A huge ad company just shifted $200 million of its TV money to YouTube - and the reason why ought to terrify TV execs
Known as an "upfront" deal, in total, Magna Global has committed to spending $250 million on YouTube ads over the next five quarters as part of a three-year partnership, the media buying company confirmed with Business Insider.
The first year of the agreement represents the "largest Google Preferred deal ever signed," Magna Global said in a statement. Google Preferred launched in 2014 and allows advertisers to reserve advertising spots from among the top 5% of YouTube's most popular channels.
Magna Global is responsible for around $37 billion in marketing investment, which it manages on behalf of clients including Johnson & Johnson, Coca-Cola, Sony, and CVS.
The deal represents a "meaningful shift from linear television to digital video," Magna Global North America president David Cohen told The Wall Street Journal. In 2014, Magna Global committed $100 million of clients' ad spend to Google's properties, so this is a big step up in the two companies' partnership.
Why? "We believe marketers deserve better"
In an emailed statement, Magna Global explains out the main reasons for the deal: Linear TV viewing (watching TV live, as it is scheduled) is on the decline - not just amongst young people (as it has been for some time) but even those aged between 25-54-years-old - yet TV ad prices keep going up.
It's exactly the kind of shift Google has been banking on.
Last month, Google attacked TV again, with research suggesting that YouTube ads generate a better return on investment than TV ads most of the time.
While TV executives argue that most marketers see YouTube as a compliment to TV - rather than stealing ad spend - this sizeable shift of TV money to YouTube will likely raise some concerns.
However, as The Wall Street Journal points out, Magna Global still spends far more money on TV overall: An estimated $5 billion to $6 billion.
EMarketer predicts digital ad spend will overtake TV in the US next year - but much of the money spent on "digital" is associated with content from TV networks (especially their video-on-demand players.) Magna Global's research arm also predicts digital spend will "eclipse" that of total television spend in the US this year, according to the emailed statement.
Correction: An earlier version of this article stated that Magna Global had committed to spending $250 million with YouTube over the next three years. Magna Global has in fact committed to spending $250 million with YouTube in the next five quarters as part of the three-year-deal.