video ads, tv ads, comparing on CPM basis and estimating productivity of the ad spend

1. Augustine Fou
- 1 -
Video Ads vs
TV Ads Dr. Augustine Fou
http://linkd.in/augustinefou
acfou @mktsci .com
January 2014

2. Augustine Fou
- 2 -
Executive Summary
• The number of video ad impressions is still 1/10th the number
of theoretical TV ad impressions.
• But when you take into account the lower CPM cost and the
better ability to track views and actions after the view (e.g.
click), video ads have a greater measurable impact and
therefore greater “productivity” in terms of ad dollars spent.
• Brand advertisers should ask:
• Whether their TV ads were even seen; don’t just ask for reach
• How TV ads compare on CPM basis to other tactics
• If there is a feedback mechanism, like clickthroughs, to calculate effectiveness
and impact (with TV ads there isn’t)

3. Augustine Fou
- 3 -
Calculating TV
Ad Impressions

4. Augustine Fou
- 4 -
TV “Ad Impressions”
# of Viewers x Length of Show = Viewer Hours
Ad Impressions = Viewer Hours x 24 ads/hr
Assumptions:
- Use the maximum # of ads per hour (24)
- Every user views every ad (which of course is false)
Calculation Methodology 1

5. Augustine Fou
- 5 -
Amount of Advertising
Network TV
• For every 30 minute episode,
there are about 9 mins of ads (or
10 – 12 ads ) – used How I Met
Your Mother as proxy
• For every 60 minute episode,
there are about 19 mins of ads (or
20 – 24 ads ) – used 24 as proxy

6. Augustine Fou
- 6 -
Ad Impressions (Top 25 Network Shows)
Source: http://tvbythenumbers.zap2it.com/2012/04/17/tv-ratings-broadcast-top-25-american-idol-ncis-top-week-30-viewing/129412/

7. Augustine Fou
- 7 -
Amount of Advertising
Cable TV
April 23, 2012 7
• For every 30 minute episode,
there are about 7 mins of ads (or
8 – 9 ads ) – used Spongebob
Squarepants as proxy
• For every 60 minute episode,
there are about 18 mins of ads (or
16 – 18 ads ) – used In Plain
Sight as proxy

8. Augustine Fou
- 8 -
Ad Impressions (Top 25 Cable Shows)
April 23, 2012 8
Source: http://tvbythenumbers.zap2it.com/2012/04/17/tv-ratings-broadcast-top-25-american-idol-ncis-top-week-30-viewing/129412/

9. Augustine Fou
- 9 -
TV “Ad Impressions”
TV Ad Spending dollars / CPM of TV Ads
Calculation Methodology 2
$68.5B divided by $28/CPM = 2.4 TRILLION /year
Assumptions:
- Every user views every ad (which of course is false)

10. Augustine Fou
- 10 -
U.S. Ad Spending by Media
Source: eMarketer, August 2013
eMarketer shows
TV still growing
strongly
Digital will
continue to grow
at the expense of
print and other
offline forms

11. Augustine Fou
- 11 -
Comparative Media Costs
Cost per Thousand (CPM): Cost to reach 1,000 users or impressions
Broadcast TV $28
Radio $10
Magazines $16
Newspaper $16
Out of Home $5
Internet $3
Traditional vs digital media costs
Traditional media CPM
Digital media CPMs
Comparing costs of various media
Relative costs of media
how do media costs compare
media costs compared
Understanding the Economics
of Digital Compared to Traditional
Advertising and Media Services
Digital media compared to traditional advertising
digital versus traditional marketing
Augustine Fou
- 11 -
Source: Morgan Stanley Research 2010

12. Augustine Fou
- 12 -
TV Ad Load
23 - 32%

13. Augustine Fou
- 13 -
Network TV Ad Load
30% ads
• For every 30 minute episode,
there are about 9 mins of ads (or
10 – 12 ads ) – used How I Met
Your Mother as proxy
32% ads
• For every 60 minute episode,
there are about 19 mins of ads (or
20 – 24 ads ) – used 24 as proxy

