Three Ways The Credit Crisis Is Impacting Online Video

by Tod Sacerdoti, Oct 8, 2008, 3:00 PM

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Wow, that was quick! Having been an outspoken proponent of the invincibility of online advertising, I didn't expect to see the credit crisis affecting the industry any time soon. However, the impact is already becoming clear -- and it is happening in a non-intuitive way. Essentially, online ad dollars are not being reduced, they are simply being reallocated. Three factors seem to be at the root of this phenomenon.

First, there is an undeniable flight to quality. The credit crisis is forcing clients to put pressure on agencies to justify every dollar. We are seeing a clear shift in budgets away from weakly branded, high-risk, and "test" placements. Nobody gets fired for buying a branded publisher, and this pressure-cooker environment is clearly favoring strong brands. Weaker publishers are scrambling to find ad fill, and will likely be reducing rates as the market worsens.

Second, branded properties are increasing inventory faster than expected. We have been blown away by the volume of highly branded, broadcast-quality content that has hit the Web over the past three months. As publishers brace themselves for any impact from the credit crisis, a logical reaction is to add more video content. This reaction becomes somewhat self-fulfilling, as more content means more inventory, and more inventory will result in a reallocation of ad dollars as rates fall due to oversupply.

Third, content syndication is shifting dollars in many directions. Many content owners have created elaborate content syndication strategies that enable them to retain the right to sell ads against their content, no matter where it lives. The intention behind this strategy was to avoid sales channel conflict, but it appears to be causing unintended consequences. Now, instead of a large publisher having the right to sell all the inventory on its site, the syndicators are also selling the inventory. However, the syndicators struggle to sell this high-volume, yet hard-to-define inventory and need third parties to help fill remaining space. As a result, we have a plethora of parties representing the same publisher inventory site, which results in a further shift in ad dollars.

Publishers and ad networks with strong brands, well-thought-out content strategies and strategies to add value to their clients will continue to thrive in this new, impacted economy. In fact, they should actually benefit from the credit crisis as dollars move away from weaker brands or players who have been aggressive in arbitraging their advertising. As with all downturns, the best players will gain market share and end up stronger than ever.

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