Original URL: http://www.theregister.co.uk/2007/08/13/video_advert_growth/

Future looks bright for video ads

Runt of the advertising litter to grow up fast

By Emmet Ryan

Posted in CIO, 13th August 2007 10:08 GMT

The revolution will be televised but you'll have to sit through the ads first.

In the new Simpsons movie, President Arnold Schwarzenegger declares that he "was elected to lead not to read", and now advertisers are trying to ensure literacy is not a pre-requisite for consumers they target oonline.

Video advertising is set to make a significant impact on the online advertising market in the coming years, but the outlets for Irish advertisers at present are limited.

"There is a huge demand amongst advertisers, but so far the only website in Ireland selling advertising in video content to a significant degree is RTE.ie," said David Murphy, chief operating officer of Sales Online, an online advertising company.

This lack of resellers of video content is a stumbling block for potential advertisers. While many media organisations sell text content, such as news stories, for use on other websites, there is quite a large gap in the video market.

"There aren't really any individual companies producing video content to resell into websites," said Murphy. "The video opportunities aren't out there at present."

He went on to say though that the wider availability of broadband was making more companies look at video-based ads as an option, and it was likely to encourage more organisations to develop video content. The few existing providers of video-based content, such as RTE, may also look to expand their current offerings by enticing advertisers with content that is only available via the web.

Video advertising: small fry in a big pond

So while online advertising is a phenomenon of sorts in terms of its growth, at present, video is far and away the runt of the online advertising litter.

"Out of all the money spent, search-based advertising, such as Google ads, accounts for 49 per cent of the market, display and banner ads have 30 per cent of the market, while most of the rest is covered by classified ads," said Murphy.

"Video has less than one per cent f the market. It's a low base but it will grow substantially in the near future," he predicted.

Murphy's belief in the potential of online video advertising is backed up by a study carried out by research firm eMarketer, which estimates that the video segment of the US online advertising market will be worth $775m this year, up from $410m in 2006 and $55m in 2002.

The outlook for the future is even more positive with online video advertising in the US alone expected to be worth $4.3bn by 2011.

Despite these significant expectations for the US market, the format is still in the embryonic stages in Ireland, with the main broadcaster RTE only providing video streaming since June of this year.

"It is very early days for advertising around streaming video content, but we expect that it will become a popular format by Christmas and will be widely used in 2008," said Aisling McCabe, sales and business development manager for RTE.ie.

Video ads are delivered in two formats: Rolling over traditional banner ads can make them play video content, or ads are simply presented at the start or end of video content accessed by users online.

The latter format has been adopted by RTE, with 15-second ads appearing at the start of every second video stream, meaning users won't necessarily have to put up with ads on every video they access. Ford was the first to use the service with an ad for its Mondeo car.

Stephen McCormack, chief executive of Wildwave, a firm that provides and distributes online video channels, explains that the online video format offers advertisers a different way to engage with their target market.

"Video advertising is very attractive as you can get more attention and more interaction from the viewer than with banners or Google ads," he said.

The launch of sites such as YouTube has seen TV viewers flock online in search of new content. However, while the short burst of content available on video sharing sites such as YouTube is free, professionally-produced programmes online tend to come on a pay-per-view basis, a major disadvantage compared to traditional television.

McCormack said advertising offers a means to even the odds. "There is less of a willingness among internet users to pay for content online and carrying advertising presents a way to deliver this content for free," he said.

The past year or so has seen several video streaming providers, some legal and some not so legal, pop up and become popular among users. The provider creating the most buzz at present is the legal, and therefore advertiser-friendly, Joost. The service, pronounced "juiced", has over one million subscribers already, no small feat considering it has not officially been launched yet.

Viacom, which owns MTV and Paramount Pictures, and Wallace and Gromit creators Aardman animations are among the media companies committed to the format.

With Irish advertisers demanding more means to deliver video content online, providers like Joost may be just what they need to quench their thirst.

© 2007 ENN