October 7, 2008
Online video is in the midst of a crisis. It's not a crisis of creativity -- the amount of content being uploaded every day, and the range of quality programming are truly astounding. Rather, the crisis lies in revenue. Making a profitable business out of online video is extremely difficult – and this means less work for the video pros who are editing and designing this content.
Liz Gannes' analysis on GigaOm touches upon a few important issues. She notes that CPMs are decreasing amidst increasing inventory levels, and advertisers are reluctant to put their messages next to user-generated content. But there's more to the picture than that.
I see four additional issues that are contributing to this failing ecosystem of online video advertising. The first is a lack of a cohesive advertising infrastructure. Part of this is a technology issue. Advertisers, publishers and content creators are working with different video advertising platforms, formats, and systems to measure viewership and engagement. The result: Vendors and their agencies have to work much harder to evaluate and execute a campaign. In many cases, they are forced to limit themselves in terms of the type of advertising and the outlets that their messages are shown on.
Second, there is a huge diversity of video programming to choose from, much of it focused on niche topics or very focused audiences. In order to get a half-million eyeballs on a certain ad, agencies may have to divvy up their buy amongst a multitude of smaller programs. Extra work is required, and this increases the chance that they will have to accommodate the different technology platforms and measurement tools mentioned above. In addition, programs with small audiences may be excluded from consideration -- how many deep-pocketed vendors want to spend time and money on a program that has only a thousand dedicated viewers each week?
Third, advertising professionals in agencies and publishers' sales teams are not pushing aggressively into online video. Who can blame them? In addition to the problems listed above, there's still a lot of uncertainty associated with online video advertising. Everyone seems to be experimenting with features and formats, and new players are constantly entering the game. Others have shied away from video owing to fears of a recession. No wonder eMarketer has scaled back earlier growth projections, and many advertisers and sales teams are sticking with models and formats that they are comfortable with.
Finally, one of the biggest obstacles to online video isn't on the advertising side. It's on the content creation side. Producing content is a very labour-intensive process, and video is a very demanding medium. Unless you've worked with video before, it's difficult to comprehend how expensive video can be. Yes, it's possible to take a low-budget approach to production with Flip cameras, YouTube, and other cheap or free DIY tools, but the amount of effort required to create a single piece of content is still relatively high compared to content based on text or still imagery. Sustaining any programming effort over time will suck up a great deal of time and money, and there is no guarantee that viewers -- or advertisers -- will flock to the program. Many ambitious technology publishers have learned a hard lesson trying to make advertising-supported online programming work, but have been forced to eventually cancel programs because the revenue is just not there.
What does the future hold for online video advertising? Certainly, audiences for online video will continue to grow, and advertisers will follow those audiences. There are also some special opportunities in online video that go beyond the simple preroll and postroll formulas that are common today. Earlier this year on The Industry Standard, Melissa Chang outlined three online video formats that she thinks could take the market by storm, including two that leverage the interactive nature of the Web.
However, it will take time for these technologies to develop, and for advertisers to understand and embrace the potential of online video. In other words, growth in the online video advertising market will be limited -- at least in the short term.
Posted by: Ian Lamont
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Comments
Posted by Brett Hill on October 8, 2008 :
Ian,
Great article! I believe there is a future in online video advertising but there needs to be more econmically friendly solutions. There are still millions of businesses out there that have been left out of traditional and now online video advertising because it is just too cost prohibitive!
As for ads appearing next to user generated content, this becomes more of an issue for advertisers creating video campaigns. I would be reluctant to advertise this way as after trying a 2 week campaign and looking at refferring URL's--our ad did played next to some questionable and even porno and gamblimg related content. Maybe that's because we have the word "Hot" in our name (ww.hotpluto.com)Who knows? That's the issue!
Anyway, we are an all-Video Business Directory. This is a low cost alternative that is completely non-intrusive. It also gives the smaller companies the opportunity to finally play on a level field.
Brett Hill- CEO
www.hotpluto.com
The creative stuff we come across that we've just got to share (rather than simply getting on with creating Digital Arts magazine)
