• by March 14, 2005

America Online says incorporating more video content and related advertising is job No. 1, and key to its Web at-large strategy. AOL and other online publishers say demand for video advertising--pre-roll and in-unit offerings--is mounting, but is demand so great, and inventory so limited, that the Internet media company will hold an "upfront" sales session, mimicking similar events staged by the broadcast, cable, and syndication TV sectors?

It's doubtful, says Michael Barrett, executive vice president of worldwide sales, AOL Media Networks. "It's a year-round process; we're placing [video advertising] assets all the time," but, Barrett says, "while video represents a growing portion of our revenue, it's nowhere near the lion's share of our online ad revenue. Like any area that's in limited supply and high demand, and we try to organize our approach to the marketplace."

"The reason we chose to hold off on it is the whole practice of TV video on the Internet is relatively nascent--there's still more technologically that needs to be done as well as in assessing inventory," Barrett explains, adding: "Our advertising partners weren't clamoring for it."

Still, as AOL continues to build toward a fall re-launch of AOL.com as a major gateway to diverse programming on the Web, it would appear to have virtually unlimited inventory with the aggregation content from AIM, Netscape, Mapquest, Winamp, AOL.com, and its other Web properties. AOL, it would appear, has the most to gain from advance sales. But AOL's Barrett points out that no one in the interactive industry wants to see the frenzied antics and pressures of the TV upfronts transferred to the online advertising sector: "There are some negative connotations," he says.

More than a year ago, Wenda Millard, Yahoo!'s chief ad sales officer, came out strongly opposed to an "upfront," saying that no one in the industry wants to see price gouging on CPMs, and likewise, the commoditization of online advertising. Joanne Bradford, head of ad sales for Microsoft Corp.'s MSN, has also been opposed to any sort of "upfront."

Advance Selling Underway

Still, each of the major portals does conduct advance selling in certain industry sectors--automobiles, retail, and entertainment, for example. Each has long lead times, and the auto segment especially is known for fierce bidding on search terms and prime online real estate. Says Barrett: "A lot of auto marketers are chasing the same inventory. If you can believe it, we're already selling for '06. Is that an auto upfront? I guess it is." Still, Barrett and others prefer not to dub advance sales to certain segments an "upfront."

As for whether AOL will participate in any way with Time Warner sibling units The WB, Turner, and The Cartoon Network at the TV upfronts this year, Barrett says: "We do not have a seat at that table right now, in a formal way, in 2005. If that were something that our advertising partners would desire and they're placing video assets, we'd be overjoyed to work with them in that capacity, but we're not going to dictate that."

Barrett says, regardless of the rate of video adoption by advertisers, online video remains an area that is "over-subscribed from an advertiser desire standpoint versus the number of impressions being generated. There are only so many impressions that are desirable," he explains, adding: "People are snacking on video, and you can only put in so many ad slots. For everyone it becomes a proposition that requires careful management." Online media strategists agree that the inventory remains limited, but there are other methods that can be used to increase inventory, such as streaming live events and adding clickable video that can incorporate product placement.

Meanwhile, Barrett says it's business as usual. He says a new video player that will be ready next month will make it easier for AOL Media Networks sales teams to sell video. A media report by Avenue A/Razorfish earlier this year expects that 2005 will be a landmark year for advertisers' use of online video. Still, video advertising represented just $121 million of the $9.5 billion spent by advertisers on all online media, according to JupiterResearch. The research outfit projects that overall spending on online advertising will swell from $6.6 billion in 2003 to $16.1 billion in 2009, with video growing exponentially.

But Barrett doesn't rule out an advance sales session of sorts when AOL debuts its programming for 2006 this fall. "Our intention would be that as soon as we have our plan set for '06, it would be our plan to show advertisers what we have. I wouldn't rule out a road show."