14. Augustine Fou
- 14 -
Cable TV Ad Load
23% ads
• For every 30 minute episode,
there are about 7 mins of ads
(or 8 – 9 ads ) – used
Spongebob Squarepants as
proxy
30% ads
• For every 60 minute episode,
there are about 18 mins of ads
(or 16 – 18 ads ) – used In
Plain Sight as proxy

15. Augustine Fou
- 15 -
Online Video
Ad Impressions

16. Augustine Fou
- 16 -
UPDATE: Dec 2013
Source: comScore, dec 2013 via MarketingCharts
Nov 2013 26.8B video ads per month

17. Augustine Fou
- 17 -
UPDATE: Dec 2013
Source: comScore, dec 2013 via MarketingCharts
Nov 2013 reach = 56% frequency = 155 ads /mo

18. Augustine Fou
- 18 -
Video Ad Formats (length)
Source: tnooz.com Feb 2013

19. Augustine Fou
- 19 -
Display ad eCPM $1.06 March 2013
Mobile ad eCPM $0.72 March 2013
Video ad eCOM $9.99 March 2013
Video Ad CPMs
Source: Turn, October 2013

20. Augustine Fou
- 20 -
Video Ad Load
3%

21. Augustine Fou
- 21 -
Video Minutes and Ads
Source: comScore June 2013
Viewers watched 1,250
minutes of online video in
May 2013 (20.8 hours/mo or
42 mins per day)
Video ads accounted for 27.9
percent of all videos viewed
and 2.6% of all minutes spent
viewing video online

22. Augustine Fou
- 22 -
9.4 ads per video for long form videos of 20+ minutes
1.3 ads per video for videos of 5-20 minutes
0.66 ads per video for videos of <5 minutes
Number of Ads per Video
Source: tnooz.com Feb 2013

23. Augustine Fou
- 23 -
Video Ads vs TV Ads
Comparison

24. Augustine Fou
- 24 -
Comparison (Jan 2014)
Network/Cable TV
• 23-32% ad load
• 204B ad impressions /month
• $12-28 CPM
• 40% of ads NOT skipped
= 80B productive impr
Online Video
• 3% ad load
• 27B ad impressions /month
• $8-12 CPM
• 74% viewed to completion
= 20B productive impr
DON’T‘ KNOW IF USER SAW IT Know user saw ad and have
further metrics of clicks

25. Augustine Fou
- 25 -
Video Ads Better than TV Ads
• Video ads have 2x message
recall than TV ads
• Video ads have 2x brand
recall
• Video ads are 50% more
likeable
• Video ads have 50% more
general recall
Source: IAB/Nielsen via
AdWeek May 2013

26. Augustine Fou
- 26 -
So What?
“On a CPM basis, video ads win; on a ‘viewed’
basis, video ads win; on an ad-load basis, video
ads win; and on a measurability to ROI basis,
video ads win. TV advertisers should more
aggressively shift ad spend to digitial video even
if they choose to keep and use the exact same
creative.”
- Dr. Augustine Fou

27. Augustine Fou
- 27 -
Dr. Augustine Fou – Digital Consigliere
“I advise clients on optimizing
advertising across all channels. Using
video ads to supplement or replace TV ad
spend, means we can shift towards more
detailed measurement and calculation of
ROI.”
FORMER CHIEF DIGITAL OFFICER, HCG (OMNICOM)
MCKINSEY CONSULTANT
CLIENT SIDE / AGENCY SIDE EXPERIENCE
PROFESSOR AND COLUMNIST
ENTREPRENEUR / SMALL BUSINESS OWNER
PHD MATERIALS SCIENCE (MIT '95) AT AGE 23
@acfou
ClickZ Articles: http://bit.ly/augustine-fou-clickz
Slideshares: http://bit.ly/augustine-fou-slideshares
LinkedIn: http://linkd.in/augustinefou

