April 24, 2014 / 2:39 PM / 5 years ago

AOL, Microsoft lure advertisers with TV-style shows

NEW YORK/LOS ANGELES (Reuters) - Technology powerhouses like Microsoft Corp and AOL Inc are flexing their muscles as storytellers, parading TV network-style shows before advertisers at an annual digital content showcase in New York next week.

The Microsoft logo is seen at their offices in Bucharest March 20, 2013. REUTERS/Bogdan Cristel

With an eye on the big bucks such shows can command, Microsoft will trot out a soccer reality show called “Every Street United.” Sony Corp’s digital network Crackle will serve up Jerry Seinfeld’s “Comedians in Cars Getting Coffee” and AOL is presenting a documentary drama about five New Yorkers called “Connected.”

This is a big shift from the short Web episodes many tech companies have presented for the last two years at the week-long “NewFronts” event - modeled after the annual “upfronts” where broadcast and cable TV channels show their wares to Madison Avenue.

Yahoo Inc is also looking for longer original programming it can unveil at the showcase, three people familiar with those efforts said on condition on of anonymity because the deals have yet to be finalized.

Yahoo Chief Executive Marissa Mayer said on Yahoo’s earnings call last week that the company plans to make fewer, more focused investments in original content.

“We are going to see more original content overall and no doubt everyone is working to package their offerings like TV because they have their eyes on TV dollars,” said Kris Magel, chief investment officer at Initiative, the media buying division of Interpublic Group of Cos.

But TV-scaled ad spending is unlikely to flow to online video commercials that usually run before and during a program, advertisers and analysts said.

“Online video just doesn’t offer nearly the reach that broadcast does,” said David Bank, an analyst with RBC Capital Markets.

AOL has spent about half a billion dollars over the last three years on shorter content. On Wednesday, it also inked a deal with Miramax to stream the independent studio’s films on the AOL network for free, but with ads.

“Internet companies are bucketed into the snackable short form space,” Ran Harnevo, president of AOL Video, said. “But we are seeing the growth in the consumption of content on big screens.”

At the NewFronts, which starts on April 28, Microsoft will show longer original shows produced by the company’s Xbox Entertainment Studios that exploit the Internet’s strengths.

“The challenge TV has is it’s not very effective in being able to reach a very discrete target audience and measure it and have more interactive components,” said Scott Ferris, general manager of TV and video advertising for Microsoft. “We have very engaged, high-quality audiences.”

Online series can get messages in front of people who watch little TV, said Peter Naylor, senior vice president of sales for Hulu.com. The website, owned by Walt Disney Co, Comcast Corp and 21st Century Fox, will also pitch shows to advertisers next week.

“There is a segment of the video universe that is very, very hard to reach through traditional television,” Naylor said. “Online video is a way to reach those light TV viewers.”

But because online viewers have to search for content, advertisers may end up paying more to reach them than on TV.

The cost per thousand (CPM) for a commercial on a cable network, for example, might be between $10 to $30, depending on the show and the demographic, estimates Brian Wieser, a senior research analyst at Pivotal Research Group. For online video, a CPM for a comparable demographic could be in the range of $20 to $40.

“There is a lot of aspiration in the NewFronts initiatives,” said Wieser. “The reality is traditional TV budgets are intended for content vehicles that are TV-like. (Content) with short term, low budgets with unknown or even known talent is unlikely to capture anything resembling a meaningful TV budget.”

Another hurdle is that the money that presenters make from the NewFronts is not tracked by the Interactive Advertising Bureau which hosts the event.

Ari Bluman, chief digital investment officer of GroupM, the media buying arm of WPP, notes the TV industry’s annual showcase for advertisers exists because they can only buy so many commercial spots on TV, whereas this is not an issue online.

However, it may take some time before online shows become mainstream enough to draw big ad dollars.

Until then, the NewFronts “is more of a showcase for what’s new and exciting,” Bluman said.

(This story has been fixed rto corrects Internet Advertising Bureau to Interactive Advertising Bureau)

Editing by Ronald Grover and Richard Chang

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