Web Video Advertising To Grow 55% Annually – Faster Than Any Other Ad Format Online

Web Video Advertising To Grow 55% Annually   Faster Than Any Other Ad Format Online

Online-video advertising spending looks to be growing again in 2011, even after an impressive 40% growth from 2009 to 2010. Media buyers surveyed by Deutsche Bank "Internet Industry Outlook" report (Jan. 18, 2010, see PDF). To fund online-video spending, many predict to cannibalize display advertising and some expect to move as much as 5% of television budgets.

According to an IDATE report titled, "The World Online Advertising Market," – "Online video sites and services will be the first to benefit from this boom. Ad revenues from online video sites will grow at an average annual rate of 54.4%, to capture 13% of the Internet advertising market in 2014 with 11.2 billion EUR. Video will in fact be the largest of the three emerging markets in the US and Europe in 2014…"

So, What's Driving Video Ad Growth?

"Video advertising is set to become the most dynamic format in the online ad market, propelled by technical advances in the field and an "explosion" of online video consumption (source: UTalk)."

Why? It's not for the "higher engagement" reasons that we'd expect: Media buyers cite less clutter, better targeting, more professional content available, and lower cost of production (relative to television). Indeed I've seen many CPG brands commissioning video production for web, and at costs approximating 30% of what they're spending for television commercials.

The audience of online video, of course, continues to grow. In November about 172 million viewers consumed 35 billion videos in more than 5 billion sessions.

Web Video Advertising To Grow 55% Annually   Faster Than Any Other Ad Format Online

Where's YouTube's Profit?

While Google keeps YouTube revenue under wraps, it claimed recently to have doubled in 2010 relative to 2011. Christopher Rick is estimating YouTube's revenue in 2011 at $2 billion based on a Citigroup report (predicting $1.1 billion) and some solid or maybe conservative assumptions (using an adjusted CPM and not including homepage takeover programs). With online advertising spending reaching $28.5 billion, it seems reasonable to expect YouTube to fetch at least 3 percent of it given the deep relationships between Google and advertisers.

If Google/YouTube paid more attention to media buying agencies, $2 billion would be a layup. Instead, I'd predict Facebook to be the beneficiary of dollars otherwise going to the world's largest video platform. YouTube is, however, benefiting from both premium ad buys (minority) and targeted ads purchased via Adsense.

Web Video Advertising To Grow 55% Annually   Faster Than Any Other Ad Format Online

Digital Spending Vs. Offline Advertising

eMarketer, like Deutsch, reports double-digit percent growth for online advertising overall, and it's poised to overtake newspaper advertising spending in 2011.

Web Video Advertising To Grow 55% Annually   Faster Than Any Other Ad Format Online

Online advertising spending, overall, is growing in double digits

What strikes me as particularly interesting is that online advertising (as it surpasses $30 billion) is not just overtaking print (newspaper), but becoming a larger and larger percent of the overall advertising mix. Online ad spending was, just years ago, a paltry 3-5 percent of the marketing budget. Now it's well into double digit percents (see Deutsche graphic below). This could change more dramatically if media buyers move even small portions of those bloated television budgets to fuel online-video advertising.

Web Video Advertising To Grow 55% Annually   Faster Than Any Other Ad Format Online

Online ad spending is becoming a larger percent of offline ad budgets

Will online-video dip into those beefy television budgets? I think it will this year, but much more so in 2012 as advertisers become comfortable with the medium and viewing becomes increasingly easier and mainstream.

Consumption Changes

Online-video used to be the workplace escape. But we're seeing those Wednesday online-video view dips, and stronger weekend views (see Tubemogul/Brightcove report), as people become more comfortable watching content on web-TV devices and gaming consoles. We're also seeing broadband subscriptions grow to 500 million.

Online-video is converging with the large screen we call HDTV (devices are proliferating and long form consumption is on the rise), the medium will benefit more naturally from the far heftier and less scrutinized television budgets. Just remember, kids. IAB said to keep it "mature.”

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About the Author -
Kevin "Nalts" Nalty is a trusted video marketing expert, speaker, and consultant (hire him, it will be well worth it). Kevin (AKA Nalts) is also one of the most successful viral comedian/entertainers (video creators) on YouTube. He often writes about his experiences with web video on his blog at WillVideoForFood.com and he is the author of "Beyond Viral: How to Attract Customers, Promote Your Brand, and Make Money With Online Video." View All Posts By -

What do you think? ▼
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