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YouTube Looking to Lure TV Dollars

1 May, 2013 By: Doug McPherson

SAN BRUNO, Calif. – YouTube is looking to win TV ad dollars by lowering prices, Ad Age reports.

Last year, YouTube introduced ad packages – described as aggressive – seeking at least $10 million to sponsor one of YouTube’s new channels. A music package, for example, was listed at $62 million, according to documents reviewed by Ad Age. YouTube landed Unilever, Toyota and GM with commitments in the lower eight-figures.

But this year, YouTube is dropping those requirements to get more advertisers to shift budgets out of TV. The new minimum this year is about $1 million for what sales chief Lucas Watson calls “Lego blocks” of YouTube content.

Watson told Ad Age that YouTube got a lot of feedback about being inflexible, so it’s breaking ad packages down into more manageable chunks that allow bigger advertisers to buy more and smaller advertisers to buy less.

The timing couldn’t be better for YouTube’s announcement: This week, NewFronts is being held, an organized effort by digital publishers to participate in the TV “upfront” ritual where ad commitments worth about $18 billion are negotiated between broadcast and cable TV. Those commitments represent a big slice of what ZenithOptimedia estimates is a $64 billion U.S. TV market.

Digital publishers are now looking to get their slice of the pie. Two examples? YouTube and Hulu heavily invested in original content last year; and others like AOL and Yahoo are investing well into the eight figures.

Last year, YouTube sold original content in which it had invested – new channels and shows like “WIGS,” “Nerdist,” “Vice,” “Machinima Prime,” “Jay-Z’s Life & Times” and others that took monetary advances from Google against ad sales. That spurred some resentment among channels that didn’t take YouTube funding and had been building audiences on the platform for years.

“Last year we focused everybody’s eyes on the 100 channels we had launched,” Watson said to Ad Age. “This year, forget who gave [the channels] a check and lets focus on who’s building great audiences.”

In a further bid to lure conservative TV advertisers, YouTube signed a deal with the Alliance for Family Entertainment (AFE), whose members include Unilever, Walmart and Subway, to create a family-friendly package across 32 channels on YouTube. Commitments from the members of AFE represent one of the bigger upfront deals YouTube is doing this year.

Advertisers will know what shows and channels they’re getting, but unlike last year they won’t be exclusive. Exclusivity around channels reportedly caused problems in practice because the same ads were shown over and over causing them to wear out sooner than expected.

Ad Age says Google’s video platform – the world’s biggest – isn’t lowering ad rates, the cost-per-thousand that advertisers pay, but it is re-thinking the way it structures up front ad deals for premium content on the eve of its “Brandcast,” a big show for marketers and agencies in Manhattan next week.

Rather than specific channels, Google is selling genre packages like sports, gaming, fashion, cooking, music, comedy or education in $1 million increments. An “intelligence” package will be organized around Rainn Wilson’s “Soul Pancake” and its breakout star of the past year, an eight-year-old from Tennessee, Kid President.

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