Online Video Ads: Ready for Prime Time?

Online video watching is growing rapidly, and where the eyeballs go, you can expect advertisers to follow.

Sixty-five percent of U.S. broadband users watch video online at least occasionally — a substantial increase over last year, when that number was 44 percent, according to a report released last Friday by JupiterResearch.

In addition, advertisers’ interest in delivering their messages via video continues to grow, with 16 percent of them saying they’ll run video ads this year, according to the report.

Fired by Broadband

One reason more people are watching video online and advertisers have begun to see the Web as a viable channel for video is the greater reach of high-speed Internet connections, maintained the report’s author, Senior Analyst Joe Laszlo.

“It’s the growth of the broadband audience that’s opened the door to online video ads,” he told the E-Commerce Times.

A sign that video advertising has come of age on the Web, he contended, is that Net surfers can cross paths with a video ad anywhere in cyberspace, not just at sites that cater to video junkies.

“The ability to do that really comes down to the growth of the broadband audience,” he said. “Without broadband, doing video on your main landing page would slow the page down tremendously and would drive your audience away. People would not have the patience to wait for the ad unit load.”

Playing It Safe

Much of the increased video traffic on the Web has been to sites like YouTube. Ironically, though, those sites have been unable to capitalize on the market they played a large part in creating, according to Mike Shehan, CEO of Westminster, Colo.-based SpotXchange, an auction site for online video ad space.

“YouTube basically hypercharged this industry, but advertisers tend not to want to touch that with a 10-foot pole,” he told the E-Commerce Times.

YouTube hosts user-generated videos, he explained. From an advertiser’s point of view, user-generated content is risky content.

“If you’re dipping your toe in the water, you’re not going to want your first dip to be something risky,” he said.

Fourfold Increase

Although still in its nascent stages, video advertising is expected to become an important revenue pipe for the Web.

“[F]or every US$100 U.S. marketers spend on television commercials in 2007, they’ll spend a mere $1.10 for video ads on the Web,” David Hallerman, a senior analyst with eMarketer, of New York City, wrote in a report released earlier this month.

“By 2011,” he went on to say, “when this latter figure will be potentially four times as high, nearly $1 in $10 going to Internet advertising will go toward video.

“Put those data points together,” he continued, “and it is not difficult to see how even a small shift in TV ad spending will be a driving force in overall Internet ad spending gains.”

More Quality, Fewer Retreads

As hot as video advertising is right now, it could be even hotter if there were more quality video to be found and if advertisers got out of the retread business, according to the Jupiter report.

“While video ad inventory overall has skyrocketed with the myriad video ventures launched in 2006 and early 2007, the highest-quality inventory, from familiar, reliable publisher brands like the major newspapers and television networks, remains relatively scarce,” it asserts.

What’s more, in 2006, about a third of advertisers “repurposed” existing TV spots for Internet play, the report said.

“This has generally not proven effective, and advertisers and publishers alike have moved strongly away from 30-second spots for much online video,” the report noted.

“The need to re-edit or shoot new creative,” it continued, “may have created barriers that motivated changes in advertisers’ plans.”

Annoying Eyeballs

Advertisers who want to capture eyeballs online need to avoid turning off Web surfers to their ads, posited Jim Ivaldi, the owner of Jivaldi, an Internet marketing firm in Pleasanton, Calif.

“People do not want to be bombarded with advertisements in video,” he told the E-Commerce Times.

Online users move through the Net very quickly and have short attention spans, he noted, so they don’t want to sit around for a 30-second spot to finish before they can get to the content that they want.

“That’s not going to go over well,” he said. “I don’t think you can approach this from the same mindset as you do on TV, where it’s a given there are going to be 30- and 60-second spots.”

Advertisers should analyze their market data carefully to make sure they’re not annoying consumers, cautioned Laszlo.

“Switching costs online are so low it’s easy for someone online to get annoyed at an overbearing ad or too many ads or too many repeats of the same ad and go away,” he observed. “I think it’s very, very hard for a company to win that consumer back once they’ve been driven away.”