Google has thrown down the gauntlet (again) – the claim is that Youtube ads provide a better return dollar-per-dollar vs. TV ads. They are spinning this not as the destruction of TV ads, but instead as an alternative. Spend smart money on Youtube ads as a good place to spend on digital. Harmless, right?
However, this is an interesting downward spiral – if advertisers start spending more money on digital because it banks better profits, they will continue to spend more there, which leads to → less inventory on TV → less money for TV → worse content on TV → lower ratings → less consumer interest → less advertising dollars … and continuous downward spiral. You can start to see why pay TV and broadcast TV are a little stressed.
The reasons Youtube ads work ‘better’
- They can be targeted – Not always, but you will be served ads more closely related to what you’re interested in or to the content you’re watching. Traditional broadcast is catering to a broader demo. If pay TV had figured out a way to make targeted and curated ads 5 years ago, maybe they’d be in a different position today.
- They are short – You don’t have to watch 5 minutes of commercials to see the next 7-11 minutes of content. I’m still not 100% convinced on the power of pre-roll, but obviously it’s more effective if you can keep the eyeballs there. When people watch TV with ads, they are reaching for their phones because they know the ads will take minutes, not seconds.
- You can repeat – We all know that repetitive viewings of ads result in better conversion. If you have a viewer clicking through multiple videos on the same channel, you could very well have the same ad or another one from the same advertiser watched multiple times. That kind of control is grating and expensive on TV, but somehow begrudgingly tolerated online (for now).
- Cheaper – Digital ads don’t cost as much as TV ads, so your cost vs. return, even with a super low conversion, has a decent chance of being profitable with good placement.
- Audience – Your audience and viewing habits are different online. That means you’re reaching people that you couldn’t before. They may only be watching for 2-5 minutes and you can squeeze an ad into that time. That kind of viewing habit can’t yet exist on TV and probably won’t until they get their VOD game together.
- Let’s pause one last second on audience before we wrap. Audience is key here. Young audiences are watching way more Youtube than they are Cartoon Network, Nickelodeon, Disney – whatever. Youtube is huge for this demo – so how do you reach an audience that’s not on TV? You simply go where the audience is.
To be fair here are some cons to Youtube ads:
- Content is largely short format / audience created – this feels like a temporary argument. If they can work out the licensing deals and the audiences shift to the format, we could see a different kind of high-quality content show up here.
- Cheaper – Ads are cheap which doesn’t support expensive content, which is why con #1 exists. Small profits on 1 million views can support a kid in his garage but not a $1m-per-episode budget. However if you put up content that isn’t generating income elsewhere or you build content out in a unique way, you can generate additional revenue streams that weren’t previously available.
- Skipping – Lots of Youtube ads allow skipping, which Luddite TV ad supporters will argue that everyone skips the ads so the ads aren’t profitable because they aren’t working. To which I would argue the same thing I argue with DVR’s or traditional live TV – you watch the ads that apply to you and you watch the ads that are well made. There’s no difference except for the user interface.
Basically, it’s now a smear campaign between Google and whoever TV ad people are – and they’re both right to an extent. Google probably baked their studies, and TV sales ain’t fooling anyone pretending that TV isn’t having problems. Digital is here to stay and ads on Youtube are making good returns (much to the chagrin of TV ad sales).
End of the day, as long as TV ads are making conversions to sales on products and services, companies will be buying ad time, BUT clearly there is a growing market for Youtube, especially when younger audiences are leaving traditional media consumption.
Youtube is a good addition to TV ads – people are watching it as well – and if you are advertising to kids demos, you better be paying attention to Youtube.
OG article here: