In news that should send a shiver down the spines of television executives everywhere, the gargantuan ad agency holding company Publicis Groupe has reached a deal with Google to purchase tens of millions of dollars in YouTube advertising over the next year.
The Financial Times’ Emily Steel reports the deal will be managed by Publicis Groupe’s MediaVest unit, which helps high-profile clients like Coca-Cola and Walmart plan and assess their media budgets.
The news comes just six months after MediaVest made a big video advertising deal with Twitter, one of Google’s rivals in the war to scoop up the advertising dollars that are currently being spent on television.
Here’s why folks with money in traditional television networks should worry:
According to data from Nielsen, Americans are still consuming more than 30 times as much traditional television as desktop and smartphone online video. But while YouTube consumption jumped 50% over the past year, from 4 billion of hours of video consumed each month to 6 billion hours, traditional TV viewership has dropped by either 0.1% or 0.2% each of the past three quarters.
And that’s the problem for television: its audience numbers have reached a plateau, but its competitors — Facebook, Twitter, and YouTube — are all growing … and they’re all coming for TV’s ad money.
Until recently, much of YouTube’s advertising inventory was of the so-called “long-tail” variety, meaning niche content that appealed to small fragments of the general YouTube user base. This past March, in fact, an executive with MediaVest’s sister company Starcom told All Things D that Google’s ad salespeople were trying to get customers to buy ad packages targeted at broad audiences instead of selling premium ads the way television always has — on specific shows and networks.
As a result, Starcom Media USA digital head Mark Pavia said at the time that Google had “tried a model that just wouldn’t work for advertisers.”
Now, it appears Google has found a way to appeal to one of the big spenders of premium ad dollars by allowing it to make the same kind of purchases it would on television, only instead of buying space on ESPN’s SportsCenter, MediaVest could buy space on an online sports network like SB Nation’s YouTube channel.
The large size of the deal is also a huge positive indicator for Google’s video advertising business, given that as recently as March, advertisers were deterred from making big online buys because video ad loads were only 10% to 20% of what they are on television. The deal can be seen as a vote of confidence in both the size of YouTube’s inventory and publishers like Machinima that are trying to bring TV quality to YouTube networks.
At least until now, television has been able to hold onto advertising dollars throughout the digital revolution, replenishing ad dollars it lost to display and online video advertising with money it has taken from dying print entities. In fact, television accounted for more than 62% of advertising dollars spent by major media buyers in 2012.
It’s not time to put television on life support just yet, but today’s news shows how that day might be coming much sooner than television executives would like it to.