Monday, February 19, 2007

Web Video: The Spirit Is Willing, the Model Is Weak

Credit cutting-edge advertisers: when they see a significant new media model, they work to get in on the ground floor and establish early leadership however possible. In an increasingly digital world, it makes good business sense to be recognized as leading-edge, and moving first into nascent technologies helps that cause nicely. But doing so has to be a "near-future" rather than "right now" consideration, and sometimes moving first also means recognizing that conditions may not be quite right quite yet to make an immediate move-the-needle splash.

That's where online video appears to be at the moment, as this Ad Age article will attest. With digital ad spend expected to exceed $20B in 2007, according to eMarketer, less than 4% (some $775MM) of that will come from video.

According to the Ad Age article, the key inhibitors to make an immediate consumer impact in online video are:

  • Fragmented audiences (therefore, hard to generate reach quickly).
  • Limited ad inventory availability.
  • Lack of web-specific video content to sponsor.
  • Ad buying model still evolving.
Industry pundits believe online video viewership must at least partially migrate from traditional TV viewership -- not all online video viewership can be incremental, after all. And the dollars must follow too, says pundit wisdom, as much as 10% of the current $65B by 2010. How can an effective system of categorizing the viewing options and congregating the viewers and ad inventory be created, in such a way that it will be easy for online sellers and buyers to deal with?

But that's only half of the problem. The other half is, where are online viewers going to be watching their videos, even in the next few months? The market is so young and in such flux, that's a major issue. Can viewers be conditioned to accept advertising? What's the proper ad length? Where does it belong during the program? Is the traditional content-plus-ad spot even going to end up being the dominant format long-term?

Some major players are going to have to make some very large bets to try to mold the market to their liking, and many of these players are going to have conflicting agendas with others, and winners and losers will be declared. But that's the way new business models evolve, and video advertising will be no different.

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