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Here’s how the pandemic is accelerating sports ad dollars toward digital media

David Steinberg, Zeta Global Co-Founder & CEO joins Yahoo Finance’s On The Move panel to assess the state of sports marketing.

Video Transcript

ADAM SHAPIRO: Welcome back to Yahoo Finance On the Move. Checking markets real quick, these markets have been volatile all week long. Right now the Dow is up about 170 points, S&P is up about 7 points, NASDAQ remains in negative territory, off about 40 points. Let's talk about football and, in particular, advertising, especially now that live sports are so important to so many people who are working at home.

David Steinberg is the Zeta Global co-founder and CEO. He's joining us live from Bethesda, Maryland. And one of the things, and we talk about the ad market, you know, a Super Bowl ad, for instance, $5.5 million. There's a difference between what you pay for 30 seconds of TV advertising and what you pay in the digital world, where you're paying, what, it's the cost per thousand. And it's a lot more affordable to go digital.

So are advertisers deciding, let's ditch TV and go digital, it's not a total ditch of TV, is it?

DAVID STEINBERG: Well, first, Adam, you're totally right. You know, you've got multiple ecosystems that are sort of coming together and spreading apart between digital. Because not only do you have digital, now you can watch the games digital, right? So for example, we think that growth of people watching through CTV, which is sort of a fancy term for watching on an app or watching on a digital platform, versus linear TV is going to grow by 178% this year.

So often, you're not just looking at the cost difference in a CPM or cost per thousand, the "M" was always confusing, gets into, sort of, Roman numerals. But-- and then you get into, kind of, what they charge for audience on television. Now you can actually build digital audiences at half the price addressing the video of somebody watching the game live. So it's getting even more complicated as you do it.

DAN HOWLEY: David, what kind of demand are we going to see this year? I mean, you know, are-- we don't even know what's going to happen as far as the football season goes, whether or not we'll see large outbreaks of COVID on teams. There's a lot of guys in a lot of locker rooms.

So I guess, what kind of demand are we going to see? And how far forward can these companies purchase ads against games? And then, will they have special, I guess, you know, parts of their contract where they can say, look, if the game's not playing, we're getting our money back?

DAVID STEINBERG: So great question, right? I mean, I think that first and foremost, one of the biggest signs of tension over the last six months have been all of the pre-purchases on TV from large scale advertisers and the TV networks who would not let them out of their contract. So I think that everybody's sort of coming into this with a different mindset.

Your question is right on. It's I'm willing to make the buys to get to the audience, but I want them out. If I'm not able to get that audience because something happens, you then have all of the local advertisers who are in-stadium, who are not really going to be getting a lot of product this year. Interestingly enough, not only is that a material part of the revenue to the NFL, it's a disproportionately high percentage of the revenue that goes to the individual teams.

Because they're taking game-- they're taking SkyBox sales, they're taking merchandise to their own facilities, and they're taking concessions, all of which is sort of being jammed into TV now on local. So, you know, when you think about, sort of, digital, back to the original question, you know, we saw a 60% increase in digital traffic through the Zeta data cloud focused on NFL in August of this year up from August of last year.

That's a very, very big move. And that really bodes well for viewership. The challenge that a lot of people are running into is when you look at the linear TV ratings, it's going to appear as if it's down because so many people are now watching through Amazon or watching through Roku or watching on their Samsung digital TV on CBS or ultimately other apps that are running NFL. That's not going to equate into the ratings. So--

ADAM SHAPIRO: But David-- if I can interrupt, and it's along what you're saying. I'm going to use Fox as an example. If I'm Fox and I'm charging 5 plus million for a 30 second ad, but then that same, whether it's streaming on a Fox app or someone else's app, just to get the scale to equal 5 million, I mean, the cost per thousand is what, anywhere from a buck to $5 CPM?

DAVID STEINBERG: But it goes--

ADAM SHAPIRO: Or in some cases, $24. But it's nowhere near--

DAVID STEINBERG: It goes higher, it goes lower, but yeah. You're in the ballpark.

