• by Ashkan Karbasfrooshan , Op-Ed Contributor, May 21, 2012

At last week’s OMMA Video in New York City, I sat and watched a handful of panels before mine, with the common denominator being: “Online video’s doing great, but, well, not as great we all expected.”

Indeed, when I started my company in 2006, I recall seeing projections for $7.1 billion in online video advertising by 2012.  I think we’ll be lucky if we hit $4 billion this year, up from the $2 billion video generated in advertising in the U.S. in 2011.  Of course, as my panelists stressed: With 40% annual growth rates, online video is now a real business.

Why Didn’t Online Video Meet Expectations?

If I were to go to the root of the symptoms and distill the cause, I’d summarize it as such:

There’s a major disconnect between publishers that have the audience, brands, sales force, ad relationships and trust, and those that have the kind of video views that advertisers seek. 

In this context, publishers include
1. original web natives like About.com, MSNBC.com, Alloy etc.;
2. print media like New York Times and Gannett, as well as
3. the digital units of television powerhouses like Viacom or News Corp., and
4.  all of the new small/mid/large, mid- and long-tail sites that are popular.

Those in 1), 2) and 3), command the highest ad rates but may have -- relatively speaking -- less video volume to sell or less variety and depth in their content library.

Over the past decade we have seen aggregators rise by gathering UGC, pirated content as well as professional (premium and super-premium) content.  But they either lacked the sales force or rights to sell ads -- or, even if they obtained rights to the professional content, there was too much unsafe material that drove advertisers to the hills.  In other words, aggregators lacked marketers’ trust, partly because across the board the vast majority of views emanate from unsafe content, to this day.

Then some new-media producers came along and saw the need for premium made-for-Web content, but these failed to build any owned & operated presence due to weak SEO, audience fragmentation, and the very nature of video content (unlike with an article, you can’t paste half of it on an aggregator’s site and link to the rest).  Indeed, the percentage of producers that had their own website fell from 57% in 2007 to 18% in 2010. Today it’s probably 5%.

In turn, redistributors saw this opportunity and filled the gap by aggregating content from traditional and new-media producers and redistributing it on publishers that had big enough audiences but lacked video content.  But by generally preventing publishers from ingesting the content in their own player or keeping the right to sell the ads, many of the redistributors failed to fully capitalize on this opportunity. 

The portals have always blazed a trail for video programming, though most of it was intended for marketers, and thus, a bit less pertinent to the average viewer.  While Yahoo, MSN and AOL command large audiences, the percentage of video watchers relative to their total reach remains small. And as Machinima CEO Allen DeBevoise said, many of these have fairly low engagement levels when measured by video views by unique visitor.

The Light at the End of the Tunnel May, In Fact, be an Oncoming Train

Publishers ought to be producing content in droves, but they don’t, generally because creating content for existing organizations tends to take time and be expensive. 

Instead, they could license producers’ content directly in order to secure the right to sell ads (or they could outright acquire it, as Discovery did when it acquired Revision3).  But to do this would require an internal discussion between the business and programming side, since publishers tend to have their own text and/or video content with its own editorial POV.  As such, while the employees on the business side fully acknowledge how producers solve some of the publishers’ pains, those on the editorial display the “not invented here” syndrome that is so prevalent in technology realms.

When video advertising was smaller and growing more slowly, the editors’ resistance was accepted by their business brethren.  But combined with the failure to scale the production of quality content at scale and low cost, time is running out. The fate of publishers’ transition to the video era is at stake. 

This reminds me of the frog-in-the-water analogy.   As video has grown in importance, publishers have managed to retain their relevance despite leading in video -- but over time, their inability to adapt may cause their end.  It won’t be sudden, but it’s inevitable.