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TV Networks Seek Formula for Online Ads

Posted by Mort Greenberg on April 14, 2008




Apr 12, 5:49 AM (ET)




LOS ANGELES (AP) – CBS Corp. (CBS) executives took an unusual risk last fall before its series debut of “Big Bang Theory” – it offered the entire episode online despite the chance it would sap viewership for the TV premiere.


The show, about two geeky physicists and their beautiful female neighbor, got 90,000 views on and other Web sites over a week, followed by a better-than-expected 9.5 million for the Sept. 24 on-air premiere.


“The thought was purely to try to find new eyeballs in a medium that generally appeals to younger demographics, and then drive them to put butts in seats to watch on their beautiful plasma-screen TV when the series takes off,” said Quincy Smith, president of CBS Interactive. “It was fairly radical, and we’re happy with how it came out.”


Looking to tap new revenue through online ads, attract new viewers and keep loyal fans, broadcast networks are making bigger, riskier bets on Internet delivery of their shows. The challenge is to grow viewership online without cannibalizing traditional ratings and DVD sales while making more money on programming seen on the Web.



But online audiences are still limited, a stumbling block that’s expected to be a hot topic at the National Association of Broadcasters’ annual gathering, which starts Monday in Las Vegas.


According to comScore Media Metrix, led the network pack with 8.5 million unique visitors over its entire lineup of shows for the whole month of February, followed by with 7.9 million. By comparison, a single episode of CBS’s “CSI” recently took in more than 20 million TV viewers in one night.


Still, there are signs that the online experimentation will pay off.


Networks now charge more per thousand viewers online than they do over the airwaves, where the average for a primetime show is about $25. Analysts put the online rate anywhere from $35 to $50 per thousand, though there are millions more potential traditional TV viewers.


Advertisers pay more online because there is a better accounting of how many viewers see the ads and an extra benefit that an impulse to purchase can be acted on with the click of a mouse.


“For an advertiser, you’re getting a clear performance result,” said Bob Davis, a Web investor and former CEO of search engine Lycos. “No matter what the click-through (rate) they get, it’s infinitely larger than the click-through they get on TV. The click-through they get on TV is zero.”


ABC, which streams “Lost” and “Desperate Housewives” on its site after airing on TV, is aiming to tweak its formula to make its online ads as lucrative as its TV ones.


“In order for us to drive the number up to what we get on broadcast, we have to do one of two things. We have to either increase the number of ads that you currently see on or figure out different ways to generate value for advertisers,” said Albert Cheng, executive vice president of digital media for the Disney-ABC Television Group.


“We are not at parity yet with broadcast, but the goal and everything that we are doing is to drive toward parity,” he said.


The CBS experiment with “Big Bang Theory” was so successful that the network repeated the online-preview formula with two other shows, “Dexter” in February and “The Tudors,” on the CBS-owned pay cable channel, Showtime, in March.


ABC, a subsidiary of The Walt Disney Co., expects to explore the effectiveness of localized advertising in test markets in the next several months, because its media player can detect the location of the online viewer, Cheng said.


Technology companies also are working to style ads that will be more interactive, leading to higher sales – such as making products that appear in shows clickable – or targeting viewers based on what kinds of content they have seen recently.


“Ultimately, where the Internet will really become a powerful source of revenue is that all forms of advertising will work in a highly targeted way,” said Steve Mitgang, chief executive of Veoh, a Web site that streams ad-supported shows. For TV shows at least, ad-supported free viewing online has proved more profitable than fee-based video downloads on services like Apple Inc. (AAPL)’s iTunes, said George Kliavkoff, chief digital officer of NBC Universal.


NBC Universal, a unit of General Electric Co. (GE), stopped supplying its hit TV shows to iTunes last year. Instead, it teamed up with News Corp. (NWS) to launch, a Web site that went public last month and streams shows like “Battlestar Galactica” and “The Office” for free with ads.


The NBC Universal-News partnership, as well as CBS, are testing a “ubiquitous” approach, making their content available across dozens of Internet partner sites, including YouTube, rather than drawing viewers to a single destination.


It’s not clear which model of delivery will prevail. None of the networks disclose how much ad revenue they collect from online show streams, but all have made major investments in what is a growing business.


“We’re sort of in the first inning of how some of these digital platforms will develop,” said Kliavkoff. “We still don’t know what the winning business model will be at the end.”


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