More and more Canadians are jumping into the digital pool. That’s no secret. It’s all about a prevailing consumer philosophy of getting content when and where they want it. It is, however, happening at an increasingly rapid pace.

Driving this growth spurt is online video – a digital bucket that Canadians, especially, see as a favourable option.

‘You’re starting to see a huge trend with the acceleration of how online video’s being consumed,’ says Graham Moysey, SVP/GM, Canwest Digital Media. ‘Especially as a younger demographic and generations start to consume content made in a different way.’

Just look at the numbers. ComScore released a report in February, 2009 showing that 21 million Canadians watched more than 3.1 billion videos online, spending an average of 10 hours viewing during the month, up 53% from what it was the year before. That’s about 88% of the total Canadian Web population, and it accounts for the highest penetration of the five countries reported by Comscore’s Video Metrix, including France (82%), Germany (82%), the U.K. (81%) and the U.S. (76%).

According to BBM Canada, for total TV viewing in Canada during prime time for all persons 2+ between May 25, 2008 and May 25, 2009, tuning to Canadian and American conventional stations dropped by 3%. And though specialty viewing did increase by 1%, the remaining 2% went to programming not falling in those categories.

A lot of this can be attributed to the popularity of sites like MSN, YouTube and social networking sites like Facebook that resonate well with Canadian kiddies, all of which provide the bulk of the competition to the major networks when it comes to attracting revenue for online ads, video ads in particular.

The Comscore report indicated that out of the top Canadian video properties (according to videos viewed), Google sites (including YouTube) came out on top, taking in a whopping 52% share of all videos viewed with more than 1.6 billion, and Facebook placed seventh with over 19 million, accounting for a 0.6% share of the total.

So, how are Canadian broadcasters like CTV, the CBC and Canwest competing with the YouTubes and Facebooks of the world – while navigating the whole analog-dollars-to-digital-dimes conundrum and attracting advertisers to a space about which they’ve so far been fairly wary?

To start, they’ve begun to make their online destinations more appealing by beefing up their digital offerings with more prime-time content, especially their conventional properties.

‘Content is going to remain king: always has, always will,’ says ZenithOptimedia president Sunni Boot. ‘There is a specific trend to long-form programming that typically resided on broadcast and is now nicely residing online. We’re always going to be where the eyeballs are.’

‘We tend to buy more conventional because of the programming,’ adds Boot. ‘When you’ve got a top-rated show, your sell out on air can come quicker, whereas your cable specialty, there are a lot of places to go, and it’s a 24-hour clock.’

Canwest relaunched its globaltv.com portal in April, consolidating shows in a redesigned video player and offering over 30 refurbished show microsites that provide more exclusive video content. And it’s seen success. Video plays on the site since the relaunch averaged 6.4 million in April and May, which was up 146% versus average pre-launch numbers between September and March, and ‘viewsers’ (viewer/users) averaged 21 videos each, up 52% as compared to pre-launch figures, with an average of 82 minutes spent, which was up 72%.

The CBC, which now has over 6,000 video assets available for on-demand viewing and streaming, is also planning to revamp its online content offerings with the introduction of a single portal consolidating its audio and video streaming capabilities in the next few months. And CTV recently upgraded to HD video online, launching its CTV HD Beta Player in March to run parallel to its video player.

So, the eyeballs keep on coming, and it’s a place where advertisers are thinking they should be. But broadcasters are now trying to figure out how to more efficiently monetize the space – especially given soaring bandwidth costs due to increasing traffic – by creating more viable advertising opportunities that go above and beyond standard IAB ad formats.

One that’s becoming increasingly appealing to advertisers because of the traction it has started to gain over the last year is video pre-roll.

‘There are some very good reasons for that,’ explains Boot. ‘The media players at the major networks are much better, so they’re serving up a better product. The second is copyright. When [the networks] are going to negotiate programs they’ve got increased copyright for broadband. And the third, which Canada is just terrific and a leader in, is the fact that our ACTRA agreements are favourable to digital. Plus, the other one, of course, is consumer receptivity to watching commercials in long-form digital.’

Increased capabilities for advertisers to do more with pre- and mid-roll ads are also starting develop. Broadcasters are looking at adding clickable pre-roll ads that direct viewers to a different online destination that provides them with a companion ad, giving them greater detail in terms of the advertiser’s offer – in a way, similar to an online version of Etc.tv.

Yahoo has started offering behaviourally targeted ads as it pertains to its video player, which is another feature that the nets could take advantage of in their own offerings. Based on a user’s cookies, they can serve ads relevant to websites that the user has visited previously.

Content produced strictly for video and pre- and mid-roll ads is something else that will likely start to be seen more.

‘The audience for pre-roll video is growing, so that’s an amazing opportunity. Because of that we’re going to be able to warrant our own one-off production for pre-roll spots in the future,’ says Nick Barbuto, director of digital solutions for Cossette. ‘The idea is that we’re going to have a large enough audience at one point in time, and they’re going to be very captive in the sense that there’s not as much clutter as the current TV environment. That’s what the opportunity is: more audience with less clutter and potentially even more

hyper-targeted.’

Although online video ads provide advertisers with bonuses like more exclusivity, with a one-to-one versus one-to-many conversation, and, arguably, a little more engagement, there is still the issue of limited inventory. In an hour of online video, advertisers may get about two minutes of pre-roll opportunity versus around 12 to 14 minutes of commercial time during an hour of broadcast. So, broadcasters and agencies are also working to take video content and ad opps further in the form of custom sponsored content initiatives and integrating content across platforms.