28. Augustine Fou
- 28 -
Related Articles
State of Online Video Ads
By: Augustine Fou, December 2013
Why Digital Kicks Traditional
By: Augustine Fou, March 2012
Video Ads Destroy TV Ads
By: Augustine Fou, April 2012
Mythbusting Advertising
By: Augustine Fou, June 2012
Augustine Fou
- 28 -
Video Ad Benchmarks
By: Augustine Fou, April 2013
Video Ad Fraud Investigation
By: Augustine Fou, October 2013
The Magnitude of Digital Ad Fraud
By: Augustine Fou, November 2013
The Biggest Lies of TV Advertising
By: Augustine Fou, May 2012

29. Augustine Fou
- 29 -
APPENDIX
April 16, 2012. 29

30. Augustine Fou
- 30 -
Comparison (mid-2012)
Network/Cable TV
132 hrs of TV per viewer/mo*
41.8 hrs of ads per viewer/mo
32% time spent on ads
24.5B ad impr by Top 25 Network Shows
5.1B ad impr by Top 25 Cable Shows
30B ad impressions per month
Online Video
22 hrs of video per viewer/mo
19 mins of ads per viewer/mo
1.5% time spent on ads
8.4B video ad views (March 2012)
* Source:: http://www.emarketer.com/blog/index.php/time-spent-watching-tv-tops-internet/
DON’T‘ KNOW IF USER SAW IT Know user saw ad and have
further metrics of clicks

31. Augustine Fou
- 31 -
Advertising CPMs (Offline)
Cost per Thousand (CPM): Cost to reach 1,000 users or impressions
Augustine Fou
- 31 -

32. Augustine Fou
- 32 -
Free Video Ad Impressions
http://www.youtube.com/watch?v=316AzLYfAzw
25 million
impressions
in 10 days
If the ad is content, now online video makes it possible to
reach as large if not larger audiences than network TV shows
AND you know users actually played the video.

33. Augustine Fou
- 33 -
Video Ad CPMs
Source: TubeMogul, Nov 17, 2011
Video Ad Pre-roll CPMs:
$10 - $11
Video Ad Pre-roll CPMs:
$8 - $10 (Women’s Lifestyle)

34. Augustine Fou
- 34 -
Video Ad Viewers are
Impatient
Completion Rates (ads viewed to completion)
78%: 0 – 15 second ads
74%: 16 – 30 second ads
61%: 31 – 60 second ads
54%: >60 seconds
Source: Vindico via MarketingCharts, April 13, 2012

35. Augustine Fou
- 35 -
Time Spent
Online TV

36. Augustine Fou
- 36 -
Time Spent Across Media

37. Augustine Fou
- 37 -
Time Spent vs Ad Spend

38. Augustine Fou
- 38 -
What % of ads are viewed?
Network/Cable TV
30B TV ads aired /mo
• Nielsen estimates 56% ads skipped by DVR
• IPG/YuMe estimates 63% ads avoided
• 60% ads skipped was used to calculate
• 40% TV ads not skipped (possibly viewed)
12B TV ads viewed /mo
Online Video
8.4B video ads shown /mo (March 2012)
Completion Rates (% ads viewed to completion)
• 78%: 0 – 15 second ads
• 74%: 16 – 30s ads viewed to completion
• 61%: 31 – 60 second ads
• 54%: >60 seconds
6.2B video ads viewed /mo
• Source:: Nielsen (2010) estimates that around 56% of ads are never seen (because they are skipped using DVR)
• http://blog.nielsen.com/nielsenwire/media_entertainment/do-americans-watch-more-dvrd-commercials-than-you-think/
• IPG/YuMe (2011) shows that 63% of TV ads are ignored (because users turn away or are doing something else when commercials come on).
• http://adage.com/article/adagestat/smartphones-a-bigger-distraction-dvrs/227725/

39. Augustine Fou
- 39 -
MAJORITY of Users Skip TV Ads
65%
65%
54%

40. Augustine Fou
- 40 -
Comparative Costs
Cost per Thousand (CPM) : Cost to reach 1,000 users or impressions
$450
$250
$140
$30
$15 $7 $2
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Direct Mail Mail Order
Catalog
Drive Time
Radio
Prime Time
TV
Online
Video Ads
Online
Display
Online
Search
Source: Why Digital Kicks Traditional Tactics in Cost Effectiveness, March 16, 2012