When the online video market began to take hold in 2005, many publishers grappled with the proper way to monetize the emerging online video-watching trend. It wasn't easy, and for the last couple of years there was a question whether it was even possible. Yet, a recent study published by eMarketer shows that while overall online ad sales declined in 2009, "video ad spending growth will far outpace any other online format, running in the 34% to 45% range from 2009 through 2014."
So it seems like publishers have finally found a way to monetize their video assets. How did they make it? And what is next in line for those publishers? The story starts with the well-known 30-second TV ad spot.
TV has popularized the 30-second ad spot. In the early days of online video, publishers and advertisers were trying to repurpose this format to online video. But what worked well in the middle of a 30-minute TV program, did not work well before a 3-minute online video clip. Users simply didn't consider the value of a 3-minute clip to be big enough to "pay for" by watching a 30 second pre-roll.
In the last two years, advertisers, beginning to see the untapped potential in online video advertising, have started producing 15-second spots for online video. The 15-second pre-roll works much better online, producing a mere 16% drop in views (versus 40%-70% with 30-second spots).
The situation for publishers of video content has now reversed. From owners of a non-monetizable video content, they became owners of inventory that is applicable to a vast amount of 15-second pre-rolls that are being produced. Yes, this is the small secret of online video: large portions of semi-professional and professional video content are fully sold.
We expect the trend to continue. Many young users are not watching TV anymore, preferring to consume their video online. And online pre-rolls have many advantages for advertisers when compared to TV spots: they are accurately measurable, the user has to watch them and cannot "change the channel" without losing the ability to watch the original video clip, and the Internet allow advertisers to better target the video ads to the right audience. These advantages, coupled with the growing availability of 15-second spots, will cause ad spend to move from TV to online.
So what should publishers do next?
The answer depends on the type of video content provided by the publisher.
UGC sites should increase the development of more professional videos by either producing it, or syndicating it. On top of it, those publishers should use the right tools to push users to those professional videos that are more monetizable. This can be done by manually promoting specific categories/videos or by automatically biasing the discovery engine engine on the site.
Professional and semi-professional sites should pursue growing their monthly streams, and monetization will then follow. There are two innovative ways to grow streams significantly:
(1) Place relevant video links on article pages to push article readers to become engaged video viewers. Today there are scientific ways to promote personalized videos on articles to best match what users want to watch next.
(2) Generate video streams from outside of your site. Traditionally, this was done by promotional, viral and SEO tools. New tools can also automatically place highly targeted links of your video content within third-party affiliate sites and blogs. In this way, users come across the most relevant videos from your inventory while visiting other sites.
So while it is becoming easier to produce/syndicate and monetize videos (meaning the monetizable inventory grows), it is also easier to distribute your videos across the Web. The bigger challenge will be to make sure users discover what they really want. Otherwise, they'll just go away.
Once the discovery code is cracked, the floodgates will open, users will stay longer, watch more, and come back. Your challenge then will be to best price your pre-roll ads, and build your brand in the advertisers' marketplace.