• by Ashkan Karbasfrooshan , Op-Ed Contributor, March 26, 2012

While the Web aspires to steal television’s role as a branding platform, with its roots as a direct-response tool, it remains a promotional platform at best, according to Ari Rosenberg, who in his recent post highlighted a surprising reality: “Dave Morgan spun what many may be feeling: Something is amiss inside our own ad revenue growth.  He points out that 20 years into this business, online spending is still predominantly driven by other online companies.  He asks, where is Pepsi, and where is P&G?”  

The Web is Kinda…Cliquey…

That can’t be right, can it?  Let’s see.  In Morgan’s original post, he points to Pivotal Research’s Brian Wieser’s findings that: “The Internet ad industry’s increasing dependence on large endemic marketers for growth is cause for concern for some. Seven endemic Web advertisers -- Google, Amazon, EBay, Priceline, Expedia, Groupon and IAC -- collectively spent nearly $7 billion in U.S. online advertising in 2011. The good news is that spending was up dramatically from 2010, contributing to a 20% overall growth in the online ad market year over year. The not so good news is that excluding these seven companies, the rest of those who advertised only grew their online expenditures by 10% in 2011.”

Ironically, after founding 24/7 RealMedia and Tacoda, Morgan did the unthinkable: he launched a startup based on the premise that TV ads may be “wildly underpriced,” effectively betting against the Web, the media that made him successful.

Is he a hypocrite?  Nope.  A sellout?  Try again.  He’s just realistic and candid.

This, I Swear, is the Best Slice of Bread… Ever!

Before online video has really met its own expectations, we’re now pointing to the iPad (and tablets) as a game-changer in video viewing.  While you may view tablets as an extension of Web video, in reality it’s different for a few reasons, one being the times when people watch videos online on their PC relative to their iPads.  The other is that TV or Web content isn’t necessarily going to prevail on that form-factor. Indeed, according to NBC News’ Chief Digital Officer Vivian Schiller: “Brands and content creators shouldn’t focus on being platform-agnostic; they need to focus on becoming platform-committed.” 

Celebrity Gold Hunt

Right or wrong, this has many implications -- among them, that creating celebrity-driven channels and programming may not be a wise bet.  Yahoo and YouTube are betting the farm on it, as did OWN, whose lackluster ratings serve as a reminder that casting celebrities in shows doesn’t automatically translate to success with audiences.

I know, comparing OWN to YouTube/Yahoo is akin to comparing apples with oranges, but it’s all fruit in this case.  In fact, at a recent industry conference, a big media company executive admitted that audiences preferred generic voice-over to big name talent -- but since advertisers preferred big name talent, the trend was here to stay.

The Web Shrinks Things: Promotional vs.Commercial

Indeed, I’ve long argued that online video remains a promotional medium, a place that shrinks total marketing expense required.

But it might inadvertently shrink the economic activity.

This is happening: “Consumers will watch more movies online than on DVDs in 2012 for the first time, but will spend far less doing so.  The number of movies rented or bought online from outlets like Netflix and iTunes will grow 135% this year to 3.4 billion, according to IHS Screen Digest. But the research firm said people will spend only $1.72 billion on digital movies, compared to $11.1 billion on DVDs and Blu-ray discs.  In total, online stores and services will account for 57% of movie consumption in 2012, but only 12% of spending.”

History Does Repeat Itself (But You Can’t Always Predict What Will Happen to Whom)

While the Internet caught both the print and music industries off guard, it’s important to note that the television and motion picture industries have always been technological pioneers in their own right; the issue was whether they wanted to focus on offense or defense.

Entertainment isn’t about Data and Analytics

It didn’t always have to be this way.  While Hollywood sold through programming, branding and unique opportunities, online sought shortcuts and focused on data, analytics and the Terrible Ts (tracking, targeting). 

That promise fell short with marketers and programmers (who kept the cream of the crop offline).  This meant that despite the increased time spent online, users were consuming anything but top-shelf programming, which in the end has kept online video grounded relative to expectations.

What Does This Mean?

If your business model requires the largest marketers shifting the bulk of their marketing budgets online, you might need to go back to the drawing board.  Some companies are premised on the fact that traditional media companies (and thus, possibly, the big marketers) won’t embrace emerging platforms in quite the way forecasts suggest. That’s Morgan’s (and I presume a few other entrepreneurs’ bet).

After all,  despite the destruction of many news organizations and newspapers, it’s worth noting that globally, print advertising will still outdraw online advertising by a considerable margin: $122 billion to $83 billion, according to the Global Advertising Forecast from Strategy Analytics.

Hold the presses!