The internet TV industry is maturing fast and the focus now is very much on monetization. This is why I have launched a new consultancy to help content and channel owners to maximise the return from their investment, TV Everywhere.
The drivers in this market are:
1) Audience size
2) Audience value
At present 1) trumps 2) every time. Ad agencies are yet to grasp the value of selective, targetted audiences, but this will change over time. The Google model is to charge more for more targetted (or valuable) audiences.
We're moving into the world of 'below the line' television. Below the line advertising is typically more targeted and more response driven. The old TV advertising model is, at best, vague, eliciting the old saying that 'I know that fifty per cent of my advertising works, but I don't know which fifty per cent'.
This concept is particularly important to narrowcast - or specialist - channels.
The likely model for them in the short term is to sell vertical market ads for higher CPMs and then to sell out inventory for more generalised campaigns.
All of this leads to an argument I often hear these days from advertisers: "If I pay $x CPM for traditional TV campaigns, why should I pay $y for internet TV campaigns?"
Well, the answer should be clear:
1) Internet TV advertising is highly targeted
2) Internet TV advertising is more engaging (ie people tend to watch, rather than make tea or go to the toilet)
3) Response rates for Internet TV run at around 8% - traditional TV advertising can only dream about this type of response through the red button or telephone or mobile
4) Because delivery is one-to-one, the cost of delivering broadband TV is higher per incremental viewer
So, what are reasonable CPMs ? It seems the market is settling in the $20 - $50 range of generalist advertising, possibly a bit more if related banner ads are being displayed or there is some type of response mechanism. This compares favourably with the $2 - 10 achieved for largely banner advertising and a similar sum for text advertising.
However, I have seen good sales teams consistently beat this. Unfortunately, these sales teams are currently working on magazines and print publications, where CPMs can go as high as $200.
The real challenge for narrowcast channels is to prove and sell the value of targeted niche audiences in the same way as magazine publishers have