Behind the Numbers: Go Slow to Grow This Market
Web video is booming, so ad spending can't be far behind
Online video might be popular with viewers, but whether it's profitable is another matter entirely. Currently, an estimated 123.4 million people in the United States will view online video this year, up from 52.3 million in 2003, according to research firm eMarketer. What's more, this year the majority of Web users who watch online video will do so at least once a month.
Despite the rapid adoption by consumers, ad spending on online video remains small, with marketers expected to spend just $775 million on Web video ads in 2007, according to eMarketer. But the good news for online publishers is that ad spending for Web video is expected to surge to $2.9 billion by 2010.
What will drive growth? To some extent, the answer is circular: Consumers will have to embrace, or at least tolerate, online ads before marketers start spending large amounts of money on them. But before consumers accept Web video ads, marketers must devote resources to improving their quality.
"Repurposing a TV commercial isn't going to fly," says eMarketer senior analyst David Hallerman. "They'll have to give back some entertainment, some engagement, and be more subtle about the brand. Most advertising is a way of saying, 'Me, me, me.' That's not what anyone wants to spend their time watching on the Internet." In the future, says Brian Haven, senior analyst at Forrester Research and author of the report Should Your Brand Use Online Video?, advertisers may need to focus more on brand attributes.
"Video viewers really push back against ads that disrupt," adds Haven. "They're not willing to pay for that content." Forrester reported that half of the consumers surveyed about Web ads and video found ads acceptable alongside - but not within - video.
Haven adds that progress in contextual and behavioral targeting will also help grow the market. "Right now," he says, "you get the same ad over and over."
Viral marketing campaigns are likely to prove less important than organic growth at publishers' sites, says Hallerman. "As more people find the sites that interest them, they'll go back more and more, and that's where the majority of the growth will come from. Viral is not - and will not - be the main driver."
Neither will search, he says - at least not until tools that can read into pictures become ubiquitous. Currently, 42 percent of online video users come across clips via search engines - the same proportion as from e-mail links. Half find clips by navigating to sites directly; 48 percent say they discover them randomly.
For now, many consumers say they accept video ads, but few are clicking on them. Forrester found that more than half (52 percent) of Web video users say they never click on video ads to learn more about products, while 39 percent say they seldom do.
Yet 71 percent of video users say they'd rather view an ad than pay for an ad-free video, according to a recent joint AP/AOL survey.
A recent study by the Online Publishers Association concluded that 56 percent of viewers who saw online video ads did nothing in response. The OPA also noted that one in three said video ads made them investigate a Web site, 14 percent went to a store to learn about a product, and 14 percent requested more information.