Video Advertising

How Many TV Ad Dollars Can Online Video Advertising Grab?

SEPTEMBER 12, 2008

Focusing closely on spending.

The frequently asked questions swirling around US Internet video advertising can be funneled into two main streams: One, why has online video ad spending not grown as swiftly as predicted? And two, when will it take off?

To answer the second question first, this year’s 55.9% increase in online video ad spending is a key indication that the channel is at least gaining speed—accompanied by parallel growth in the kind of trusted video content, such as sports, to support it.

“By 2012—when both traditional and alternative media companies will be distributing far more professional-quality video content online, and when the national elections and the summer Olympics will contribute far more to video ad spending than they will in 2008—annual growth will peak at 78.9%,” says David Hallerman, senior analyst at eMarketer and author of the new report, Video Advertising Online: Spending and Pricing.

NBC’s results for the Beijing Olympics underscored video’s increasingly central place on the Internet and the still-problematic position of video advertising.

“With record traffic to NBCOlympics.com, the online portion of the games looked to be a major success. At the same time, eMarketer estimates that the site collected approximately $5.75 million in video ad revenues, or about 1.1% of this year’s $505 million total video ad spending,” says Mr. Hallerman. “That revenue—both substantial for one site in only 17 days and insufficient for an event of Olympian magnitude—illustrates the market’s growing pains.”

Even amid worrisome trends in the overall economy—and a traditional advertising slowdown—long-term spending growth for online video advertising looks strong.

“Next year, there will be slightly slower growth, due to the still-struggling economy and the fact that advertisers are working out the best ways to do online video ads,” says Mr. Hallerman.

But the hurdles will be overcome because both marketers and publishers crave video.

“Marketers want video advertising for its far-greater branding power than other online formats,” says Mr. Hallerman. “Publishers want video advertising for its far-greater revenues—or at least higher CPMs—than other online ad formats.”

Video is an evolving ad format, with equally evolving content models and audience usage patterns to sustain the advertising.

As Mr. Hallerman concludes, “The mixed traffic and revenue results experienced by NBC this summer are a natural outcome, and an accurate reflection, of today’s online video market.”

 

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