Posts for 'J.P. Morgan'

  • Warning: Not All Cord-Cutting Research is Created Equal

    When it comes to understanding cord-cutting trends, not all consumer market research is created equal. In my view there are two basic types. The first is speculative research that focuses on "potential" cord-cutters. The second is research that focuses on actual cord-cutters. For industry participants trying to get an accurate handle on this complicated topic, the second type is much more valuable.

    The big problem with speculative research is that there's a massive difference between what people say they're considering doing (or even say they're planning to do) vs. what they will actually end up doing. In fact, it's a cliche this time of year to resolve to do certain things, though in reality we never will. How many of us said we'll get more exercise in 2011? Lose weight? Stop smoking? Save more money? And how many of us actually will? You get the idea.

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  • Where Does Advertising Fit In with Broadband-Enabled TVs?

    If you haven't noticed, the theme at VideoNuze this week has been broadband-enabled TVs, since this has been one of the main themes of this week's CES. On Monday, when the dust has settled, I'll recap some of the key deals. For today though, I want to inject a small dose of reality into the hype that's starting to build up around broadband-enabled TVs.

    First off, I'm thrilled to see an ecosystem of technology leaders, TV set manufacturers, content providers and aggregators taking shape around broadband-enabled TVs. It's looking increasingly inevitable that broadband access is going to be a staple feature of HDTVs in the years to come. Just as you wouldn't consider buying an HDTV without multiple HDMI ports today, at some point in the future you'll be unlikely to buy one without broadband capability. That's pretty cool.

    Still, what's missing from the flurry of this week's announcements is how the exciting new broadband path to the TV will actually be monetized by video content providers. I know that mundane questions like this aren't what people tend to focus on at glitzy CES, but they are critical nonetheless. With services like Netflix or Amazon VOD - which have been in the middle of several announcements - it's obvious enough how they'll benefit. The more pertinent question is how video that is ad-supported is going to work, especially since ad-supported video will always represent the lion's share of the average consumer's viewership time.

    The broadband video ad model itself is still nascent, and this week's J.P. Morgan report shows that there's no shortage of lingering skepticism still overhanging it. Nonetheless, I'd argue we're at least at a point now where most market participants have a pretty good handle on broadband video advertising's basics - serving technologies/vendors, formats, expected delivery quality, CPMs, user preferences, click-throughs, etc. In short, I believe the foundation is pretty well in place for a strong ramp up of spending (notwithstanding the larger economic issues) as the broadband video world exists today.

    But how much of that foundation will still be valid for broadband-enabled TVs vs. how much will need to be re-built (as is the case with mobile video)? Many of the answers are driven by the chips from Intel, Broadcom and others that are going into these TVs. Understanding their respective capabilities and how they'll support broadband video advertising's existing ecosystem is key.

    Here's why: in the broadband world to date, the computer's vast processing capabilities (along with the supporting cast of browser, media players, plug-ins, cookies and of course robust broadband access) has played an incredibly important, yet largely unsung role in raising the user experience bar to a point where broadband video has been massively adopted. Of course, this massive adoption has been THE key ingredient for the broadband video ad model to take off. And client-side capabilities only become more important in the highly syndicated broadband video world that I envision in the future. Ad servers need to know which site is playing the video so the right ad is dynamically served and everyone gets compensated properly. The new broadband TV chips need to support all of this and more.

    One needs look no further than cable's VOD experience to date to recognize how important the building blocks for an effective advertising model are. While billions of VOD streams are now consumed, very little of it is monetized due to still-inadequate ad capabilities. Years after VOD's launch, these monetization constraints are curtail content providers' interest in participating in VOD. In fact, I'd argue that broadband has actually been a beneficiary of VOD's deficiencies: faced with a choice of where to allocate resources, many content providers have shifted attention to broadband because its monetization mechanisms are so robust.

    Anyway, you get the point. Broadband-enabled TVs are very exciting. But to reach their potential, they must deliver a robust user experience and allow advertising to work effectively. In these penny-pinching, resource-constrained times, something that's cool is no longer enough to gain interest. People need to understand how they'll make money from it.

    What do you think? Post a comment now.

