eMarketer Dramatically Lowers Online Video Ad Forecast

EMarketer now expects domestic online video ad spending to reach just $505 million this year--a dramatic downturn from the research firm's $1.4 billion estimate in February.

The revised spending projections are the result of changes in methodology, based on historical data from the Interactive Advertising Bureau, eMarketer's benchmark source. eMarketer's revised estimates are also much closer to those released by Interpublic's Magna unit in July. Magna Director of Industry Analysis Brian Wieser projected online video advertising in the U.S. would reach $555 million in 2008, up 54% from 2007, and forecast it would grow another 45% to $805 million in 2009.

eMarketer's lowered estimate represents an increase of 55.9% over its 2007 spending estimates.

U.S. online video ad spending is expected to grab only 2% of total Internet ad spending and 0.7% of TV ad spending in 2008.

In addition, eMarketer projects that nearly 67% of U.S. Internet users will view online video ads at least once a month in 2008.

"A great indicator that online video will reach a mainstream audience is the 129.5 million people who will watch online video ads in 2008," the eMarketer report said. "By 2013, an estimated 183 million people in the U.S. will watch online videos, a mere 4.9% change compared with the prior year."

The majority of video consumed online today is in the form of clips rather than full-length TV episodes or movies. The most popular online video content, watched by more than 40% of the U.S. online video audience, is clips of 5 minutes or less. These consist of news, jokes, movie trailers, music videos, and TV shows.

"Even as video becomes the great growth area for Internet advertising, there's a major disconnect between the amount of time people spend with short-form video--especially user-generated--and the ad dollars that accompany such video content," said eMarketer senior analyst David Hallerman. "However, as media companies change their business model, putting more and more professionally created video content online, the audience--and related ad dollars--will increase dramatically."

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