Video Ads and the Future of Online Media

Includes: AABA, NWS, NYT
by: Trefis

Online content portals like Yahoo (YHOO), the New York Times (NYSE:NYT) and News Corp’s (NASDAQ:NWS) Wall Street Journal are creating new revenue opportunities by increasing video content and video ads. We estimate that the online display ad business accounts for about 15% of the $21 Trefis price estimate for Yahoo’s stock and about 30% of the $10 Trefis price estimate for the stock of New York Times.

We believe that these portals will increasingly bring relevant and quality video content online in order to drive growth in number of visitors as well as display ad revenues.

As the economy improves, overall ad expenditure is expected to grow and a significant portion will be spent online. Below we discuss the advantage of online video monetization and how these portals are increasingly incorporating video content.

Online video ads are more effective than TV ads

According to a study conducted by Nielsen, a market research firm, ads displayed during the content streamed online deliver better results than corresponding TV ads. Nielsen found in its study that overall brand recall and message recall levels are much higher as a result of online video ads compared to TV ads. This phenomenon can be attributed to the fact that online viewers tend to be more attentive and engaged to the content they stream.

Content portals have opportunity to leverage TV viewing customer segment

During its most recent earnings call, Yahoo discussed that TV viewers are willing to watch 6 to 7 minutes of video ads per month online versus an average of 4 minutes of video ads for a typical site visitor. This implies that there is an opportunity for the content portals to lure these customers with relevant online video content. As video ads tend to have significantly higher pricing levels compared to other online display ad methods, the revenue generation opportunity is significant.

Online portals like Yahoo, New York Times and Wall Street Journal are increasing their video content

1) Yahoo

Yahoo is improving the amount and quality of its video content across its different media verticals including sports, news, finance and entertainment. Yahoo! News’ “Who Knew?” and Yahoo! Entertainment’s “Prime Time in no Time” video programs have been great success. The company can drive RPM rates up for its display advertising by creating such online video content.

2) Wall Street Journal

Wall Street Journal’s ever increasing video center can drive higher growth in the portal’s ad based revenues which amounted to roughly $1.2 billion in 2009. The website displays relevant videos with each news item as well as on the home page.

Wall Street Journal videos have dual user engagement points. For example, videos in WSJ’s video center have ads that are displayed at the beginning of videos as well as featured as static ads near the video on the same page. This increases the effectiveness of the ad message.

3) New York Times

TimesCast is a video program that features on New York Times website and presents a look inside the New York Times newsroom featuring discussions of stories being covered that day. Besides TimesCast, the website features a number of videos related several topics like politics, business and technology.

Like the WSJ, the New York Times has multiple ads formats featured on its videos. For example, TimesCast features FedEx (NYSE:FDX) ads around the frame of the video as well as FedEx ad clip at the beginning of the video. The increasing popularity of videos and video programs will drive ad revenue per page up for the company.

For additional analysis and forecasts, here are our complete models for the stocks of Yahoo, New York Times and News Corp.

Disclosure: No positions

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