  • J.P. Morgan is Too Bearish on Online Video

    There's been a lot of buzz over the last couple of days about J.P. Morgan's just-released "Nothing But Net - 2009 Internet Investment Guide," including many references to Morgan's distinctly bearish commentary on online video. I'm always interested in what other analysts are saying about video, so I downloaded the document yesterday. Though it's 340 pages, only 2 pages (81-82) are devoted to online video specifically. (And incidentally, as best I can tell, that's 2 pages more than the "Nothing But Net - 2008" devoted to the video industry.)

    I have to say I found Morgan's write-up to be quite superficial, with a generally dismissive tone regarding online video's opportunity. Like many Wall Street analyst reports I've previously read, it seems more focused on near-term financial prospects than longer-term strategic opportunities. An investment professional without in-depth knowledge of online video trends who read the report would likely conclude that it's not worth spending much time on online video, at least in the near term. That would be a critical mistake, because, as I've said many times, online delivery is the single most disruptive influence on the video industry today.

    Morgan's analysis is strictly focused on the ad-supported model. No attention is paid to broadband's impact on the multi-billion dollar multichannel subscription TV or home video markets which companies like Netflix, Amazon, Apple and others are pursuing with disruptive fervor. As for advertising, while Morgan acknowledges that online video usage has taken off, it believes that "performance-based marketers and brand advertisers are looking at three variables in determining their investment: reach, content quality and performance measurability." In Morgan's view, today's "advertising formats do not appropriately address these three variables."

    It's important to note that a key Morgan theme is that performance-based advertising models like search are more desirable than CPM-based models like display, and most video ads today. Morgan believes (and I do agree) that performance and ROI-tracking will become even more important in the down economy where ad dollars are scarce and must deliver real sales results.

    Still, the reality is that over time, online video ad dollars are most likely to be shifted from TV, which is a CPM-based medium. And online video ad units offer far greater interactivity than TV ever has. But this still misses a larger point - video is a CPM-based medium because video is the pre-eminent media format to make an impression on a consumer. Nothing packs the same emotional impact as video, and that's why brands have always been drawn to TV advertising. In short, while the overall online ad market is shifting to performance, brands will always need a visual medium. With all the challenges traditional TV has (e.g. DVR-based ad skipping, audience fragmentation, etc.), online video formats that are engaging, non-skippable and interactive will gain in appeal.

    Yet Morgan suggests that brand interest will remain quite muted. Paraphrasing the report, it suggests: content providers can't guarantee viewership as they can in TV (though in reality many can and have been doing so for a while now), content providers have a hard time determining pricing (though the CPM ranges for many sites has already solidified), "many video sites are plagued with videos of varying quality and copyright violations" (though outside of YouTube and MySpace, all of comScore's top 10 video sites are premium video-only) and no "ad format seems to be widely accepted by users, publishers or advertisers" (though the IAB published its digital video ad format guidelines back in May '08, and users are now well-accustomed to the kinds of ads to expect in their online video experience).

    If brands' interest in online video advertising is so challenged, you wouldn't know it from actual experience. In 10 minutes of random sampling this morning here are ads I saw: Oreos (, HP (, Blackberry, Target (Hulu), Gillette, IBM (, Ritz, Sears ( and Dunkin' Donuts, Robitussin (Yahoo). I'm not suggesting that the online video medium doesn't have its challenges in attracting brands, but based on everything I continue to hear, the premium video sites in particular - like those cited above - are holding up pretty well even in this environment. Even much-maligned user-generated video may have some unexpected silver linings; just yesterday it was reported that Japanese anime producer Kadokwa Group Holdings is pulling in $110,000/mo from its YouTube channel stocked with user-created material.

    Far from being the uninteresting medium that the Morgan report depicts, online video has already become a bright spot for many established content providers whose traditional models are under pressure. It is also opening up new opportunities for new ad-supported entrants. And it is threatening to completely upend the paid part of market through improvements in "over-the-top" technologies and consumer services.

    To be sure, the medium is still in its adolescence. But that's all the more reason why savvy investors, entrepreneurs and other market participants who look past cursory industry reports, and instead choose to dig in and understand the massive disruption online video is causing will do quite well in the long term.

    What do you think? Post a comment now.

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