The online video ad market hit $225 million in 2005 and is expected to reach $385 million this year, $640 million in 2007 and $1.5 billion by 2009 (eMarketer). Other projections range as high as $2.5 billion in 2010.

There is no doubt that as broadband penetration multiplies, and both video technology and ad serving technology advance, most major advertisers will want to use this branding strategy because of its ability to engage viewers.

Online Video Engages Users

A study by F. N. Magid Associates for the Online Publishers Association shows that consumers engage with video advertising as follows:

  • 5 percent of consumers view online video daily
  • 24 percent view once a week
  • 46 percent view once a month

While many are attracted to humor, video news clips are most popular, with each genre being viewed by more than 25 percent of visitors at least once a week.

Online video ads have great potential on the web and are particularly appealing to a young, wired demographic. As online videos become more popular on user-generated sites like YouTube, the audience for video ads will increase, as will the number of video ads created.

Video Entertainment Factor

People are drawn to video because it is entertaining. Video popularity has grown with the proliferation of broadband. The best video ads are interactive and should be contextually and behaviorally relevant. Video ads can be used for branding, building loyalty and direct response but ads have to be presented in a manner that gives prospects what they want and when they want it. This may involve building a community where consumers can be entertained, interact with the video and perhaps even share it.

Ad-Supported Video

Consumers don't mind viewing ads if they can get TV programs gratis on the web through their mobile devices. A recent survey reports that 62 percent will watch free on-demand TV programs with commercials rather than have to pay $1.99 for commercial-free content (Points North Group and Horowitz Associates).

Starcom USA reports the same. Consumers prefer to download ad-supported video content rather than paying to view programs without ads.

Online Video Ads Work

The community of online video watchers is growing. ComScore reported that the number of consumers viewing videos online increased 18 percent between October 2005 and March 2006. The early adopters who watch are very engaged with the advertising they encounter, especially when it is relevant to their needs.

The above mentioned Online Publishers Association study conducted in February 2006, surveyed a representative U.S. population sample of 1,241 Internet users aged 12 to 64 and reported the following:

  • 40 percent clicked a link or visited a web site mentioned in the video ad
  • 34 percent went to the advertiser's web site
  • 15 percent requested product information
  • 14 percent visited the store to check out a product
  • 10 percent forwarded the ad to a friend or family member
  • 8 percent made a purchase
  • Average viewing time spent with a video ad was 21 seconds

The above findings show the power of video ads to engage viewers.

Video Viewer Demographics

The study found that frequent viewers of online video are more likely to be young, male and affluent. These heavy viewers were 65 percent male with an age mean of 33 years, putting them in the coveted 18 to 34 demographic. Eleven percent had household incomes of $100k/year, and over 80 percent had broadband at home and at work.

Heavy Video Viewers Engage

The heavy viewer profile differed from the norm. For instance, 50 percent of heavy viewers visited a web site mentioned in the video ad, versus 40 percent for the total sample. Up to 45 percent of the heavy viewers went to a search engine to find more information on an advertised product, whereas only 33 percent of total viewers did so.

Clicking a hyperlink was less popular, even among the heavy viewers of video ads, with only 20 percent doing so versus 17 percent for the total sample. Overall, only 20 percent of the heavy viewers took no action, while 31 percent of the total sample took no action.

Video Viewers Are Wired

Viewers of online video are frequent consumers of multiple media. Ninety-one percent use the Internet for email, instant messaging or chat, while 84 percent also use the Internet for other purposes. Fifty-nine percent read newspapers online, 48 percent watch videos or DVDs, 46 percent read magazines and 43 percent play online video games.

Video Creatives Must Improve

Current video ad creatives must advance to be more effective. Most online video ads are merely repackaged television commercials. When creatives are designed specifically for online campaigns, response will likely improve. While these creatives will be more successful, this will require increased budgeting for studio production costs necessary to create more appropriate online ads.

The challenge is to create video ads for the short-attention span of web surfers who demand high-quality content presented as a compact viewing experience. While some video ads run 10 to 15 seconds, others run 30-seconds like a standard TV spot. Trends lean toward shorter ads, especially on mobile devices.

Obstacles to Video Growth

There are some limiting factors that can affect online video ad growth. The most obvious was mentioned above: cost. And while cost is an obstacle, video also has a lack of format consistency as a number of video formats exist, which include but are not limited to video technologies like Quicktime, RealVideo, Windows Media Player and Adobe Flash.

These formats have created a lack of interoperability between devices, and it is not yet clear which will emerge as the video standard in the future.

Another obstacle is the lack of inventory. Right now, publishers are only equipped to run streaming video in about one-quarter of their content.

There is a need for interactive and traditional ad agencies to integrate their skills. The traditional agencies that normally handle video do not understand the online environment. The interactive agencies that do understand the online space are not skilled at making videos. The result is too few full-service ad agencies that can do both effectively.

Video is an emerging marketing strategy, and the potential for growth is there. Search engines are developing video search capabilities and integrating video ads into their paid search offerings.

Video Search

Google and Yahoo provide video search. Microsoft recently added video search (beta) to its Windows Live search engine. Results are displayed with a photo of the video and a brief description of video content. Google, Yahoo and Microsoft are building their video search inventories and implementing video ads into their paid search offerings. Yahoo will include click-to-call and video content into its next Yahoo Search Marketing update.

Google officially integrated video ads into its AdSense network in May, exposing online advertising to a much larger mainstream audience. Google's video ads are very non-intrusive by presenting a static screenshot that won't play unless the user clicks.

Users can expect online videos and video ads to grow in popularity as people move from the TV screen to computer and mobile device screens. This method of ad delivery has promise because most people can choose to view videos on the fly -- a pleasant alternative to being inundated with TV ads over which they have no control.

Online video ads are still in the early stage of development. Technologies need to converge and improve. Video ads will provide advertisers with the means to offer different executions in a video message across multiple platforms like TV, the Internet and mobile devices. This may become the norm in two to three years.

Discuss this article in the Small Business Ideas forum.

September 18, 2006

Bruce Clay is president of Bruce Clay, Inc. Since 1996, has been one of the foremost search engine optimization Web destinations. Services include: tool subscriptions, training classes, site assessments, consulting services, and full-service projects. Areas covered are SEO, PPC, Analytics, e-mail, ad programs, and consulting.

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