Investor's Business Daily, March 2nd, 2007
Hearst is changing its Internet strategy to cash in on online video.
Within a few months, Hearst, one of the nation's oldest publishers, will revamp the Web sites of eight of its largest magazines to include video content and TV-like ads.
Hearst is joining a crowded field of publishers and Internet companies -- including Google, Yahoo and Google-owned YouTube -- that are looking to carve out a piece of the online video market.
With millions of people now watching video online, the timing seems right, says Chuck Cordray, general manager of Hearst Magazine's digital media unit.
"More people are using more video online all of the time," he said. "So consumers are leading it, and advertisers are quickly following."
Hearst plans to relaunch its Web sites for magazines Seventeen and Cosmo Girl, with video, in the next two weeks. Six other publications, such as Good Housekeeping and Redbook, will follow within three months.
The video content "will be largely contextual," Cordray said. "If you're looking at recipes that call for a certain technique and we have a video demonstrating that technique, then you can play the video."
Hearst plans to run 10- and 15-second "pre-roll," or TV-like, ads before each video.
Such ads are catching the eye of advertisers that want to find ways to reach the online audience.
Hearst wants to get in on the ground floor, says Michael Cai, an analyst for research firm Parks Associates.
"More content owners are taking a look at this and trying to figure out how to get a bigger piece of the pie," Cai said.
Video ad revenue in the U.S. will rise to $4 billion in 2010 from $1 billion last year, Parks says.
Most analysts have been cautious about predicting the growth of the online video ad market.
That market will grow much faster if more publishers such as Hearst climb aboard, says Hilmi Ozguc, chief executive of privately held Maven Networks. It helps companies bring video online, and Hearst is a client.
"Once you get a lot of people viewing these TV channels online, it creates (ad) inventory," Ozguc said.
Video is only part of Hearst's new Internet strategy. The privately held company now plans to manage all of its Web properties. The Web sites for Hearst's magazines have been managed by iVillage.com, a Web portal geared to women.
Hearst joined cyberspace seven years ago when it signed a deal with Women.com, another Web portal for women. IVillage acquired Women.com in 2001. NBC bought iVillage last year for $600 million.
Hearst is now in the process of removing its online properties from iVillage to better take advantage of the growth of online advertising, says Cordray. By 2011, sales of online ads in the U.S. are expected to reach $25.9 billion, from $13 billion in 2005, says Jupiter Research.
"The circumstances have changed," Cordray said. "It's clearly a viable advertising media on its own, and Hearst wants control over its brand in that environment."
With iVillage, Hearst had to split online ad revenue.
Hearst's new Internet strategy could be the start of a trend of media companies preferring to host their own videos and other content, rather than placing it on other sites like Yahoo and Google, says Cai.
"Hosting it on your own saves you money, and you get a bigger piece of the revenue stream," he said.
Copyright 2007 Investor's Business Daily, Inc.
