YouTube, the upstart repository of cover songs, makeup tips and cat videos, is starting to give television a run for its money.
Buoyed by breakout successes such as Psy's "Gangnam Style," a kitschy Korean music video that has racked up nearly 1.4 billion views globally, YouTube has turned streaming into mainstreaming, and major marketers are clamoring to leverage the medium to promote their brands. That means everything from rolling big-budget TV commercials before the latest "Harlem Shake" video to creating their own content in a calculated bid to go viral.
Some 200 marketers attended a YouTube event at the Museum of Contemporary Art in Chicago this week showcasing success stories, self-made video stars and strategies for reaching 800 million monthly viewers, one video at a time.
"If you're after an 18-to-34 (demographic), this is how they're spending their time, and there are great opportunities to work together to build brands against that audience," said Jim Lecinski, Chicago-based manager of national advertising sales for Google Inc., who hosted the YouTube event. "This is where it's at, so advertisers need to be there."
Founded in 2005 as an egalitarian platform to share videos, YouTube was acquired the following year by Google for $1.65 billion in stock. More than 4 billion hours of video are watched each month and, much like traditional television, peak viewing is during prime time, according to YouTube. Popular content includes an endless parade of unusual cinema verite captured by citizen videographers on ubiquitous smartphones. But comedians, musicians and aspiring filmmakers have also found a launching pad to broader success, which in turn has helped elevate YouTube into the same conversation as TV for many marketers.
Digital is the fastest-growing advertising medium, trailing only television in annual spending. This year, digital revenue is projected to reach $42.5 billion in the U.S., a 14 percent increase over 2012, according to eMarketer. That represents one-fourth of total ad spending, which is growing at about a 3 percent annual rate. Paid search and banner ads still dominate, accounting for about 71 percent of digital spending in 2012. Video ads generated about 8 percent of digital revenue but are expected to grow to nearly 15 percent by 2016, according to eMarketer.
A recent Nielsen study shows that while TV viewing is flat, streaming continues to grow, particularly among 18- to 34-year-olds. Digital video ads produced higher recall in viewers than TV ads, and also improved the impact of later TV viewing of the same ads, according to the study. Pre-roll ads, commercials that appear before selected videos play, average 79 percent completion rates.
YouTube offers marketers two ways to promote. The first is to place commercials in front of videos through a program called TrueView. Viewers can skip the ads after five seconds, and marketers pay only if the full ad is aired. Completion rates range from 15 to 45 percent, according to a YouTube spokeswoman.
The other way brands can leverage YouTube is by developing their own content. That ranges from sponsorships, such as a concert series by American Express called "Unstaged," to brand channels with how-to videos, quirky user-generated content and excursions into the tricky space of short-form online entertainment. While more difficult to quantify returns on investment, the possibility of going viral makes it a gamble worth taking for a growing number of marketers.
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