UPDATED 16:25 EDT / MARCH 31 2009

Reckitt-Benckiser is Supporting the Indie Video Producers. Sort Of.

image AdAge has an interesting piece today for online video producers, talking about the shift of advertising dollars from analog to digital video, primarily in the context of one ad firm’s pitch on their shift. The ad firm is Reckitt-Benckiser, and they say that 20% of their $475 million measured media budget has now shifted to digital video.

Their partnerships extend with “over a dozen video ad networks,” including Glam, Tidal TV, YuMe and BrightRoll. It all sounds very hopeful for independent producers, as well it should. A company like Reckitt-Benckiser shifting that much money into a medium still largely controlled by independent producers is a good imagething, and legitimizes what we do.

Here’s the problem: even though the digital video world is traditionally a better  place to spend money than heritage media video outlets, Reckitt-Benckiser continues to “[push] hard for CPMs that were well into the single digits to get more bang for the marketer’s newly digital bucks.”

Reckitt-Benckiser is Handing Out Very Small Slices of the Pie to Indies
This is exactly the sort of ridiculous pushes that will end up killing independent digital video production for everyone.  The economic landscape for independent producers isn’t the panacea it might have been for the lucky few to get direct sponsorship as recently as a year or so ago.

There are what is now quickly approaching almost half a dozen levels of entities that are funneling the money towards the indie producers now.  It starts at the advertiser, who’s giving it to traditional media ad firms like Reckitt-Benckiser. They, in turn, make deals with larger ad networks, like the aforementioned companies like Glam and Brightroll. 

image These ad networks typically don’t represent distribution companies with fewer than 3,000,000 unique video views.  To accrue quality programming with viewership in that neighborhood means the companies they partner with are generally collections of smaller distribution companies. Those companies will be comprised of studios that may manage a few shows.

Once you finally get down to the actual talent involved with the production of the show, you’re now four or five generations of away from the original advertisers, and each level is taking a piece of this pie that at best is worth only $9 CPM.

To put that in perspective, for most moderately popular shows, the target CPM you’re looking for to break even at low budget is around $40 CPM.

Their Aim is Admirable, But Ultimately Destructive
Holding producers over a barrel in tough economic times is awfully gracious to their clients, but it could end up destroying the nascent online video industry.

These rates aren’t sustainable, and it’s incumbent upon these larger ad networks to negotiate more strongly for higher CPMs.  By the standards the ad agency is used to, these campaigns are much more measurable, which is admittedly the reason why this method was chosen by the agency to shift towards.

"Everything is ROI-focused and needs to be accountable," Mr. Fonzetti told AdAge. "That’s why this program has taken us so long to develop. We want to make sure everybody is comfortable behind this."

Certainly their advertisers are comfortable.  Let’s hope the ad networks are as concerned with making the producers as comfortable with the arrangement, as well.

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