The Future Of Video Advertising
1. The advertising market will shrink for several years. Digital media projects that five years from now the aggregate advertising spend will be smaller than it was last year. Total advertising revenues from all modes in 2013 are projected at $245 billion as compared to $285 billion in 2008. Internet advertising will gain share from 8% to 22%.
The Great Recession of 2009 is leading sponsors to radically alter long-held assumptions about the marketing and advertising uses of media. In short, advertisers will face new competition from their own sponsors as sponsors increasingly use the Internet as a direct media channel to customers. They'll allocate a greater share of marketing budgets to enrich their own Web sites as interactive, lead-generation properties. Similarly, they'll intensify focus on their own email marketing and employ embedded video and related forms of Digital Media in press releases, product promotions, and corporate communications.
2. Video will migrate to the Internet. Cable and satellite networks are evolutionary dead-ends that cannot hope to match the innovative pace enabled by the Internet.
Consumers are learning to get unlimited Internet access at their TV, most commonly by attaching a laptop computer. The computer's onboard WiFi links over a home network to the Internet thereby transforming the laptop into an Internet Gateway for the TV. A remote mouse and keyboard provides a lean-back viewing experience 15 - 20 feet distant from the screen. While the uninitiated sometimes assume the set-up is too complex, numerous instructional videos demonstrate that it is easier to connect a laptop computer to the TV than it is to attach a TiVo or cable set-top box.
An estimated 10 million Americans watch Internet video on TV monitors via computers. Ultimately it is an intermediate step leading to either (1) browser-centric TVs or (2) TVs, or devices similar to the Apple TV, with their own Apps Store or Yahoo-like widgets. The store would be like the iPhone one, except that its (typically free) applications would enable Web sites like Hulu.com and YouTube to be watched on TV.
3. Product promotion will replace product advertising. The Internet will redefine product promotions to fit into a larger context. Historically product promotions were nearly synonymous with product advertising. The applicable marketing budget was allocated to the agencies and buyers responsible for the creative work and media placement.
Increasingly, sponsors will incorporate their own use of the Internet into product promotion. By enriching their websites, press releases, email marketing, and corporate communications with Digital Media they'll trigger transactions and generate leads in activities that bypass the traditional advertising industry.
4. Ad rolls will become shorter. There are three reasons why Internet Video advertisers will be able to justify accommodating consumer interest in reducing time devoted to disruptive commercials.
First, is the avoidance of ad-time allocations for local network affiliates or cable operators. For example, sites like Hulu don't need a local TV affiliate to stream shows over the Internet. This frees-up about four to five minutes per hour. Second, unlike DVR users, viewers of streamed Internet Video cannot fast-forward through advertisements. Third, Internet Video can employ non-disruptive interactive overlay ads. As a result, the typical hour-long TV show on Hulu takes only 48 minutes -- including six minutes of ads.
5. Advertising industry bypass will promote interactivity. Web sites with the highest "click-through" rates are engaged in triggering transactions. Examples include Amazon.com and iTunes. This is partly because visitors show up to shop, but it also partly reflects good behavioral targeting of ads for suggested merchandise based on the visitor's prior purchases.
As sponsors gain experience using Internet media to connect directly with customers, they'll also concentrate on inducing transactions. Thus, as an indirect consequence of bypassing the advertising industry, sponsors will learn how to increase click-through rates, thereby advancing the state-of-the-art for interactive advertising. In short, Internet advertising and Internet retailing will overlap.