‘We are seeing a definite increase in sponsorships,’ says Boot. ‘[Networks] are creating multi-platform opportunities that include contesting, polling and the development of microsites, and just totally integrated sponsorships in general.’

Canwest, for example, put together a custom content opportunity for L”real, an anchor tenant sponsor of season two of Project Runway Canada and its microsite on Globaltv.com. A videographer was on set, capturing content everyday as the show was being filmed. The result was exclusive-to-web footage and branded content segments called ‘Get the Look,’ streamed onto the PRC microsite wherein L’Oreal Paris makeup artists showed viewers how to achieve a look featured in the previous episode.

‘It’s really creating customized branded content for our advertisers within the framework of the online asset, and that online asset is obviously built to support not only the broadcast show, but the advertising messaging,’ says Moysey.

The microsite has logged 1.2 million video plays, 95% of which were people that visited the site specifically to watch full-length episodes. Of that percentage, over half of them also watched the ‘Get the Look’ series.

The CBC has also offered up custom, cross-platform opportunities to its advertising partners. One for McDonald’s in partnership with Hockey Night in Canada, which will resume at the beginning of next year’s NHL season, was originally implemented during the 2009 Stanley Cup Playoffs. Working with media agency OMD, the Ceeb took content from HNIC – recaps of the previous night’s games featuring former NHLer and CBC personality PJ Stock – and extended it from TV to online, as well as making it available through widgets, allowing users to access the content from their computer desktop or their Facebook page.

‘It’s probably one of the first times that we’ve created a branded environment that really reflects the tone and the feel of the advertiser,’ says Byron Ells, director of media innovation and planning at the CBC. ‘The environment takes Hockey Night in Canada as a brand, but kind of gives it those red and yellow hues that we associate with McDonald’s.’

The program also extends the experience onto the mobile platform with a mobile-optimized end site, an area that Canwest also made a foray into in July, when it launched a Blackberry application for Food Network Canada. They’re currently monetizing it with Blackberry creator Research in Motion as a paying sponsor, and they’re also close to closing a deal to bring in a large CPG client.

‘My view is that you’re seeing strong growth of users consuming media content via mobile, but it’s very much in its infancy on the other side,’ says Moysey. ‘The ad dollars haven’t flowed dramatically into that space, so we’re on strategy to drive as much of our content and brands into that mobile space.’

The growing trend of Canadians flocking to digital platforms for video is causing media agencies to examine their attitudes towards buying in the space, and some are changing their practices accordingly.

‘We are seeing a shift whereby a couple of our big agency partners are starting to configure themselves in such a way that their broadcast buying group is starting to buy online video,’ says Moysey.

ZenithOptimedia is one agency that’s changing its online video-buy thinking. The attitudinal change is manifesting itself in treating online video as just another part of an overarching video platform, as it’s becoming about the total number of screens advertisers can access.

‘We’re starting to get more of our broadcast buyers negotiating that, and the reason is they have the discipline and the understanding,’ says Boot. ‘But we still need all of our digital specialists to help us with the ad serving, the frequency caps, so it’s an area in transition.’

The change in thinking is also starting to be reflected in upfront negotiations as agencies look to build portfolios for their clients that extend through conventional television, specialty, digital and broadband.

PHD Canada has already begun investigating bringing in digital opportunities as part of its upfront talks with media vendors.

‘We talked a lot this year about trying to bring digital into those discussions with respect to the fact that, by and large, a lot of them have been TV driven,’ explains Fred Forster, president and CEO of PHD Canada. ‘We believe philosophically that we should be talking to vendors about the total commitment that we’d like to make on behalf of our client base, and we should be talking about the total assets that they have in that conversation.’

However, he says that the networks aren’t really ready to play ball, and that deals of that ilk are, at this point, mostly brand driven as opposed to being part of larger corporate upfront deals.

‘I just don’t think most vendors are structured in a way that allows us to have that conversation and get to a finished deal because there are so many moving parts to it,’ says Forster. He does say that, for PHD’s part, it’s a direction the agency should go in order to build greater flexibility and to make the best decisions about platforms at the macro level.

And that’s not to say that the networks aren’t attempting to step up to the plate.

‘As we negotiate upfront commitments with our large agency partners, broadcast, print and digital are at the table in an effort to meet the channel demand and ensure that we continue to take share from our competitors while offering a fully integrated solution,’ says Moysey.

According to IAB’s 2008 Actual + 2009 Estimated Canadian Online Advertising Revenue Survey, online advertising now occupies third place in terms of marketing spend by advertisers, accounting for 11% of the combined $14 billion spent on all major media in Canada in 2008. It’s estimated to increase by 9.2% this year. Online video advertising in particular grew from $9 million in 2007 to $12 million in 2008.

While it certainly appears as though digital’s being allotted a bigger slice of the pie in terms of media agencies spend at upfront time, no one is looking to the space as a competitor or alternative in a world of increasing fragmentation and expanding media opportunities, but rather as a means of enhancement. And it’s about finding balance.

‘As fragmentation occurs, you need to add these components to round off the portfolio,’ says Boot. ‘I wouldn’t argue that one is necessarily better than the other; I argue that we need them all.’

‘I don’t see people stopping watching television; I just think that you’re going to see digital as a great complement,’ agrees Moysey. ‘There’s probably between 10-12% of all media dollars that are spent in the online space today in Canada and I think the delta between that and the consumption is your opportunity. So I would say that the tipping point in terms of us getting closer to what the blend should be from an advertising perspective is upon us.’

And while broadband costs and content platform issues like limited inventory remain a barrier for digital expansion, there is, at least, a lot of room for flexibility and freestyling with brands who take the plunge into the digital pool.