Commentary

I Stream, You Stream

After years of fits and starts, online video advertising has grown tremendously in the past twelve months. Advertiser demand is up, inventory is on the rise, and the market is set to explode.

It all began last October, when Starcom MediaVest Group (SMVG) declared that video was a "multiplatform medium," and started actively pursuing online video buys to complement their television buys. SMVG launched a "broadband embrace," which amounted to an upfront buy of online video totaling nearly $10 million.

By focusing on in-stream ads - where an online video ad is shown to a user directly before a piece of online video content, mimicking the television ad model - SMVG showed a great understanding of the market, and helped advance the cause of online video.

That decision finally, mercifully, took the focus away from video banners, which are too invasive to be effective, and put it on in-stream ads, a format both consumers and advertisers understand and accept. SMVG had started a trend, and in the months that followed both they and other agencies bought additional in-stream inventory.

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Publishers responded to this increased demand for in-stream video ads, and are now offering more video content than ever before. In coordination with the SMVG upfront buy, Microsoft introduced MSN Video, and was almost immediately serving tens of millions of video streams each month.

Yahoo! Launch and ESPN Motion, two of the early leaders in the space, have steadily added content and ad inventory this year. AOL, Feedroom, and others quietly stream tens of millions of clips each month as well.

In addition to rolling out new video content, publishers are also increasing the inventory available within that content. In the past, sites artificially limited in-stream ad inventory, trying to introduce the format slowly without annoying users.

Often, publishers integrated so little advertising that many consumers had an ad-free experience. Emboldened by the new dollars flowing into the space and the lack of consumer pushback, sites are steadily increasing the ad-to-content ratio.

The increased advertiser demand, the rapid addition of new content and the relaxation of artificial inventory controls will fuel remarkable growth for online video advertising. At JupiterResearch, we're predicting streaming media advertising will generate $121 million in the United States in 2004, up 57 percent over 2003. In 2009, we're forecasting that the market will reach $657 million.

With in-stream video finally hitting its stride, sites that offer the format and agencies that understand how to use it will have a decided advantage in the coming months and years. Over the next several weeks, I'll be examining several of the players in online video advertising. Stay tuned for a look at the leaders.

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