Media Cos. Confident Web Video Will Draw Viewers

Media companies and Web portals are rushing to make more video content available online, looking to ride a surging advertiser demand for Internet video spots that offer the promise of measurability and targeted reach.

In the latest sign of how seriously media companies are taking online video, Time Warner siblings AOL and Warner Bros. Home Entertainment Group are unveiling today plans for its latest push into online video: In2TV, a broadband video network that will have 1,400 episodes of vintage TV programs such as Growing Pains, Alice and Eight is Enough when it launches in January.

AOL and Warner Bros. executives said In2TV’s focus on old TV programming rather than hit shows is not unlike how cable channels sprung to life on the back of such fare. “I think it’s a huge mistake for people to be only focused on new TV productions,” said Kevin Conroy, evp of AOL Media Networks. “This is a very logical progression.”

AOL’s move is another example of the evolution of TV content into video, to be made available to viewers on a variety of digital platforms, from cable video-on-demand to iPods and Sony PSPs to broadband. AOL, MSN and Yahoo!, as well as media giants like Viacom, are putting content online, banking on the fact that consumers will turn to the Web to watch.

“We’re convinced they will come,” said Jeff Lanctot, vp of media and client services at aQuantive’s Avenue A/Razorfish. “We’re just not sure where they’ll go when they get there.”

AOL has added interactive options to In2TV to differentiate the experience from linear TV viewing and provide branding opportunities for advertisers. The broadband channel will have a “TV Karaoke” section for users to sing along with their favorite program theme songs, and advertiser-sponsored quizzes and contests. One feature lets viewers wager virtual money on the outcome of People’s Court cases. In all, In2TV will have nearly 100 interactive features and will create custom options for advertisers.

Until a larger audience develops, however, advertisers will continue to see Web video as an extension of cable buys—not as a separate medium that needs fresh creative designed for it, Lanctot said. “That’s where the industry is falling short,” he added. “We’re still stuck in that rut of just taking 15’s and 30’s and plopping them online.”

Agency executives also point to the fact that larger audiences can be sliced and diced, targeting specific audiences with video ads much more easily. Such critical mass will help the industry formulate standards for how many ads are shown and at what length—something that doesn’t exist in the nascent medium. “The only hurdle is a standardized ad model that advertisers think is effective and the consumers will accept,” said Cory Treffiletti, engagement architect at Aegis Group’s Carat Fusion.

According to ComScore, an estimated 94 million U.S. Internet users streamed video in June. Yet despite the growing adoption, interactive ad executives say the demand from advertisers for video inventory—currently heavily weighted to news, music and movie clips—outstrips the supply, or audience. “The viewing experience at your computer might be one of the holdbacks to getting a larger audience,” said Tracy Scheppach, video innovation director at Publicis Groupe’s Starcom USA.

Web portals bank on attracting bigger pools of users from the current wave of on-demand entertainment, highlighted by last week’s decision by CBS and NBC to offer on-demand TV programs through Comcast and DirecTV. [See story, p. 11.]

For such back-of-the-catalog fare like the shows In2TV is offering, Web delivery offers a potentially lucrative additional syndication window, said Eric Frankel, president of Warner Bros. domestic cable distribution, particularly since the Web does not have the distribution constraints of TV. “We still have dozens or hundreds of shows not [airing] anywhere,” he said.

Conroy said AOL would seek deals with other content owners to add to In2TV’s six channels, which range from “Dramarama” to “Toontopia” to “Heroes and Horrors.” To encourage consumer adoption, In2TV will be light on ads, using one spot before and after programs, and one during the natural commercial breaks. In all, In2TV shows will have about two minutes of commercials per half hour, compared to broadcast TV’s eight minutes per half hour.

MSN and Yahoo! both see big opportunities to lure audiences with Web-only content. MSN struck a deal with JibJab Media last month to stream videos of its parodies on MSN Video, and sell ads that run before them on MSN and on JibJab’s site. Unlike repurposed TV fare, JibJab includes interactivity to suit the medium, allowing users to insert their own photos that are used as part of the animation. “We think there’s a democratization of content that is afoot that’s going to be just fascinating,” said Todd Herman, director of advertising and business strategy for MSN Video.

A differentiated viewing experience is a key goal for former ABC programming chief Lloyd Braun, who is plotting Yahoo!’s broadband media strategy. Thus far, the results have been modest: Yahoo! offers a menu of news, sports clips and movie previews similar to most portals.

David Katz, Yahoo!’s vp of entertainment and sports programming, said Yahoo!’s early moves in video content are just the beginning. While the portal will continue to license TV programming, it will produce a different class of content, which, along with customized user experience, will differentiate the offering. “What you see on Yahoo is the first step in that direction, the 1.0 experience,” he said.