Is Online Video Advertising More Expensive Than TV?

Categories: Internet TV,TV Business

Written By

April 12th, 2008

Desperate Housewives

This isn't intended to be the long ramble it winds up being, but some of the numbers interested me so I went a little crazy with it. If you're interested in TV advertising rates and such for broadcast networks, it may be worth the ride for you.

Is online video advertising more expensive than TV? Apparently the answer is yes, and by a wide margin raging from 40% to 100% on a CPM (cost per 1000 viewers) basis if you believe this AP story.

I learned at least one thing from that article. Online is still as small potatoes for now as we (Bill and I) already figured it was. The story cites comScore data that in February, led the broadcast nets with 8.5 million unique visitors across all its lineup of shows followed by NBC at 7.9 million. The author of the AP story, Ryan Nakashima listed those numbers and then did exactly what we would have done. He pointed out that by contrast a single airing of CSI recently took in more than 20 million viewers.

The story also talks about how The Big Bang Theory premiere was made available online before it aired on television, but that only drew about 90,000 views

While the article reports that generally the average for a primetime show is $25/1000 viewers, and that online ads go anywhere from $35-$50/1000 viewers, some TV shows make much more than that. I gathered from the story that one of my favorites, LOST along with Desperate Housewives were shows that pulled in higher than a $25 CPM because on broadcast because of this:

"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.

I have watched several shows via, and as with most other online video, nowhere near the amount of commercials are shown as are shown on broadcast television. Mostly it seems like online you get 5-6 thirty second spots and that's it. But I was curious about what the CPM for TV shows winds up being. We have no way to know exactly, but if I take the #s for Desperate Housewives used in last fall's Advertising Age survey (by the way, that's really the only value I've found in Ad Age, and I didn't need to buy the $99 subscription to get access to that - neither do you) I find the results interesting.

Either the Ad Age survey is way, way off in listing DH at $270,000 per 30 second spot --- I doubt this -- or the story in AP is wrong. Or, more probably I am missing something.

When I do the round number math DH generally had around 18.5-20 million viewers in original airings through early January, I come up with a CPM of $13.50 ($270,000/20,000 units of 1000). It's possible the networks are thinking about things in the aggregate and look at TOTAL revenue for all ads - and in that case it's certainly a much, much bigger number. But the bigger aggregate method makes no sense to me because if I'm an advertiser I'm only paying for my 30 second spot. If there's some requirement that I must run four spots a show, then it gets to over $50, but even at two spots per show it's still around $25.

Thinking that neither ad age or my new favorite AP reporter, Mr. Nakashima could likely be that wrong, I concluded I must be missing something. Then I had my a-ha! The ABC people aren't Les Moonves and CBS and decrying ageism. The ABC people are not trying to push alllll their viewers on the advertisers, just the 18-49. But you know what? Even then it just basically doubles the number to a $25ish CPM. So I'm kind of confused by the data in the AP sory. Certainly, DH is among ABC's most watched shows and has one of the highest costs for a $30 second spot. It trails only Grey's Anatomy, though by a fairly wide margin ($419,000 vs. $270,000).

If nothing else, this suggestw a huge, huge premium for valuing a relatively small group. Grey's Anatomy gets more 18-34 year olds than Desperate Housewives, and perhaps more importantly, more women 18-34. In round numbers although they have roughly the same 18-49 viewers, Grey's has about 1.5 million more 18-34 year olds than DH. Even if they're all women, that suggests that a huge, huge, huge value is placed on them because Grey's, according to the Ad Age survey costs 55% more for a 30 second spot than DH. A 55% premium based on only 1-1.5 million females 18-34. That seems insane to me.

In fairness, Bill Gorman warned me last summer before we'd even launched that I'd never be able to figure this stuff out because it's completely insane. It may be hubris, but, I think I'm crazy enough to at least begin to understand the insanity. With that in mind, I must apologize to the fine people at the CW network. Why? Because I shook my head in disbelief that they gave up on their most highly rated show (Friday Night Smackdown!) because men were watching it, and it didn't serve to cross promote the shows aimed at young women.

But if Grey's is getting its 55% premium based on way less than a 2 million women 18-34 vs. Desperate Housewives, I totally, totally understand the CW's obsession with Gossip Girl.

That said, I don't think the average primetime cost per 1000 viewers is anywhere near $25 - not applied against total viewers. By that metric, Grey's Anatomy, the most expensive ad in the entire Ad Age fall survey doesn't even get to $25.

While we're no longer receiving age demographic information from Nielsen, we did have it back when Grey's Anatomy and Desperate Housewives were still running new episodes. You can click the hyperlinks to check out all the data. And you can believe the very next thing I'm going to do is try to put together one of those tables for Gossip Girl.

In conclusion, I'm really not so sure that online advertising actually gets a higher CPM than primetime broadcast, or for that matter, more than a $25 CPM - not if ABC is struggling to make as much on Desperate Housewives online as it is on television.

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