3 Things That Need to Happen Before Big Money Gets Spent on YouTube, Hulu, Yahoo & AOL

3 Things That Need to Happen Before Big Money Gets Spent on YouTube, Hulu, Yahoo & AOL

Hint: it has nothing to do with celebrities.

Television companies have descended upon New York every May for decades to pitch advertisers about their newest shows at the UpFronts. But this week, for just the sixth time, a series of companies straddling the border of tech and entertainment are trying to convince those same advertisers that they are the future during the NewFronts.

Google, Yahoo, AOL and Hulu are jockeying for position in a new era of entertainment, one where people are as willing to watch video on a five-inch-screen as their television.

While all those companies have begun to amass huge audiences for their videos, serious advertising dollars have only begun to trickle in. Television racks up tens of billions of dollars each year at the UpFronts. These companies will be lucky to walk away with a few billion.

Here's what needs to happen for that to change:

1. Psychological Warfare
Most adults don't believe online video is legitimate because they haven't heard of any of the shows or the stars. Freddie Wong? iJustine? “Burning Love”? Netflix started to change that with its latest original shows, “House of Cards” and “Hemlock Grove.” Advertisements were plastered across billboards and buses, which is how a lot of people still learn about movies and TV shows. If YouTube stars, Yahoo and AOL want more attention for their shows, they will have to advertise in some more traditional spaces. It can still be disruptive, as Vuguru CEO Larry Tanz pointed out in a recent conversation, arguing traditional advertising remains "the most accessible."

If they protest tradition, then they need to work with advertisers on being more innovative.

"Advertisers need to think about ways they are engaging with their audience," Keyvan Peymani, head of digital at ICM Partners, told TheWrap. "Digital has always been that place where people talk about how we should engage the audience more. The reality is that most advertisers haven't been doing a lot of interesting things."

2. Scarcity
Television convinces advertisers to shell out during Upfronts because they can't buy airtime later in the year. There is a finite amount of time to buy, so advertisers line up to get it when they can. That's not a problem on the web. If you don't choose to advertise on YouTube next week, you can buy on a channel later because there's a larger supply of ad space. There's a built-in flexibility that inhibits the flood of ad dollars. The online video companies need to find a way to package their shows as a “Spring slate” and make particular advertising real estate desirable through scarcity.

"Advertisers clearly want it. They aren't stupid; they know viewership is declining rapidly in traditional TV and they are going to shift their dollars," Matt Diamond, CEO of Alloy Digital, told TheWrap. "But they want to be smart about it."

"Anybody can take a video, shoot it and put it up on various platforms."

Diamond will only sell ads for a select few shows, which is why he would make the following guarantee:

"Every company is different, but in our case we will sell all of our propeties. We're not providing 15 shows but specific opportunities that will sell."

3. Measurement
Here's the big one. Much as people malign the Nielsen ratings system, it provides advertisers with a standard they understand. If a show gets a certain rating, they can chart out what it means for them. No such measurement exists online. YouTube provides several measurements on its own. Anyone can see the numbers of views and subscribers, and what it really cares about is the amount of time people spend watching. Yahoo, AOL and every other portal provide a different number, making it even harder for viewers and advertisers to understand which shows are doing well and which are not. Until the industry gets a handle on that, nobody is paying out.

Here's what Corey Moss, VP of Digital Production at Principato-Young had to say: "I'll watch one video on Yahoo climb to 300,000 views. I'll watch one on YouTube get 3,000 views. The one on YouTube has 2,000 comments, 90 percent of them are about how great it is. 90 percent of the ones on Yaho are about how terrible it is. It's all apples to oranges."

Here are three other things to look for this week:

YouTube Channels Will Look More and More Like TV Channels
YouTube resdesigned its website around channels over the past couple of years, reorganizing the look and feel so that frequent visitors would come back for specific brands and channels rather than a one-off video. While companies like YouTube and Netflix bemoan television's adherence to strict viewing schedules, YouTube and its partners have also begun to recognize the appeal. Many of the biggest production and distribution companies on YouTube, like Maker Studios and The Collective, have realized they need to program their channels like TV with regular air times and more frequent programming. Case in point: YouTube sensation EpicMealTime just announced it would air new programming every day and greenlit a second season of its show "Epic Chef."

“The trend is moving towards more programmatic distribution content. The Annoying Orange is one show on its channel on YouTube. What we want to do is create two more shows that are not The Annoying Orange but appear on that channel […] kind of like a cable channel," Dan Weinstein, head of The Collective Digital Studio, which distributes EpicMealTime, told TheWrap. "There's a Monday show, a Wednesday show and The Annoying Orange on Friday. We're looking to do that across the board."

The newest power in online entertainment? AOL.
Yep, AOL. One of the initial Internet titans. The same company that used to dominate mail and now stares longingly at Google. But guess what? AOL is now the second most popular destination online for video after Google's YouTube (if you exclude Hulu). While much of that is due to the Huffington Post, Engadget and other deals, AOL launched its hub for video, AOL On, at the NewFronts last year. For some time, AOL and Yahoo depended on their popular home pages to direct audiences to their video content. Now both of those companies have realized they need to set up a desirable location for video alone.

"They want to turn it into a video destination," Tanz said. "They are now number two because it's not just video consumed through the home page."

Star Wattage
Rashida Jones joined Twitter at least year's event, one of many signs that the online companies wanted to bring in mainstream Hollywood talent to attract even more attention. This year you can expect a lot more, starting at Yahoo tonight. Yahoo's presentation will feature celebrties like Ed Helms and Zach Levi, a performance by The Lumineers (these guys) and even CEO Marissa Mayer. Hulu has enough talent coming to their event on Tuesday that they have employees whose job it is to keep them company, and you know that YouTube will make sure talent shows up for their event. Their LA version of Brandcast (of course YouTube has its own name for its event) featured two musical performances, a guest host and several star-studded videos.

"Last year Vuguru had Michael Eisner and that was the star," Moss said. "This year they have actual talent. Everyone loved last year that John Legend played at Vevo. Now everyone has a band."