctance by programmers and networks to endanger their cash cows have stalled that service. “Original programming is the only solution to Apple’s biggest problem in the video world–that is, that nobody wants to sell Apple content rights,” says Forrester analyst James McQuivey.
Either way, it’s clear that Apple has designs on its own bundle of programming, especially programming no one else has, to drive more interest in all its devices. And now Apple TV may loom more important in that effort than it has so far. A stronger Apple move into television and online video is long overdue, but instead of the television set many people had expected for years, it appears that for now Apple TV is the horse the company plans to continue riding.
The challenge for Apple is that its rivals have galloped ahead of Apple TV, which hasn’t changed much in three years. … Given Apple TV’s solid but unspectacular base, original programming would offer the last piece that help recharge it into the home hub that Apple appears to want it to become. …
Beyond plans to spend like crazy on everything from search to virtual reality, Facebook gave investors little to complain about in its fourth-quarter results reported Jan. 28. Ad revenues jumped a stunning 53%, and they would have been five points higher but for currency fluctuations. Mobile ads rose to 69% of those revenues, up from 53% a year ago, a sure sign of the company’s progress in making advertising on phones and tablets compelling. Annual revenues blew past $10 billion for the first time.
But investors pay for future profits, so it’s important to step back a bit and assess how well Facebook is positioned vs. an always-growing pack of rivals–Snapchat, Pinterest, Google and YouTube, Twitter, and yes, even Yahoo. In particular, it’s not yet clear that Facebook has cracked the opportunity for brand advertising, the kind of image ads that dominate television, where most advertising dollars are still spent.
What’s the problem? One ad agency executive I talked to has an idea, and it involves not only advertising but the reality of Facebook’s core service, its news feed. The issue, says Craig Elimeliah, senior vice president and director of creative technology at RAPP, is that Facebook has saturated its most lucrative audience, the U.S. and to some extent Europe. There’s the rest of the world, but CEO Mark Zuckerberg says the Internet.org effort to get them online is one of Facebook’s 10-year projects, not three to five years.
To keep growing–not just audience but time spent on the site, which leads to revenues–Facebook must give people more reasons to use it than they have, Elimeliah says. While Facebook has frequently changed up the look and the algorithms of the news feed, we’re still doing basically the same things on it that we have for years: watching a bunch of cat videos, fake news stories from the Onion, and photos from friends. Nothing wrong with all that, but it’s pretty passive, especially for a social network in the hyperconnected age of Snapchat.
“They really haven’t evolved the engagement on the platform much,” says Elimeliah. “There’s a lot of noise and clutter.” He thinks the rise of Snapchat shows how young people want closer, more immediate interactions with friends, and advertising that works in that context. Indeed, Elimeliah says he’s “blown away” by Snapchat Discover, its just-announced content and advertising service (check out the video below). The “low-friction” experience is already getting kudos from media types. “It blows Facebook out of the water from an engagement standpoint,” he says, because it fits so well into the intimate and yes, ephemeral Snapchat service.
Facebook needs to make sure it provides the right context for those ads–a place where ads not only seem natural but play in a context that isn’t quite as noisy and distracting as the current news feed. Video ads also seem unlikely to be effective unless they are made to be consumed on the go and provide actionable information–so they can’t be simply downsized TV spots. “I don’t know if the Facebook platform can make that kind of change,” Elimeliah says. …
Straightforward and unflashy, Susan Wojcicki doesn’t come off like the most powerful woman in advertising that Forbes and others have labeled her. When we meet outside her office at the Googleplex in Mountain View, she’s dressed in jeans and a simple maroon top and speaks with an almost self-deprecating lilt.
But as the search giant’s senior vice president of advertising and commerce, she is indeed the exec leading the development of some of the most disruptive ad technologies of the past half-century. I interviewed Wojcicki (pronounced wo-JIT-ski) for my article in the current issue of Forbes on how Google is gunning for brand advertising, the image advertising still dominated by television and the dwindling pages of slick magazines.
After picking up “detox” lemonades at a juice bar, we walked past a T. Rex skeleton sculpture festooned with plastic pink flamingos to a set of tables to talk about how the company aims to wrest away brand advertising budgets, which still constitute the majority of ad spending worldwide thanks to the persistent popularity of television among advertisers. Over the slap of spikes and serves from a nearby volleyball court and the occasional caw of a crow resting in the nearby trees, she explained her vision of Google’s next big step beyond search and plain-vanilla display ads. This is an edited version of our conversation.
Google senior VP Susan Wojcicki
Q: Lots of brand marketers and agencies say they can get truly large audiences more easily on TV than on YouTube or elsewhere online. Why haven’t online ads been able to provide similar branding opportunities as TV and other traditional media?
A: Most advertising is a portfolio of different types of advertising. TV definitely is effective for lots of advertisers. If we want to talk about the long-term future, the question is: Where is TV going? Will all TVs be Internet-enabled? And if they are Internet-enabled, what does your TV look like then? Is your TV then basically a screen attached to your computer in your living room? There could be all different types of things your TV looks like in the future.
