Commentary

Five Trends To Watch In Online Video Advertising

It's that magical time of year again. Of course I'm referring to the annual ritual of declaring that the coming year will be The Year of Online Video. Sure, we've heard it all before-and each year has indeed brought online video that much closer to the big time, if not quite living up to the hype. But in 2008, five key trends point to real breakthroughs in the emergence of online video as a major medium --for advertisers as well as consumers and media companies.

1. Must-See Video Goes Portable

To date, most of the excitement around online video has centered on user-generated content. While some of this stuff can rival major media in terms of creativity and entertainment value, for consumers it's more about instant gratification than appointment viewing. If you have a free moment at your desk, you'll click the link for the hilarious webisode du jour, but it wouldn't break your heart to miss it; tomorrow will offer plenty of new options.

But the kind of high-quality online video that will reach critical mass in 2008 is another matter entirely-big-media content like Heroes or 24, high-definition online video, services like Microsoft Media Center. For video that really matters, portability becomes key, so you can watch it wherever, whenever, and however you want.

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This creates a powerful opportunity for advertisers: as consumers move quality downloads from PC to portable device to TV, they'll take seamlessly integrated, optimized advertising with them--and hear the marketer's message anywhere they enjoy video content, from the media room to the carpool to the beach. This unique dynamic will draw increasing ad dollars to online video, fuelling further momentum for high-quality downloads and will create new advertising opportunities.

2. Higher Quality Content Commands a Better Screen

Once you're downloading quality content, the question arises of how you're going to watch it. A cramped browser window might be fine for a cat flushing a toilet-maybe even preferable--but a premium production calls for a richer viewing experience. Fortunately, as prices drop and quality improves, the difference between a TV set and a computer monitor is becoming less and less distinct. In today's WiFi households, they're all just displays, and they're going to be used interchangeably to view both traditional video and Web-based content.

This concept has been a little slow to catch on so far, for both media companies and consumers. The content that could be extended from the PC to the TV hasn't been all that compelling, and AppleTV, which delivers YouTube and iTunes-purchased content to an HD set, hasn't exactly set the world on fire. But this will change as more full-screen destinations and applications launch--Microsoft's Media Center InternetTV, HP's Next.TV, NBC Direct, and so on--and people download more content that lends itself better to a living room couch than a desktop crouch. At that point, online video becomes more fully competitive with TV in its traditional bailiwick--with mobility that TV could only dream of.

3. Advertising Standards Draw the Big Money

The industry has been clamoring for standards in online video formats, placements, tracking, and reporting, and with good reason. A simple standard helped Google and Overture achieve huge success in the text world by making it simple for advertisers to modify and optimize their ads to improve performance. Standardize video ads to help marketers refine their targeting and optimize their creative across platforms, and new dollars will flood into online video.

The same applies for measurement. Data trackers like Nielsen are finally recognizing online video and time-delayed (TiVo) viewing habits, and launching new technologies to gather and analyze granular data about viewer demographics and more. It's a start--but more is needed. It's a little too early to call this a trend rather than an aspiration, but my guess is that 2008 will bring more consistency in the way publishers track and report metrics. It just makes sense: advertisers need scale and consistency before they'll commit big money online. It's too hard for an agency buyer if everything is a "one-off" that needs to be rationalized to their client. Make it easier to buy online video, and they'll beat a path to our door.

4. Transparent Inventory Builds Advertiser Confidence

In the eyes of media buyers, TV has always had one key edge over online video: the ability to know exactly where and when their ad is appearing. Without this kind of transparency and clearly defined types of content in online video, advertisers can't feel confident about what they're really buying--is it contextually relevant? What demographic am I reaching? Is it brand safe? As with standardization, this is as much a challenge to the industry as a prediction, but in 2008 our focus needs to be on making online advertising as simple and safe as TV.

When a TV advertiser says they are showing up on ESPN or the Oxygen network, we have an instinctive feel for what the content is and therefore, who the demographic is. We need to add this to the online video advertising landscape. In addition to the Web sites or domains on which the ad will run, ad networks and Web sites need to name specific content or content channels on which the advertiser is running. In the TV world, it's simple to show the client that their ad is running in the 3rd slot at 4:00 pm on Sunday on the Lifetime network. The highest level of transparency the online video world has been able to offer is: "Just keep clicking on the site until you see your ad. It might take a while." And that's just not going to cut it.

If we can get our act together, the opportunities are tremendous. Major media companies are eager to meet the needs of big advertisers for more efficient multi-platform, multiple-screen campaigns that put the same consistent message everywhere the video appears with a single buy. By tying optimized advertising to video content wherever it goes--streaming, download, mobile--online video ad networks can help content producers meet this need, and encourage advertisers to think of online video as an integral part of their video advertising program.

5. Online-Native Video Gains Respect

The rising quality of online video isn't just a matter of repurposed TV shows. Traditional networks and professional production teams are increasingly developing new content specifically for the online market, recognizing the rise of PCs and other devices as the entertainment option of choice for many people, especially the younger consumers who already spend so much of their time online. Improving content tracking is helping this trend, as producers become comfortable that they can syndicate and monetize their content wherever it lands-PC, TV, or mobile.

Depending on how long it lasts, the writers' strike may have a major impact as well. TV and film writers are already freelancing for online outlets, developing their own content delivery sites, and even pursuing venture funding for media businesses of their own. These are people capable of the highest-quality work, and who are deeply versed in the practices of big media--who will now put that knowledge and expertise to work in new places. It's impossible to tell where it will lead, but any disruption of traditional media models creates a more favorable environment for new models of content creation and delivery.

Add it all up, and 2008 looks to be a busy year. Will all of these trends come to fruition? I hope they will, but it will take more than good intentions. All the signs clearly point to a vast and growing opportunity for the online video advertising industry in the months to come. Whether we rise to the occasion by delivering the transparent, simple, and portable solutions that advertisers are looking for is entirely up to us.

Kadambi is the co-founder and CEO of YuMe Networks. He has over 18 years of experience in the areas of networking, hardware architecture and semiconductors. Prior to co-founding YuMe in 2004, Kadambi was Vice President R&D and Officer of Netopia, Inc., a publicly held manufacturer of DSL equipment and service provider for ISP's and carriers. Kadambi joined Netopia upon its acquisition in 1999 of StarNet Technologies, a VoDSL company he had co-founded.

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