Online video ads: The tipping point is near

September 24, 2009: 10:00 AM ET

Large advertisers are starting to shift their ad budgets to online video. Is the demise of broadcast television at hand?

By Jason Glickman, CEO, Tremor Media

Glickman: online video ads are on the verge of the big time. Photo: Tremor Media

Glickman: online video ads are on the verge of the big time. Photo: Tremor Media

At the 61st Primetime Emmy Awards this week, television actors were full of quips about the demise of their medium: "Amy [Poehler] and I are honored to be presenting on the last official year of network broadcast television," joked sitcom star Julia Louis-Dreyfus.  The subtext: Online video, among other things, is killing broadcast and cable networks by siphoning away eyeballs – and advertising dollars.

Despite the jocular talk of doom and gloom on the Emmys, the apocalypse of television isn't upon us. Yes, online video has garnered enormous buzz – and venture investment dollars – but the medium has yet to secure much more than a sliver of the $65 - $70 billion advertisers spend annually on television spots.

Until now.

Now I would not be so bold as to call "time of death" on the television model. In fact, with all due respect to Julia Louis-Dreyfus, I think reports of TV's death are greatly exaggerated. Viewership is as high as it's ever been and the medium will (and should) receive the lion's share of advertising dollars now and in the near to mid-term future.

But I do believe that when we look back years from now, the period starting from the third quarter of 2009 to the first quarter of 2010 will be remembered as the turning point for online video advertising.

The future is now for online video ads

It will prove to be the period when large brand advertisers began paying real attention to the medium, and it will be the beginning of online video's aggressive 5-year climb to the highest level of the food chain in the media mix.

There are already visible signs that this is occurring. We are seeing large brand advertisers planning seven-figure online video buys on a more regular basis than ever before. The marketers use television planning rationales and pricing terminology. Several advertisers and agencies are also launching research initiatives aimed to draw a closer apples-to-apples comparison between online video and television effectiveness/engagement. The goal: to see if brands can justify significant increases to their online video ad spending in the years to come. Big changes are clearly coming.

Some of the driving forces that are currently at play that will influence this shift include:

  • Scale: The audience for online video is growing large enough to grab marketers' attention. According to Comscore, 158 million US internet users watched 21.4 billion videos in July – a record month.  In order to shift dollars from proven offline models, this validation of critical mass of user behavior and time spent is required to capture significant dollars and move past the label of an experimental medium.
  • Professional Content: Until recently, there has been a misperception amongst major marketers that online video content was almost entirely made up of user-generated clips that were unsuitable for branding focused advertisements. This fear of being associated with inappropriate content kept most advertisers at bay. The tide has changed however, as major media properties have begun to distribute their professional content and show that scale does exists in this area. Companies like Hulu have taken off and deliver hundreds of millions of professional content streams per month. Video ad networks have aggregated premium professional video impressions from hundreds of sites, and even Youtube has begun to promote its professional content as a home for large brand dollars. This trend will only continue and as a result the budgets are unlocking.
  • Innovation: Not to be lost in this equation are the inherent differences from the television model that online video brings to the table, particularly from a technology standpoint. The ability to target individual users based on their demographic or behavior, combined with real-time reporting on user engagement gives online video a major edge. Just as important is online video's ability to introduce new video ad formats that go far beyond the standard 30-second spot.

This is just the tip of the iceberg for this conversation. While I would classify this period we're in as the tipping point for the industry, the hard part for online video advertising has only just begun.

As budgets begin to shift more aggressively, the standards and rules of engagement need to mature at the same pace. The rates for online video will also need to evolve to be more comparable to those of television; for many opportunities (like video ad networks) this has already occurred, but it is not yet universal across all video publishers.

Stay tuned

There is much more to be written on what the online video industry needs to change and the developments that need to materialize in the coming years to best capitalize on the opportunity…but alas that is for another post. If nothing else, this space (and particularly the next 2-3 quarters) will be very exciting to watch for anyone who is passionate about the evolution of media.

Glickman is CEO of New York-based Tremor Media, an online video advertising network and technology platform that places in-banner and in-stream video advertising on more than 1,400 sites.

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