By Peter Whoriskey
Washington Post Staff Writer
Thursday, April 17, 2008
CBS this year presented every game of the NCAA March Madness basketball tournament on the Web for free, marking the first time a major U.S. sporting event has been so readily available online. Now the numbers are in, and they indicate that even for a company reared in traditional media, the Internet may be more profitable.
Although some have doubted the possibilities of Web advertising, for CBS, online viewers were slightly more valuable than television viewers, according to executives and statistics released this week. The network made $4.83 in advertising for each of its 4.8 million online viewers and $4.12 for each of its 132 million television viewers, according to data from CBS and TNS, a research firm.
CBSSports.com executives declined to disclose advertising rates but said the prices that advertisers paid for reaching 1,000 online viewers were as high or higher than the prices for reaching the same number of television viewers.
As more media are consumed online, networks, magazines and newspapers have cast a fearful eye on how much money can be made with online distribution. Without ample Internet advertising, some have warned, the Web could become a cheesy haven of movie trailers, promotional blather and novelty videos such as cats on skateboards.
The NCAA numbers undercut such concerns.
"Our clients were willing to pay us [rates] for online that were equal to or higher than the TV," said Rich Calacci, senior vice president of advertising sales for CBSSports.com. "It's less about where the consumption takes place than what's being consumed. This was live exclusive coverage of the NCAA tournament."
ABC began streaming television episodes for free over the Internet in 2006 -- becoming the first broadcast network to do so -- and now sees a similar trend in online ad pricing. About 20 series, including hits "Lost," "Grey's Anatomy," "Desperate Housewives," "Ugly Betty" and "Dancing with the Stars" can be seen online at ABC.com the day after airing on television.
Ads that run with those online episodes command a higher price per person, ABC officials said, but each show runs fewer ads per episode, so overall, a television viewer still remains more valuable.
For March Madness, CBS ran equal amounts of ads on TV and online.
"We still have a long way to go with respect to getting parity in economic value per viewer between online and TV," said Albert Cheng, who oversees digital media for the Disney-ABC Television Group.
By some measures, Americans with Internet connections spend as much or more time online as they do watching television. Yet some major advertisers such as Procter & Gamble, for example, spend only a fraction of their vast advertising budgets in online pitches.
"The large advertisers are still seeing where Internet advertising is going" before committing more of their money to the Web, said David Hallerman, a senior analyst at eMarketer who specializes in online advertising.
James L. McQuivey, a principal analyst at Forrester Research, said that attitude is changing.
"Any old-media people who think they can't make money on the Internet are using antiquated reasoning," he said.
While online broadcasts are inferior in quality to the typical home television set -- the computer screen is smaller and the picture often grainier -- the ads cannot be skipped and companies know exactly how many times their ad gets shown, and that's an advantage for the Web, McQuivey said. That's why the price for an online ad is as much as 50 percent more expensive than a television ad per viewer, he said.
Over time, the networks have learned what works online -- and what doesn't.
From 2003 to 2005, CBS presented March Madness online on a subscription basis, with prices ranging from $9.95 to $19.95 for the whole tournament.
In 2006, CBS began showing most of the games free online, though it required viewers to register. It garnered 1.3 million registered users and $4 million in advertising.
This year, CBS dropped the registration requirement and made the game available from online rival ESPN.com and other Web sites. More than 4.7 million people saw all or part of the tournament online, and ads generated about $23 million, according to CBSSports.com.