June 23 (Bloomberg) -- Yahoo! Inc. Chief Executive Officer Marissa Mayer landed on the French Riviera last week with a posse of space adventurers. Her goal: Convince advertisers that the Internet -- with programming such as a new Yahoo sitcom about an alternate universe -- can be as effective as television for pitching brands.
Mayer joined executives from AOL Inc., Google Inc. and Microsoft Corp. at the annual Cannes Lions advertising festival to court potential clients with beach parties, gift bags, and appearances by the likes of Mariah Carey, Kanye West and Sarah Jessica Parker. The digital companies came bearing scripts, pilots for shows, and a hard sell on the benefits of online ads.
Yahoo and its peers are seeking to follow the lead of Netflix Inc. in creating original programming like “House of Cards,” said Richard Raddon, CEO of ZEFR, a company that sells rights management software for online videos.
“Media companies are trying to get brands to be associated with their quality and saying ‘Look advertiser, this is what it could be,’” Raddon said.
A few years ago, those companies wouldn’t have bothered with the Cannes advertising festival. But last week, Microsoft and Google occupied prime space along the beachfront Boulevard de la Croisette, where they put up elaborate tents to wine, dine, and entertain advertisers.
“In the past it used to be the advertising agencies on the beach, but now tech companies have taken it over and the advertisers are in suites in the hotels,” said Miles Young, CEO of agency Ogilvy & Mather.
Sin City Saints
While Cannes remains a showcase for all kinds of ads, the digital newcomers expect to take an ever larger share of the market. This year, companies will spend some $203 billion on TV advertising and $122 billion online, up from $153 billion for TV and $55 billion online in 2009, according to ZenithOptimedia. The researcher predicts digital spending will exceed that on television by the end of this decade.
AOL CEO Tim Armstrong attended the Cannes festival to promote the company’s Huffington Post news website as well as the 16 new online TV series AOL expects to introduce this year. And Microsoft held a lavish beach party with DJ Calvin Harris, where the company highlighted original productions coming out of its Xbox Entertainment Studios.
Yahoo’s lineup includes “Other Space,” a 30-minute show produced by Paul Feig, the director of the film “Bridesmaids.” Yahoo has also commissioned “Sin City Saints,” a comedy about a pro basketball team in Las Vegas from Bryan Gordon, director of the TV series “Curb Your Enthusiasm.”
The sitcoms, Yahoo’s blogging site Tumblr, and exclusive interviews by newswoman Katie Couric give agencies ample reason to place ads on the site, Mayer told ad executives in a speech at the festival.
“When we acquired Tumblr a year ago, we saw what you probably saw: an unmatched platform for creators,” Mayer said in her speech. “We also saw something else: A great platform for brands.”
Google’s YouTube invited 80 creative heads of ad agencies to a seminar in Cannes to introduce what it calls its “brand partner program.” That initiative in March took companies to Space LA, a studio in Los Angeles, for tips on the kind of content that best attracts viewers online, according to Derek Scobie, a YouTube ad executive.
Scobie says companies are increasingly creating videos that blur the line between advertising and entertainment. Unilever has a channel called “All Things Hair” where it places its V05 and Tony & Guy products in tutorials by popular beauty bloggers. And Pepsi Max created an ad, to be posted before adventure videos, in which stuntman Damien Walter runs around a vertical “loop-the-loop.”
“Brands are really trying to grasp the content effort themselves, to create a unique story and publish that,” Scobie said.
While ad agencies are receptive to the efforts of the newcomers, some urge those companies to come up with alternatives to standard formats such as the 30-minute sitcom.
“They’re merely taking TV programming and putting it on their sites,” said Doug Scott, president of Ogilvy Entertainment, which creates sponsored documentaries and TV shows for advertisers. Instead, they should develop “something shorter or more interactive and engaging.”
That would help advertisers get people to actually watch ads. When viewers have the option to skip so-called pre-roll advertising -- spots that pop up before videos online -- they almost always do, said Gian LaVecchia, managing partner of digital at ad agency MEC.
“People don’t want to watch ads before a video, and if we’re living in a world of pre-roll, then why not figure out more elegant ways in shorter form,” LaVecchia said.
Yahoo shares declined 0.8 percent to the equivalent of $34.05 in Frankfurt trading at 9.48 a.m. Before today in New York the shares declined about 16 percent, giving the company a market value of $34.2 billion.
As the Internet companies get more sophisticated with their offerings, they will continue to take viewers from traditional television networks, said Scott Symonds, managing director of media at digital ad agency AKQA. And their appeal to young people will make them ever more attractive to brands seeking to project a fresher image.
The Internet giants “are basically trying to steal dollars from TV,” Symonds said. “Digital is exciting, it’s maturing and it wants to be more premium.”
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