Q: You still hear the argument that TV is a lean-back medium and people in that kind of environment are always going to be more receptive to brand messaging. Are people ever going to be as receptive online?
A: Even in TV advertising, they try to target specific types of users. That’s why they’ll say, “We want users who watch sports,” because that means a certain type of demographic. Users are opting into seeing specific shows on TV, and I think it’s similar with digital. They are choosing specific shows to see.
I’m not really sure that lean-back vs. interactive necessarily means that the user is more or less receptive. It’s counterintuitive that something where you’re engaging, you’re less receptive. If users are engaging with something, they’re choosing to see something. That’s the whole concept of what we’re doing with TrueView [YouTube ads that viewers can skip and that advertisers pay for only if they’re viewed], where users are choosing to see something, so they’re engaging with it. …
In the lobby of Google’s Building 900 at its Mountain View headquarters, there’s a display of Google-colored squares and rectangles that looks like a bland abstract-art piece. It turns out these are the shape and relative size of standard display-ad units that run on nearly every commercial website.
The “display” display exposes the paradox of Google’s attempt to extend its dominion over online ads to the realm of image advertising done chiefly on television and in glossy magazines. To get the wide reach of television, the company needs to shoehorn image ads into those standardized, easy-to-buy units, but it also needs to provide technology that allows marketers to do more compelling pitches inside those boxes. Resolving that paradox is the job of Neal Mohan, Google’s vice president of display ads.
After joining the company with the $3.2 billion acquisition of display technology firm DoubleClick in 2007, Mohan has helped build or buy what’s likely the industry’s broadest set of technologies needed to create, place, and measure the impact of display ads. In an extensive interview for a story in the current issue of Forbes, we talked about how he and hundreds of engineers in Mountain View and New York City are trying to apply that technology to wrest billions of brand advertising dollars from TV. This is an edited version of our conversation.
Google VP Neal Mohan
Q: Could you lay out the key challenges today in getting more brand advertising to move online?
A: The primary use case for advertisers online is generally performance-oriented. That applies not just to search advertising but frankly to display, and even video ads have been performance-oriented. That’s done the industry well. There’s been a lot of growth around impressions and clicks and conversions.
But the next big opportunity for the industry if we are going to grow it not just X percent a year but 10X over the next few years is to crack this brand advertising nut. It’s not about display banners or text ads or rich media or video or mobile. It’s really about all of the above, and what the objectives of the brand advertiser are. It’s more upper-funnel campaigns where brands are looking to establish their brand or a new product that they’re looking to bring to market.
Q: Why the focus on brand advertising now?
A: There are a couple of things coming together that make this the right time for this opportunity to be addressed. The first is just the fundamental consumer trend. Fifty-seven percent of media consumption is online now, greater than any other channel combined, including television. …
IT’S MID-SEPTEMBER, and Volkswagen of America has a problem: It won’t have any new models coming out until the spring. Keeping VW front and center in consumers’ minds has drawn a group of marketing folks from the automaker and two of its ad agencies to Google’sBrandLab at its YouTube headquarters south of San Francisco. Dedicated to “evangelizing the art and science of brand-building,” the richly appointed meeting space is basically a man cave for ad creatives, complete with overstuffed couches, booze and the mother of all big screens, an assemblage of 32 flat-panel displays massed into 300 square feet of video overload.
In one corner of the BrandLab, Google’s Jeff Rozic goes to work running VW’s folks through a rapid-fire succession of video ad campaigns the BrandLab feels have worked. His earnest delivery is well-honed, courtesy of 100-plus similar “private workshops” held for potential advertisers from Coca-Cola to Toyota over the past year. VW has some catching up to do, a point Rozic makes intentionally or not by highlighting 13 travel vignettes produced by a rival, Nissan Mexico. His larger point: Don’t clutter a story with too blatant a call to action. “We shouldn’t apologize for trying to sell cars,” one VW exec protests. “Sure,” Rozic shoots back, “but you have to be careful to distinguish when you’re telling a story and when you’re selling.”
Fair point. Rozic is clearly selling–and it’s a product intended to change Google’s path. The king of the click is now lecturing one of the world’s most accomplished advertisers to forget those clicks and amp up the image ads. CEO Larry Page can go on as much as he wants about self-driving cars, wearable computers or any of the company’s other “moon shots.” But Google fundamentally remains the most disruptive advertising company of the past half-century. As its total advertising-revenue growth rate has halved in the past two years, from 29% to 15% (thanks in part to Facebook and Twitter), it’s now charging full-bore toward the biggest pot of advertising gold it doesn’t own: brand advertising, the image ads you see in glossy magazines and on television.
Most online ads–the banners that litter nearly every commercial website and, most notably, Google’s search ads–have failed to help marketers move the needle on classic advertising measures like brand awareness and intent to purchase. Instead, they mainly drive people to a product page to click the buy button. Direct marketing is lucrative: Search is still upwards of 60% of Google’s ad revenue, helping it earn an estimated 15.8% net margin in 2013–but image ads will come to dominate digital advertising in this decade.
