Digital Video Ads Expected To Hit $5B By 2016

Hulu-By 2016, domestic digital video ad spending will explode by over 250%, from $2 billion in 2011 to $5.4 billion.

The estimate, from Forrester, is largely attributed to a renaissance in quality, brand-safe video content, a proliferation in video-friendly devices and the maturing of younger online adept consumers.  

As such, Forrester analyst Tracy Stokes predicts that TV is next in line for a dramatic digital makeover.

“Linear TV is unrivaled in its audience reach, but various forms of digital video are emerging as efficient advertising channels that enable marketers to target and engage consumers on a deeper level,” according to Stokes. “Forward-looking marketers will shift their approach away from planning silos and form a holistic video strategy that integrates TV and digital video into one team.”

Ballooning video content is the result of a concerted effort by top Web companies. Along with Yahoo and Hulu, Google recently announced YouTube’s network of more than 100 professionally produced content channels.

According to Forrester, 37 million U.S. households currently own a connected device that enables them to watch digital video on their TV screen -- up from fewer than 25 million in 2010.

Among these connected households, younger consumers lead the way, outpacing the overall population in adoption by nearly 20 percentage points.

Forrester projects connected device penetration will reach 50% in 2016, further opening the fragmentation floodgates of video consumption options.

Following consumer eyeballs, ad sellers from both TV and digital video are beginning to adapt what they package to media buyers, while new cross-platform measurement options include support for online video.

“Cross-platform measurement has been a primary barrier to buying both online and traditional TV as part of an integrated media strategy,” according to Stokes. “Companies like Nielsen, Rentrak and Kantar are working on new metrics that will allow media buyers to plan and buy across TV and digital.”

For example, Nielsen’s new Online Campaign Ratings product allows media buyers to quantify online video campaigns in terms of gross ratings points (GRPs) and measure TV and digital video performance with a single metric. 

Meanwhile, major advertising sellers like ESPN are partnering with technology platforms like FreeWheel to monetize their digital video inventory and sell integrated video campaigns across TV and digital, while TV networks that skew younger, like The CW Television Network and Fox, began to offer marketers packaged deals of TV and digital video ad placements at the fall 2011 TV upfronts.

Furthermore, online video ad networks like Tremor Video, YuMe and are working with TV manufacturers like LG and cable companies like Cablevision to apply the targeting benefits of digital video ads from the PC to the TV screen. These online video innovators join Google and a host of new startups, like Accelerated Media and Simulmedia, which focus specifically on bringing audience targeting and interactivity to TV ads.

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