Online video advertising faces its own set of challenges, including:

–        Audience fragmentation

–        Proliferation of UGC increasing inventory, which drives down ad rates

–        Piracy

–        Lack of a prevailing ad format

Exacerbating matters is the fact that in our over-eager state as salespeople, we tend to make mistakes that are bound to come back to haunt us. These include:

Targeting. In its heyday, even MySpace executives would joke that they could give marketers any demographic they wanted. The problem was the numbers — or lack thereof — that such targeting would yield.

Today, when I talk to marketers, I tell them to focus on one level of targeting (be it geographic, gender, age, etc.) because the more restrictions you add on a campaign, naturally the less  volume you can generate — which, combined with the Web’s fragmented nature, makes the campaign less interesting.

The ROI trap. The beautiful thing about online media is its tracking abilities.  Make no mistake about this: the fact that marketers can track their ad dollars means that, over time, we will win more deals than we shall lose.

However, the reality is that all marketing efforts generally have a negative ROI in the short term.  Even seemingly positive ROI tactics like search engine marketing fail to show a positive ROI as you add to your budget.  In other words, it might be possible to make money on a $1,000 to $10,000 test, but if you want to grow your sales, you might need to spend $100,000  to $1 million over a period  of time. At that level, it’s hard to spend everything on search engine marketing without expanding your list of keywords or increasing your pay-per-click spend, making the campaign less attractive.

Video is not search: intent vs. interest. With search, as with online video, it’s infinitely harder to drive short-term results or sales. Yet because we see search’s 40% share of online advertising dollars, some of us get envious and try to poach dollars away, even though the two are like apples and oranges and tend to appeal to different type of marketers and campaigns.

Search is all about intent: I want to travel to Madrid, let me search for that; oh, look, here’s a text link to a hotel in Madrid.  Let me click on that.

Video captures intent as well, but mainly captures interest.  I will watch videos on many topics that I have no intent to make a purchase around.  But that interest creates tangent opportunities for advertisers.

As a result, video is a better tool for branding and awareness campaigns that target audiences by interests and psycho-demographics.  Trying to pit search dollars against video dollars is bound to mismatch a client’s expectations and objectives.

Manage expectations: under-promise, over-deliver. I always ask would-be clients (who are marketing to drive sales more than get branding):  Say you spend $100 (to use an index), how much sales or profit should you generate in period 1?

Whatever their answer, I generally go out of my way to bring them down to reality.  I do this because clients tend to have unrealistic expectations, but also because it’s far easier to over-deliver when you have managed expectations early on.  Generally marketers don’t turn away with this approach, but instead appreciate the candor and want to continue the discussion. Yet many salespeople are so eager to seal the deal that they over-promise, only to have an unhappy client after the fact.

With video, this is even more problematic because the market is so fragmented.

Online video isn’t — and will never be — television.  Another mistake we make is trying to argue the merits of online video advertising by juxtaposing it to television.  Folks, let’s face it: television remains the 800-pound gorilla in size and reach.  We’re not just talking a different ballpark here, it’s a different universe!  Those who can position video alongside television, and for that matter, display and search, will be able to seize deals, as more marketers embrace online video.

Understanding primary vs. secondary demand. The pure-video players (such as still need to position themselves as overall media solutions that happen to include video, because  video-centric RFPs will gravitate toward more established brands.  The reality is, the first online video startups that will get meaningful dollars from marketers are the video offerings of established brands like ESPN, Yahoo, or MSNBC.  Thankfully, a rising tide lifts all boats.