• by Tod Sacerdoti , June 10, 2008

While ample research seems to indicate that HD advertising outperforms standard definition advertising on television, advertisers have been slow to adopt HD advertising at scale, which begs industry pundits to question: Why the hesitation?

On television, HD content has been promoted in an ongoing media blitz but data shows that not everyone is tuning in. By way of example, just 41% of viewers watched the 2008 Super Bowl in HD (according to Nielsen). Far fewer viewers watch HD channels or even have HD capabilities on a regular basis. Put simply: The reach of HD advertising inventory is just not that compelling.

As a result, most HD channels still show the majority of their advertisements in standard definition, which provides a visual example of the industry's reach problem coupled with a poor viewing experience for the user.

The Internet, again, appears to be flipping the traditional model on its head. Advertisers, not content owners, are the driving force behind the growth in HD quality advertising. To understand the dynamics behind this change, we need to explore the online content distribution cost structure, the penetration of HD-ready users on the Web and the nature of where online ad inventory lives.

Television v. Online: Factors for HD Advertising on the Web

The most significant difference between the media properties online vs. those on television is that the largest properties online are all losing money or are barely profitable-the cost of video serving is still high. As such, online content owners haven't aggressively pushed the new video format, given that it will significantly increase the cost structure.

Contrary to popular belief, the vast majority (more than 75%) of Internet users can view HD content online with a good user experience. Broadband penetration and LCD monitor distribution have essentially solved the reach problem for HD advertisers. This evidence strongly points to the fact that most people can be having a better online video experience already-and don't even know it. Moreover, advertisers already have HD-quality ads in digital formats and can serve them to the masses-the targeted masses-at a reach that crushes their counterpart channels on television.

Notably, online video advertisers are not constrained by the whims of the media properties with regards to video inventory. In fact, there is over one thousand times more video inventory outside of the video players on media properties, primarily living inside rich media and other video enabled banner inventory-giving online video advertisers a significant lead over television-specific advertisers in delivering more engaging, customized content to mobile viewers.

The combination of HD- ready users online and the wide availability of online ad inventory has led to an aggressive push of HD video advertising units by advertisers-regardless of the slow roll out of HD video content. The most widely visible example of this trend is the wide distribution of HD movie trailers, which have become the staple of nearly every movie site on the Web.

What's Next? Advertisers Will Decide

With advertisers driving the proliferation of HD quality advertising units across the Web, it brings to question what other innovations will be increasingly more advertiser-driven. Interactive video, storyboarding and video hot spotting are likely to be next, as the initial barriers to adoption has been publisher standardization. However, as with HD, advertisers can go around the slow moving media properties by working with third party networks and aggregators.