• by Christophe Louvion , June 1, 2009

The promise of online video - and the pay-off

The promise of online video ad revenue has proven elusive for all but the largest Web publishers. Smaller to midsize sites have had little patience with video providers as they've struggled with bandwidth, expensive setup and storage, unimpressive roi and insufficient marketing efforts that failed to gain traction and critical mass.

Today, costs of bandwidth and storage have fallen to the extent that video is an expected part of the user experience. With more eyeballs come more advertisers, and pre/post-roll video ads, rich media overlays, product placements, and branded viral video applications are accelerating every day. So it's important for Web publishers of any size to understand the key factors in the profit formula so they can choose the right platforms and players from third parties such as Brightcove, Springboard and others.

Starting small - testing a new video section site with a few videos - and getting quick feedback from site users, is a sound financial approach. But the problem of ongoing data storage and bandwidth cost must be understood up front. Publishers with large-scaled storage and well-negotiated CDN (Content Delivery Networks) may want to store and serve videos from their own infrastructure. Others may prefer to use a third-party hosting and serving platform and not have to worry about it. Such solutions usually cost in the $2 to $3 CPM range with no up-front out-of-pocket costs and therefore no exposure or risk. This alone will allow hundreds to thousands more Web sites the ability to provide video.

Publishers need to be able to serve standard ad units like pre-rolls, mid-rolls, and post-rolls, as well as new media units like overlays, companion ads, custom units, product placement, and branded viral videos. A solid solution should utilize DoubleClick's Motif and DFP ad serving platforms, Panache, and other rich media providers. Publishers need to have full control over what types of ads they want and don't want to run through their video players, whether it's a specific advertiser or category of advertisers, type of content, or other pre-defined parameter.

The same spending trend for brand display advertising is occurring with video: Ad dollars are moving from the portals and top 100 branded content sites into the mid-tail with quality editorial environments and passionate users. What industry rates should a publisher expect for use of their video inventory? It depends on the demand for a particular vertical market consumer, competitive advertiser demand, and the length of the campaign, but, on average, the range is from $14 to $20 gross CPM, and, in some instances, up to $25.

Adding videos to one's own Web site is very different from uploading videos to a massive user-generated
video content site. Publishers need a more comprehensive solution utilizing a full content management system. Publishers with a lot of videos need to be able to organize them into playlists and channels. Access rights also need to be considered for those wishing to create and publish playlists. A fully functioning CMS should provide the publisher with easy-to-use tools to upload, manage, and analyze each video presented.

Some of the newest players support a custom skin kit that allows publishers to customize the look and feel of their player with their own graphics and colors reinforcing the publisher's brand rather than the player's brand. Video consumption is viral by nature, so some publishers may want their video players shared as widgets so their users can take them to social networks, message boards or simply as email to share links. Player technology around Flash evolves very quickly, so platforms with plug-in distributed architecture enable the download of new features automatically without the need for changing the player.

Despite the challenges of the current economy, now is a great time to set up and embrace the opportunities for online video ad revenue. Internet & TV convergence has been discussed for decades, and now that midsize and smaller publishers can easily adopt video technology - and make money doing so - it's happening right before our eyes.