Ad rates for popular shows like The Simpsons and CSI are higher online than they are on prime-time TV. That's a stunning reversal from the rule of thumb that online ads cost less, often far less, than they would if placed on a TV, radio, magazine or newspaper outlet.
If a company wants to run ads alongside an episode of The Simpsons on Hulu or TV.com it will cost the advertiser about $60 per thousand viewers, according to Bloomberg. On prime-time TV that same ad will cost somewhere between $20 and $40 per thousand viewers.
Why the reversal? Targeting and engagement. Online viewers have to actively seek out the program they want to watch, so advertisers end up with a guaranteed "captive" audience for their commercial every time someone clicks play on Hulu or TV.com.
Also, fewer online ads means viewers are twice as likely to remember a commercial they've seen on Hulu than on television, Bloomberg reported.
The challenge for the networks, whose total prime-time audience shrank 3.6 percent last season, is that Web viewing and ad sales, while increasing, are still too small to replace traditional revenue sources.
Therein lies the danger. Networks risk siphoning off prime-time audiences with lots of inventory and higher sales volumes to sites with less inventory and lower ad sales volume.
A “Simpsons” episode on Hulu has just 37 seconds of ads, for example. A broadcast episode has nine minutes and produces three times the revenue per viewer at half the price.
So cannibalization remains an obvious danger.
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