According to Accustream, online video will generate $5.6 billion in 2011. That figure includes in-page video campaigns; instream (pre-, post-, and mid-roll) ads; paid viral placements; overlays; and podcasting. The lion’s share — or 59% — will come from in-banner placement. Raise your hand if you’re surprised.
Most content producers only create articles. These publishers have back catalogs that are well indexed by search engines, creating a steady of flow of traffic, which is amplified by social media.
Very few publishers also create video content. Video content creators (suppliers) are either
– Traditional media companies (TMCs) who are looking at monetizing their “super premium” content online, or
– New media companies (NMCs) whose main distribution platform for their “premium” is the Web.
Few video producers have built “own-and-operated” distribution on their own websites. By and large, video producers create content and distribute it on aggregators:
– Distribution sites such as YouTube or vertical publishers (ex: WebMD.com), or
– Intermediaries who then redistribute the videos on multiple related websites.
As such, the ecosystem is made up of:
– Suppliers: video content creators.
– Publishers: producers of articles who may or may not also produce video content, and tend to have a lot of unique users who generate pageviews.
– Aggregators: distribution company like YouTube that then publish the content on its own site, or a re-distributor who then syndicates to thousands of other sites.
– Advertiser: needs no explanation.
According to comScore, in July 2011, 180 million Americans generated 6 billion viewing sessions for an average of 1,107 minutes per viewer (under 20 hours). Indeed, while the online universe is now generating billions of in-stream views, most of it remains on YouTube, where a high portion of the activity is around UGC content, and thus not monetized. After YouTube finally embraced pre-roll ads in 2010, there was an 89% spike in media spend in 2010, according to Accustream.
As such, a major opportunity remains the ability to create in-stream views. To achieve that, obviously, the content does matter.
With in-banner executions, most of the monetization is being done by the aggregator, so the supplier’s content doesn’t really matter so long as it’s
– Professionally produced,
– brand-safe and
– relevant to both the publisher’s environment and advertiser’s message.
Relevant should mean a video of Berlin alongside an article about Berlin, with an ad from Lufthansa before it. Provided the placement is above-the-fold and sound is user-initiated so the user experience isn’t compromised, then that kind of aligning-of-the-stars represents a valuable opportunity for any advertiser, even if the delivery is in-banner (morehere). While advertisers want the sound to be on auto-start, adding sound automatically will lead to a bad experience.
Rates will fall; variance between instream and in-banner should grow
With or without a slowing economy, marketers have every right to ask for a return on their investment, even if the metric they may use (such as the CTR) is the wrong one. As search and banner rates fell, video rates will fall while total video revenues grow.
Right now, the spread between in-banner and in-stream rates is surprisingly small — but still too large given the difference in engagement level. Over time,
– in-banner rates will be priced at a slight premium to display banners, and
– instream rates will be multiples higher than in-banner rates.
The Main Challenge Facing Publishers
Considering the existing market rates for in-stream and in-banner pre-rolls, publishers don’t have an incentive to create true pre-roll inventory, preferring to run in-banner ads where they previously ran display banners. In theory, a publisher can replace display banners with in-banner video ads and yield more revenue. Of course, there isn’t enough demand for in-banner ads to fill up a publisher’s entire display inventory, but this explains why Undertone bought Jambo and Specific bought BBE: the specter haunting display is video.
Seeing how in-banner placements tend to show weaker results, advertisers will want to shift their spending to in-stream, but there simply isn’t enough supply of in-stream inventory around monetizable content out there. This challenge creates an opportunity for content creators.
What Does This All Mean?
While aggregators have certainly built up a good lead at the expense of content creators, all these moving parts can only mean one thing: we are about to enter a period where
– To entice marketers to spend the big dollars, suppliers, publishers and aggregators will have to dole out exclusive content;
– To get users to generate more video views, content will start to matter.
This by no means suggests that content creators can start to high-five one another. With 48 hours of content uploaded each minute to YouTube, there’s too much clutter for suppliers to ever feel like they can coast, but, it does signal a shift that will have wide repercussions in the years to come.