• by Michelle , Saar Safra , April 18, 2005

Online video advertising is the hottest product on the market today. More importantly, the media is reaching the point where it is scalable. However, online video advertising has limitations and downsides we do not yet comprehend; like in a gold rush, reality is blinded by great potential.

While not everyone would associate the development of online advertising to that of non-software technology, the two are tightly interconnected, especially by hardware and network technologies. Six years ago, the main hurdle to rich media (RM) advertising was delivery of the ad content. Things moved slower back then, even if the stock markets moved faster. Back then, we would not have been able to deliver 100K ads over the Web and locate suitable media for such advertising (I refer to media as online publisher's properties representing broadband users). Back in 1999, one had to target RM advertising to broadband publishers and there weren't many of them (a year later there were even fewer).

However, with the increased adoption of broadband access by home users, not to mention the ubiquitous high-speed access businesses offer, content delivery has become less of an issue and the focus has shifted to user-experience. I call this process "The Wheel of Fortune"; the best analogy is that of a chicken and egg.

As broadband adoption grew, online advertising became more commonly used and that process gave birth to RM. This increased the value of media and publishers established valid revenue sources from advertising on their properties. As publishers' revenues from advertising increased, their sites' usability improved and the amount of content they published increased. In turn, this caused that content to load slower, which pushed users to adopt broadband for better surfing and faster access.

Alternative paths could have been less beneficial for certain parties (surfers for example), but all entities involved in this cycle benefited from this turn of events, thus, "The Wheel of Fortune." With this swirl of technology, the next natural and logical step for online advertising was the inception of RM with a fresh twist: video. Now that we know what contributed to the evolution of modern online advertising, we can start speculating where it is going.

The vision of digital marketing was always the "perfect marketing mix" - even though it is almost impossible to achieve - due mainly to the fact that the perfect mix consists not only of different formats on different media, but also of a variety of goals bundled into a single marketing initiative. There is a spectrum of goals for marketing campaigns, including raising awareness, increasing interest, expanding involvement, and improving conversion rates. Achieving a matrix of those targets in a single marketing campaign has been nearly impossible, until today.

The limitations of TV advertising are well known to all: It suffers from viewer passiveness, the inability to interact, segmentation limitations, and more. However, TV has "video" content as its biggest advantage over any other advertising medium.

The lack of interactivity, segmentation, and accurate tracking pushed people to look for alternate advertising mediums; efforts evolved largely around interactive TV technologies and around online video advertising. While video advertising on the Web today is an adequate combination of TV advertising with the ability to segment, target, and track accurately, it nonetheless lacks interactivity, a crucial element. With all the video products offered, the interactive video format is still missing. Interactive video is what marketers want and still don't know and it is what "rich media" was in 2000. Everybody needed it, but they didn't know it at the time.

We are seeing buds of such technologies today, even if it may be too early to describe them as technologies at all; it might be more accurate to call them dry runs, trials, or bold experiments. Imagine a video ad for a clothing brand where you see people walk in fashionable clothes similar to what is shown on TV. Apart from the ad being targeted to the right segment and accurately tracked, users would be able to click on the video and obtain additional information in real-time about the specific item they clicked!

There are advertising technologies that can accomplish this today, but they are Flash-based. In the near future, we will see video combined with the ability to segment, target, convert, and track. There are concrete examples of such advertising, ESPN.com's new video format is one of them, but it is not new technology. ESPN's new advertising format is simply leveraging Flash's ability to combine streaming video with advanced user interaction features. However, this is one publisher and their first experiment. We will no doubt see more to come in the near future.