Commentary

All Great Internet Companies Eventually Build Or Buy a Video Ad Network

Lately, I've been looking into the evolution of successful Internet companies. How did they succeed? Which factors were the game-changers for them? Earlier, I wrote an article that addressed a few of these issues, where I dove into why many successful Internet companies build or buy an ad network.  

Being in the online video business, I began to wonder: Is the same true for video networks? I think the answer is yes. Here's why:

1.     The "big TV budgets" all great Internet companies are fighting for are made up entirely of video advertising.  Sometimes the most obvious points are the hardest to see. Video advertising is the preferred ad unit for most major marketers, so as budgets continue to shift, video demand will increase. The research and data are undeniable; video outperforms every branded ad unit on the Web. The only issues in the market are scalability and targeting, which will eventually be solved.

2.     All great Internet companies will create video content, use video advertising as a form of monetizing non-video content, or sell ads targeted to their users on other sites with video ad inventory. Fundamentally, the Internet is becoming a video medium and online video advertising is an engaging and rapidly growing category. No powerful publisher will be selling in the market without a video ad offering. As video grows as a piece of the overall ad pie, every major player will fight for their slice.

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3.     Video networks will be larger than the great internet companies until they build or buy their own video networka. The same phenomenon that was observed in display advertising (ad networks becoming bigger than the large publishers) is happening now in video advertising. Last month, six of the top 20 video properties were video ad networks, according to comScore's VideoMetrix report, and within the next 12 months, video networks will likely be the majority of the top five properties. Only YouTube will hold its position, and I would argue it has already built a video ad network of its own.

Obviously, the timeline for this video ad network evolution is likely much longer than it is for display (although many great companies have already made significant moves in the display arena -- Yahoo, Facebook, LinkedIn, Fox Interactive Media and Cox, to name a few). As a result, it is hard to know which steps to take today.

My advice for Internet companies is to focus on video inventory creation or video advertising strategy. If you are able to create meaningful inventory of your own, or if you are able to build a powerful video media network, then there will be many ways to win in the marketplace. 

Alternatively, you can simply focus on becoming a Great Internet Company in your own right. If you succeed, you will be able to make your build vs. buy decisions and determine your own timelines. You can even delay focusing on video entirely, as Facebook has done. The minute Facebook decides to open the video spigot, it will quickly be the largest streamer in the world.  Don't forget, Flickr used to be the default photo site, as YouTube is for videos today.

6 comments about "All Great Internet Companies Eventually Build Or Buy a Video Ad Network".
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  1. The digital Hobo from TheDigitalHobo.com, December 10, 2009 at 2:24 p.m.

    Sounds like a pitch for a "Great Internet Company" to come and buy you, no?

    Guess thats good for the VCs and other investors in you, Tremor, YuMe, BBE, etc.

  2. Rich Reader from WOMbuzz, December 10, 2009 at 2:45 p.m.

    One should infer from Mr. Sacerdoti’s perspective that Video Advertising Networks are among the cream of the picks-and-shovels among the internet industries. One may well agree that the VANs (video ad nets) will outperform the rest of the pack for the next few years.
    However, we need to cut to the chase on what this means for the rest-of-the-internet-world, who are not already great internet companies and who will not ascend to that rank this year or next. Foremost, we should agree that our own strategic goals for video intensification are:

    * Growth
    * Security
    * Sustainable/improved net margins.

    Most of us will never build or buy a video advertising network. On our way to our own strategic imperatives, we must learn to be more effective in how we leverage the new picks-and-shovels of video advertising, whether we be advertisers, content publishers, content owners, or creators.

  3. Jonathan Mirow from BroadbandVideo, Inc., December 10, 2009 at 3:56 p.m.

    Not planning on doing either - we're in the content / webcast / streaming biz - not the ad placement biz. I agree w/the digitalhobo (below), sounds suspiciously like a "come buy me" advertorial to me. Buy us instead - we've got an Emmy, we don't wear suits and we have more fun than human beings deserve to have.

  4. Jonathan Mirow from BroadbandVideo, Inc., December 10, 2009 at 4:06 p.m.

    In a related story - I read this article (written by the CEO of BrightRoll) with an ad for Tremor Media ("The most powerful in-stream ad format") flashing around at the top of the page. I'm not buying a video ad network until they iron the kinks out of the display advertising model.

  5. Jim Cardle from Texas Insider, December 14, 2009 at 6:18 p.m.

    The $64 mill. questions -- "How did they succeed? Which factors were the game-changers?" Great analysis & perspective here, confirming an already in progress video creation inventory process that, at times, becomes frustrating in the tortoise & hare world.

  6. James Wood from HD Productions, December 26, 2009 at 3:45 p.m.

    Todd your advice in the second the last paragraph is key one that people should take note of.

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