The Future Of Video Advertising

Most everyone agrees that future video advertising will be significantly different. At least five changes are likely. 

 

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.

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7 comments about "The Future Of Video Advertising".
  1. Colin Donald from Futurescape , September 1, 2009 at 4:14 p.m.

    Hi Phil,

    Very much agree - see our ongoing list of big name Hollywood and TV talent (eg X-Men director Bryan Singer and Friends actor Lisa Kudrow) that have already made the move to branded entertainment by making their own Web TV shows with major sponsors attached:

    http://tinyurl.com/lvr2dt

  2. Bryan Cox from Cox Marketing , September 1, 2009 at 4:16 p.m.

    Even the business of “Voice” has made a terrific shift into voicing for Videos for web sites over the last 2 years or so. I’ve even seen video demos from Voice Actors. These are short videos creatively made up with the actors mp3 voice demo. Agents seem to love this type of promotion. Talk about Video Promotion replacing Video Advertising and even old mp3 audio advertising. See http://www.mynextdemo.com

  3. Massimo Martinotti from Mia , September 1, 2009 at 4:41 p.m.

    I believe that webvideo should not be used alone. It should be based on transmedia and synergic storytelling: Stories so great that they cannot be squeezed within a single medium or platform. We should create as many point of entry into the video content as possible and offer a transmedia experience that gives users resources to eventually generate their own stories in a collaborative model of authorship.

  4. Rob Sandie , September 1, 2009 at 5:03 p.m.

    #5 is biggest point in my opinion of the entire article. Web video deserves more interactivity. At Viddler, we do instream comments and tagging to help increase the engagement and interactivity. This helps us drive higher clickthrough rate on advertising campaigns, total time watched and have done some tests with brands on receiving comments on the video ad itself with a ton of success.

    Great article. Thanks Phil.

  5. Martin Russ from Real Time Content , September 2, 2009 at 11:34 a.m.

    Cool article! But I'd merge 2,3,4 and 5 together and predict that online video will be short promotional videos mixed with personalized/customized video that is highly relevant to the consumer, and tells the stories that they want to see. Once you've moved away from a broadcast model, then the consumer wants to be in control, and the future of video advertising needs to work with the consumer.

    Our experience so far is that when you allow people to choose whzt they see in promotional material, then their engagement goes up, and they explore more - people even watch adverts multiple times voluntarily!

    http://www.realtimecontent.com

  6. Jimm Fox from One Market Media , September 2, 2009 at 1:02 p.m.

    Philip, nicely done.
    Advertising is disruptive. Relating to your points #3 and #4 promotion will not only be less disruptive, in some cases it will be become desired content - created by smart companies that are able to integrate their value into informational and entertainment content. With the artificial constraints of broadcast media gone this content will take on infinite forms. I've posted about future roles of Chief Content Officers in organizations. See http:onemarketmedia.com/blog

  7. Matt Weeks from WorkersCount, Inc. , September 17, 2009 at 12:59 p.m.

    Hi Phil, great observations on the future of video advertising. I’d add a number 6, which is: “Consumers will be more in control of their ad stream.” And a number 7, which is “Discovery will get easier.”

    As we move closer to “addressable” advertising and “personalized” advertising some of the issues you mention go away. Namely, we won’t be so concerned about ad form, or ad roll length, issues around product placement vs. sponsorship will diminish as we stop swinging the bat in a dark room. At EyeTMedia we are laying the predictive advertising metrics groundwork for the coming ubiquity of IPTV, which enables much more of a personalized and accurate match-up between brand messages and receptive consumers. We enable the triumvirate of “Intention, Attention and Engagement” to be captured and acted-upon by advertisers and publishers, for the benefit of consumers. We’re building a bridge between the old world and the new, including such radical (but sensible) features as “personal-cast” of content,” ad screening,” as well as linking discovery and sharing to ad performance metrics, benchmarks and insights.

    Your point about video migrating to the Internet will become a non-issue as IPTV gains footprint, and as flat-panel companies experiment with App stores, “decks” and open standards. My now-8 year old daughter won’t know and won’t care about “how” her entertainment is delivered, or though what pipes. But she will be impatient with those who don’t deliver it to her when, where and how she wants it.

    The big win for those of us trying to suss-out how to thrill consumers with ads they want to see, is that all entertainment experience will be via an IP connection (mobile included) so that we will be able to engage in a meaningful dialogue and respond intelligently to what consumers are telling us explicitly and implicitly via their behaviors and history.

    There are experiments that may leapfrog IPTV-like experiences and usability, so that disruptors may enter this market and threaten the set top box altogether. Yahoo! widgets is just the beginning, and we can expect hundreds of experiments building on that crude example and others.

    The abundance of high-quality content has made casual observers into passionate consumers of online video. It is up to us to address the items on your list above, to ensure that we pay attention to “Content, Control, and Community” (our mantra at EyeTMedia) to push all members of our community to pay attention to the consumer experience first.

    The entertainment world has changed with the millennial generation and these expectations are rapidly bleeding up to my generation (young boomers).

    If we are successful in bringing the brand messages together with consumers in a way that “respects and reflects” their (consumers’) preferences, ad rates will rise as campaigns improve, and more money will flow into the online video ad spend sector of that online ad spend that you point out as growing disproportionately. And we all hope that this is enough to raise ad rates to the level that content owners get confident enough to continue to keep ad-supported free or nearly-free content flowing via the Internet. Don’t get me started on “TV Anywhere.”
    Keep up the great work. Looking forward to your next article.
    Matt Weeks (650) 520-8808 mweeks@eyetmedia.com
    www.eyetmedia.com