YouTube v. TV: Why ads spending will change the industry

Evolution of the television and broadcast industries continues, and while powerful forces remain committed to maintaining the status quo, it seems increasingly obvious technology firms are committed to side tracking existing business models, assuming they can’t reach a deal to disrupt them.

What this means is that viewers are increasingly defining the future of the TV industry — and technology firms are eager to help them do so. The most recent evidence for this claim comes, of course, from Google.

The changing role of the network

You only need to look to YouTube to determine Google’s huge ambitions for television. The company is shaping its online video service to become as big a brand in user-directed broadcasting as any conventional entity.

Most recently the company grabbed a page from Apple’s playbook, introducing its own system that now lets YouTube mobile users beam shows they’re watching to the Google TV and — to be announced at CES this month — smart televisions from a range of manufacturers, including Samsung and Sony.

It isn’t clear and Google hasn’t said if this new feature will be made available via Apple devices running the company’s YouTube app, given Apple’s AirPlay feature, this seems a little unlikely.

This is an interesting step, as it means anyone with an Android-powered device in their pocket will be able to beam any YouTube content they are watching to their own, or a friend’s, television.

With YouTube becoming a go-to distribution centre for television content that’s not made available in some territories, Google’s streaming step means users have become just a little more liberated from conventional broadcast schedules.

All about the Benjamins

This sounds nice in theory, but liberty isn’t the company’s main ambition, which is to take ownership of the ads network for international broadcasting. To follow the money….

The desire to follow the money is the main barrier between conventional incumbents in the broadcast space and the new Silicon Valley interlopers who hope to take a few cents off every dollar spent.

Broadcast and cable firms don’t want to let technologists take a slice from their business. Cable firms are particularly exposed as they seek to recoup on their huge historical investments in their cable networks.

Advertisers care less. They are keen on Google’s promised future of personalised, localised, targeted ads beamed directly to demographically-selected viewers judged most likely to be interested in what’s on show. That’s the Holy Grail for ads spending — to deliver ads to people most likely to react to those ads is something they’ve wanted for time.

That’s the big advantage of Google’s online ads: the company gathers a host of user preference data to help it put its sponsors messages before the right eyeballs. Broadcast and cable company’s can promise huge potential viewing figures, but aren’t able to offer the capacity to discriminate for the most appropriate targets from among that audience.

This places existing broadcast industry incumbents in a position in which they either try to develop their own online video portals (Hulu, iPlayer), or reach deals with tech industry firms designed to ensure they have at least some presence before the new digitally-switched-on viewing public.

Eyeball action

YouTube has already become a profitable advertising platform with over 800 million monthly users uploading over an hour of video per second and hosting new ads from some of the world’s biggest brands (General Motors, Toyota, Unilever, among others).

The company is also working with creative partners and Hollywood studios to make YouTube an ever more compelling place for people to pick up their dose of TV Tamazapan.

A huge viewing audience, an active assembly of creative contributors and the support of major advertisers puts existing industry incumbents under ever more pressure to sign-up to Silicon Valley’s demand that it gets the chance to revolutionise television.

Incumbents in the space will look to local flashpoints with some trepidation: for example, some big brand Danish advertisers are already shifting their ads spending from conventional TV ads toward YouTube.

A relatively recent Allot Communications report claims mobile streaming grew 93% in the first half of 2011 with usage of YouTube’s mobile channel growing by 152 percent.

An appy future?

That’s significant, but it is perhaps more significant that YouTube generated 22% of all mobile video traffic in the first half of 2011.

As smart televisions, smartphones, tablets and other devices all become peer players within any viewer’s broadcast consumption habit, advertisers will want a slice of the eyeball action.

This means that despite resistance to changing viewing habits from inside the broadcast sector, there’s a confluence of dynamics which will eventually force the introduction of new systems, such as Apple iTunes-powered televisions or Android-happy set top boxes.

It’s even possible in future, TV channels won’t be channels at all, that they will choose to offer their carefully curated content as apps, perhaps the only compromise they can safely make which protects their advertising income while also remaining relevant and useful to connected content consumers.

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