Magna Global Pours $250 Million Into YouTube Ads as TV Audiences Drop

It's Google Preferred's largest upfront deal

Interpublic Group's Magna Global has struck a multi-year deal with YouTube to invest $250 million into digital video.

It's YouTube's largest upfront deal ever for its premium Google Preferred program that will be presented for the third consecutive year at its Brandcast event Thursday night in New York as part of the Digital Content NewFronts. As more consumers (particularly millennials) cut the cord, YouTube is pitching advertisers this week on its reach and data. It claims to reach more 18- to 49-year-olds than any TV network with just its mobile traffic.

Over the next three years, Magna Global will get "competitive rates" on Google Preferred's unskippable ad inventory as well as access to measurement tools and top creators. In the second and third year of the deal, the media-buying firm specifically plans to address an "innovative learning and measurement partnership" that will examine how to balance digital and traditional ad budgets. Magna Global buys media on behalf of big brands like Coke and Johnson & Johnson.

Unlike other splashy digital deals that typically take the money from other parts of a digital budget, Magna Global's $250 million investment in YouTube advertising will come straight from its TV budget. The $250 million investment is four to five times Magna Global's typical YouTube budget. As a result, the firm will spend less on traditional marketing overall this year as TV ratings dip.

According to Magna Global, 18- to 49-year-olds watch an average 26 hours of linear TV per week, down from 32 hours in 2009. The firm estimates that global ad spend overall grew 3.2 percent in 2015 (equivalent to $503 billion) with digital growing 17.2 percent—or $160 billion—yearly while traditional media spend dipped slightly by 2.2 percent to make up $393 billion in spend.

"Due to relatively flat demand and decreasing supply, Magna Global is estimating television inflation to be in the high single digits for this year's upfront," the company said in a statement.

"For the first time ever in the U.S., Magna Global is predicting digital spend will eclipse that of total television. This is being driven by the wide adoption of social, mobile and video consumption anywhere, anytime and on any device. Scaled players like YouTube have been driving the industry forward and are creating the cultural currency of today."