Is online video the Holy Grail for content owners?

Posted by Chris Wynn Thursday, December 18th, 2008

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The UK online-video advertising market is expected to be worth £35 million this year – just one per cent of total online advertising spending.

But broadcasters are pinning their hopes on online video as a significant source of revenue in the future and some, including the BBC and ITV with their Project Canvas, want to take this viewing experience on to the television screen.

Speakers at Informa’s Online TV and Video Forum in London last week were optimistic that the sector would live up to its promise, but there’s still a long way to go to convince advertisers of its value and to create industry structures to support it.

Oded Napchi, vice president of product at targeted-advertising company Hiro Media, argues that rather than expressing any inherent belief in the medium at the moment, most money spent on online-video advertising is from research budgets at major advertisers.

Advertising buyers also need to sort out responsibility for online-video commercials. While the television buyers have taken an early lead, the digital-media specialists are perhaps better placed to understand the online environment.

There is also a view that advertisers do not really care about what content they are associated with (user-generated content excluded) because they are seeking volume in the online-video space just as they do in television.

This might be worrying for those who believe that the power in online video will be in targeted advertising, which is intended to create added value for brands that want to reach consumers defined by precise demographics.

For online video, targeted advertising is not yet happening as there is not enough inventory available to provide the scale to identify specific groups.

This will soon change when the likes of Kangaroo and Hulu arrive (Hulu is seeing a slow down in ad bookings though). But even volume does not always equate to advertising revenue. Just ask YouTube.