Look at the numbers: Digital brand advertising is an $18 billion market this year, according to eMarketer. Its forecast implies that number will double by 2018, at which point it will have passed search and direct marketing, with plenty of room to grow. Television advertising, comprising almost entirely image ads, is currently a $200 billion global market. And it’s a vulnerable one, as the medium’s iron grip on the bulk of ad spending looks a little less firm as younger people scatter to YouTube and Netflix when they aren’t Snapchatting or Instagramming on iPhones or skipping ads entirely on their DVRs. Some 75% of respondents to an Interactive Advertising Bureau poll of 5,000 ad execs expect to see some spending move from TV to digital video in the next year.
This explains the man cave. YouTube remains one of the greatest acquisitions of the Internet era. Larry and Sergey paid $1.65 billion in 2006 for a business that today would conservatively be worth $20 billion as a stand-alone. So what’s another $400 million or so to build out a brand ad business? …
Samsung shows off huge new TV (Photo: AFP/Getty Images via @daylife)
Are TV makers going the way of Detroit in the 1960s? In what many, including those who didn’t bother to attend, are calling a boring Consumer Electronics Show, the star attractions seem to be leviathans such as Samsung’s and Sony’s new 84-inch TV sets. Even they apparently is not amazing enough, because Samsung is promising a 110-inch model later this year.
Size isn’t the only way they’re big, either. Those 84-inchers, which one Sony executive had the audacity to call “Ferraris,” costs $25,000, more than I will ever pay for a car, let alone a TV. And they have more pixels than my never-acute eyesight can ever process–even if there were content created for them, which there isn’t.
Seriously, guys, I’m not buying another TV for a very long time. The screen I’ve got is as big as I can fit in my living room, and that’s not going to change. Even if I did have a bigger living room, a big-ass 84-inch TV would feel faintly embarrassing, like tractor tires on a little pickup.
What’s more, not a single Smart TV feature, no matter how cool, is going to sway me to pony upwards of a thousand dollars for a new set to replace a perfectly fine screen. I’ve got TiVo, I’ve got Apple TV, I’ve got Roku, I’ve got Google TV, and probably there’s some other add-on device I can’t even remember. All of them offer more features and apps than I will ever use.
All of this makes me think of those road hogs of the late 1950s and early 1960s that Detroit insisted on manufacturing shortly before those cheap little imports ate their lunch. The fact is that more and more TV watching is occurring on much smaller screens, especially tablets. The sofa spuds of today don’t drive Cadillacs. We want Ferraris, or even Priuses. …
For the past few years, I’ve offered predictions here and on The New Persuaders for what’s likely to come in the next year. This year, I’m going to shake it up and throw out a few questions instead. I think I know the answers to some of them, but if many won’t be answered definitively by year-end, they remain top of mind for me and probably for many others in online media and advertising.
So in this, the first full week of the new year, here are some questions to which I hope to start finding answers:
* Will image advertising finally take off online? I have to believe that as people spend more and more time online instead of reading print publications and watching TV, brand marketers will want and need to reach them there with ads that are aimed at creating consideration for later purchases, not just eliciting an immediate sale like Google’s search ads and too many banner ads. We’re already starting to see signs of such advertising with the early success of Facebook’s Sponsored Stories, Twitter’s Promoted Tweets, and YouTube’s TrueView ads–not to mention the explosion of tablets, which provide a lean-back experience more compatible with image advertising. This won’t be a sudden change, since brand marketers and agencies don’t move quickly, but you can’t tell me there aren’t going to be increasingly compelling ways for brands to influence people online.
* Can advertisers and publishers make ads more personal without scaring people? That’s the $64 billion question, and it likely won’t get answered in full this year. It’s easy for headline-hungry politicians to make a big deal out of Facebook’s latest privacy gaffe or the Wall Street Journal’s or the New York Times’ latest scare story about an ad that followed somebody all over the Web. That’s especially so since Facebook really does push the privacy envelope too far at times, and too many advertisers idiotically chase one more sales conversion at the cost of scaring off hundreds of others or inviting onerous legislation. But making ads more useful to each individual person is not only crucial to online commerce, it’s potentially better for most consumers as well–seriously, I don’t need to see another ad for a fitness center or a new credit card, but that ad for Camper van Beethoven’s new CD had me in a split-second. The answer lies in these two words, everyone: transparency and choice.
* Will mobile advertising work? Well, some of it already does, to hear Google and Facebook tell it. And while those already devalued digital dimes so far turn to pennies when it comes to ads on smartphones and tablets, this still feels more like growing pains than a crisis in online advertising. Sure, the screens are small and people don’t like to be interrupted in their mobile cocoons. So a different kind of advertising is probably needed–clearly, banners don’t cut it on a four-inch screen. But the value to advertisers of knowing your location and maybe the apps you’re using, coupled with knowledge of what your friends like–all with permission, of course–is huge. That permission may be really tough to earn. But if advertisers can offer tangible value, perhaps in the form of useful services related to what you’re doing or looking for or shopping for–and isn’t that the ultimate native ad?–people may loosen their hold on that information.
I have a lot more questions, but I’ve got to stop before too much of 2013 is gone.