ADAM SHAPIRO: So how does the NFL get apps to sign up to stream? Because is it worth it to them? You need millions of people to stream to make any real money on this.

DAVID STEINBERG: Well, what they did on the Super Bowl, and I only know this because I watched it on Yahoo Sports last year from the first class lounge in the Istanbul airport, like, there was no other way to watch the Super Bowl internationally. So I'm sitting there, and every American in the lounge was watching over my shoulder. And then this is back when things were sort of normal, and you didn't mind being around people.

And, you know, the TV ads that ran through Yahoo Sports in the video role were the same ones that were running on the TV. So I think what happened there was specific to the Super Bowl. Because that's the only place they're getting 5.5 million. It'll be CBS this year-- Fox last year, so you've got, sort of, CBS getting it this year.

You know, there are so few events where companies can announce their presence. You know, it's for-- and, you know, not to really generalize, but to the, sort of, NFL-typical audience, nothing beats the Super Bowl. And then everything else is the Super Bowl of that, right? So the Academy Awards are the Super Bowl of entertainment, and, you know, the Masters is the Super Bowl of golf, and you get into that.

So they get that money not necessarily because the eyeball trade is worth it. They get the money because of the perceived credibility of being a Super Bowl advertiser. There was a great event a few years ago where, sort of, Anheuser-Busch decided they didn't like the rates that, at that time, Fox was charging, to your exact point. They were like, this makes no sense.

And they went to every local affiliate who had the Super Bowl, and they roadblocked every moment of local affiliate time for Anheuser-Busch and half the price for the same people in the same eyeballs.

RICK NEWMAN: Hey, David, let me--

DAVID STEINBERG: We see that happening in digital now, specific around the video component of watching. Because not only can you run video inside the ad, you can run advertising below it, on the sides of it, above it. And I think that's where you're going to see a lot of the local advertising from the stadium stuff sneaking into that. And they'll be buying at a CPM rate of--

ADAM SHAPIRO: David-- David, hold on a second because Rick wanted to ask you something about that.

RICK NEWMAN: Oh, thank you so much, Adam. Can you just say, what does the NFL want? I mean, the networks obviously want to keep this cash cow going as long as they can. Is the NFL agnostic about where its games show up? Or does it see profit maximization in one way or another?

DAVID STEINBERG: So I think, you know, I've got to be careful, I-- you know, we work with the NFL on a couple of teams. But what I will tell you is that what the NFL wants and what the NFL are effectively getting are not necessarily the same thing here, Rick. What you're seeing is-- really, what happened a number of years ago was Major League Baseball launched what has become, sort of, the best sports interactive program in the world.

And I mean, the reason I loved it, I'm a huge Yankees fan. I'm generally out of town, like a lot of us in normal times. And I could watch an entire Yankees game in 22 minutes. It just showed every pitch and every action and sort of took everything else out. But it showed that younger people wanted to consume sports digitally.

The NFL would not allow any digital broadcast to their content because they saw the linear TV contracts as the cash cap, right? And that's where the money is. The challenges, ratings started to shrink because people want to watch TV or consume content the way they want to watch it.

And younger people, who are moving to eSports and interested in certain parts of the country and NASCAR, and then in other parts of the country, into, sort of, MLB interactive, we're sort of squeezing the NFL, which had always been, sort of, the dominant player from a content perspective. So what we're seeing is they're begrudgingly doing the digital stuff. But most of the digital stuff they're doing is on the apps of the company they're doing the linear deals with.

Right, so you can watch the football game, but it might be on CBS' app through Hulu or through Roku or through your Samsung TV. They're bundling it together at this point, sort of, Amazon, who's got, sort of, unlimited budget, sort of, make a-- made a run for one of the games and got it. And it's-- I think, it's in partnership with you guys. And it's been a big win for them.

ADAM SHAPIRO: All right. David Stenberg-- Steinberg, Zeta Global co-founder and CEO. We appreciate the insight and always have to remind everybody the Roman numerals. It caused us trouble in elementary school, still causes us trouble, CPM.