• by Mark Walsh  @markfwal, January 16, 2009

Average pre-roll ad rates for online video in the fourth quarter dropped 25% from the year-earlier period and 12.5% from the prior quarter, according to video ad network BrightRoll. Pre-roll rates on average were down 14.2% in 2008 from 2007.

BrightRoll, whose network spans hundreds of sites, declined to provide actual average CPM figures for business reasons. But average online video CPMs are generally estimated to run from $20 to $25.

Online video ad rates have been expected to decline gradually as inventory increases, especially with a growing amount of professional content flowing to the Web. The economic downturn is depressing ad pricing more widely, however, and will likely hasten that trend.

But that's not necessarily bad news for online video if it boosts overall ad-buying. "Fundamentally, online video ad inventory has been (and continues to be) overpriced," states the BrightRoll report released Thursday. "As agencies' video ad budgets have grown to millions of dollars, there has been significant pressure (and success) in pushing online video CPMs to converge with rates paid on television. We believe this is good for the category, as it will bring significantly more total dollars into the medium."

Despite an expected slowdown in overall online advertising this year, video is still forecast to grow at a healthy clip. EMarketer projects the category will increase 45% in 2009 to $850 million.

The BrightRoll report also offered data suggesting that pre-roll remains the dominant video ad format. Pre-roll advertising accounted for 83% of campaigns in the fourth quarter of 2008 compared to 63% a year ago. "The optimization to pre-roll is occurring because pre-roll tends to outperform on nearly every metric tracked by advertisers--duration viewed, click-through rate, cost per view, brand lift and change in purchase intent," states the report.

Newer video ad formats such as overlays have emerged as alternatives to pre-rolls, but have yet to gain much traction with advertisers.

Underscoring advertisers' preference for professional content online, BrightRoll this week introduced a new service called BrightRoll Broadcast offering marketers access to only television programming online.