Is Online Video Advertising Ready for Prime Time?

A year ago, eMarketer issued a report on digital video advertising asking the question, appropriately enough, “Where’s the Money?” The report told the story of rapid growth in the sector (40 percent annual growth rates through 2012) but suggested that video advertising would remain a “relatively small share of overall Internet ad spending.” More significantly, for video advertising to reach large-scale implementation, “two types of convergence” would need to happen, according to eMarketer:

• The convergence between video delivered on the Web and video delivered on television.
• The convergence of business models, with digital video increasingly supported by a mix of ad dollars subsidized by audience subscription fees – much like cable TV.

BrightRoll, a company that is said to be the largest video ad network in the U.S., has a substantial stake in fueling the growth of online video advertising. The company recently released results of its second annual Online Video Advertising Report, suggesting that “advertisers are becoming increasingly reliant on online video as a proven means to reach targeted audiences at scale.”

BrightRoll surveyed executives and media buyers at leading U.S. ad agencies and found that 94 percent planned to increase their spending in online video advertising. Over half of the respondents (56 percent) said they thought online video advertising was “more effective” or “much more effective” than other forms of advertising. The respondents felt that targeting was the most valuable asset of online video ads. As for measurement and analysis, 45 percent of respondents said they would base their online ad spending on cost per video view, versus 34 percent who would base it on cost of engagement, and 16 percent who would base it on cost per impression.

Of course, this survey offered feedback from ad executives, not from website publishers who run video ads on their sites or the consumers who view them.

Let’s keep in mind that video ads are still in their infancy, relative to traditional television. eMarketer says for every dollar spent on Internet video ads in 2009, marketers spent almost $65 on television commercials.

There are legitimate reasons adoption of video ads may be difficult to measure, and why online video advertising may be slower to succeed.

As Ashkan Karbasfrooshan, CEO of video producer WatchMojo, points out in a January 2010 article for TechCrunch, the industry hasn’t even standardized its measurement criteria:

The first thing you realize about video advertising is that most of the money being generated from video content isn’t derived from in-stream advertising (such as pre-,mid-, or post-roll) but rather by in-banner ads (be they standard display ads or rich media). Yet when you look at the projections being forecast by eMarketer and Forrester, they focus mainly on videos sold inside the video player.

Karbasfrooshan also cites other issues that complicate online video advertising, including the risk of basing success on hits, over-selling the use of videos to advertisers without considering the specific audience, the unknown impact of viral video, and the failure to create revenue share deals that can work.

Still, there are plenty big name marketers who are on-board with video advertising – and where the big marketers go, the others are sure to follow.