Growing video ad market leaves most outside
March 31st 2009
by Edward Barrera

                                                          

Everybody talks about the growing online video ad market, but few are actually able take advantage of it.

Hulu, Youtube and some others are concentrating on premium content, but the vast majority of video streams available to advertisers are user generated. Most advertisers are not comfortable with the relatively unknown content and quality. So when publishers are able to have professionally produced content they are being paid a premium for it. That leaves small to medium publishers and many ad networks on the margins of the market and that will unlikely change unless content improves.

“I think ad spend will always go disproportionately to premium content, no different than in other areas of the online and offline world,” Will Richmond, editor and publisher of VideoNuze, said via email. “Distribution is higher, brands want to be associated with high quality content, ROIs are better. Indie and non-premium will get a share, but it will be smaller.”

Eric Franchi, SVP of Undertone Network, said there will be opportunity though. Just as there are vertical ad display networks that are doing a good job of monetizing categories within segments, publishers that have professional content in specific niches will be able to monetize video, he said.

“But I don’t think they are there yet in scale,” he says. “What advertisers want, fortunately for CBS, unfortunately for some of the smaller guys, is scale combined with professional content.”

Undertone has been doing online video for about two and half years, Franchi said, because many of the many of the sites that were part of its display network had quality premium inventory that was a natural complement. With so much inventory available, he believes there will be a growth of other networks looking to monetize video.

“The question is will they be able to,” he said, with much of the videos user generated, “history has shown that no one has been able to do that successfully.”

That is one of the reasons that YouTube is moving toward acquiring more premium content. But it’s not only the advertising opportunities but also the advertising itself. Does TV change for the Internet or does the Internet change for TV?

“I think the main difference is that online video is much more targetable and interactive than traditional TV,” Richmond said. “So it would be a shame if the programmers and advertisers didn’t take advantage of these benefits. That should drive change. Also things like a 1 hour time block and linear scheduling become less relevant in an online/on-demand world. So marketers need to think about how they get the audience’s attention.”

But Scott Ferber, of TidalTV, said give the people what they like about television, that includes long form content, and what has been proven.

“TV advertising works,” he said. “We need to replicate that model online. What’s the difference? Conceptually, it’s an easy problem to solve. Give people what they want.”

He agreed that as interactive technology emerges, the Internet can give an added layer of value. But he also said that the technology will also help offline companies become interactive.