12 Surprising Things Holding Back Online Video Advertising

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Saturday, January 16, 2010; 3:40 AM

Editor's note: Earlier this week, guest writer Ashkan Karbasfrooshan wrote a post about the state of online video. In this post he follows up with some thoughts on what's holding back this budding industry. Karbasfrooshan is the founder and CEO of WatchMojo, a leading producer of premium, informative and entertaining video content. The company?s catalog of 5,000 videos has generated over 100 million streams since 2006. Photo credit: Flickr/Paraflyer.

After four years in the online video business, one thing is clear: if you produce high quality content and build sufficient distribution across a large enough number of consumer touch points, you can generate more than enough revenue from multiple sources and platforms to build a profitable, stand-alone business. But no one said it would be quick or easy. Building distribution isn't obvious and most producers fail to build any meaningful reach, but if you can hatch an editorial direction and business strategy that can attract an audience, over time you will be able to create a real business around it. But keep in mind the surprises below.

Surprise #1: Lack of Definitions and Standards After All of These Years

Steven Spielberg was trying to transition online with Pop.com in the 1990s and, until his resignation last week, Real Networks' Rob Glaser has been "at this" for 16 years since 1994 . Yet to this day, in online video, we still don't speak a common language.

Heck, we're not even on the same planet. The first thing you realize about video advertising is that most of the money being generated from video content isn?t derived from in-stream advertising (such as pre-,mid-, or post-roll) but rather by in-banner ads (be they standard display ads or rich media). Yet when you look at the projections being forecast by eMarketer and Forrester, they focus mainly on videos sold inside the video player.

Meanwhile, as online video consumption continues to soar, it is clear that the share of total advertising for video content is going to be much larger than the projections suggest. YouTube, for example, sells pre-roll ads on an infinitely small percentage of its videos. They generate the lion?s share via display banners. Personally, I think that while display banners aren?t worth much in articles because a reader scrolls down quickly past them, next to video content they are worth a lot more.

But with so much video being consumed on third-party sites, how can producers stay in business, let alone thrive?

One answer, of course, is branded content, which remains unproven at best, and the latest fad at worst.

Surprise #2: The Myth That Branded Content Is a New Thing

Branded content can be many things. It is ultimately the blurring of church and state, or information and advertising. Examples are numerous and include:

Soap operas, which were funded initially by Procter & GambleThat ubiquitous Coca Cola cup on American IdolA web series about a couple trying to conceive sponsored by a home pregnancy testHow-to videos featuring products, such as the use of a particular vodka or gin in a how-to-make-a-martini video.

Whereas publishers have always relied in part on advertiser support, branded content tends to be fully supported by a marketer. With the so-called death of the 30-second spot and the short-form nature of online video entertainment, the appeal of branded content is growing among video producers desperate to make a buck.


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