Up Next: Online Video Ad Boom?

By: Catherine Holahan
BusinessWeek
Nov. 07, 2006

http://www.businessweek.com/technology/content/nov2006/tc20061106_523381.htm?chan=search

Online audiences may soon wish the Web was equipped with a fast-forward button. Spending on Internet video advertising is set to explode next year, growing nearly 90% to $775 million, according to an eMarketer study released Nov. 6. By 2010, online video ads will bring in $2.9 billion, making up 11.5% of the online advertising market, the researcher says.

If the projections pan out, broadband users can expect to see many more commercial breaks in online video, particularly with content from advertiser-trusted sources like TV networks. And these won't simply be ads tacked on to the beginning or end of programs, as is the case on video sites such as Revver and Time Warner (NYSE: TWX - news) 's (TWX) AOL. Advertisers will also be clamoring for space within video streams, preventing users from easily ignoring pitches. Video ads will increasingly be embedded within Web pages and online articles as well. "More video advertising is going to be attached to professionally produced content online," says report author David Hallerman, eMarketer senior analyst.

Advertisers Adapt
Major television networks such as ABC (DIS), NBC, and CBS (CBS (NYSE: CBS - news) ) already post full episodes of shows with multiple commercial breaks [see BusinessWeek.com, 10/11/06, "Click Here to Catch Up on CSI"]. On Nov. 6, CBS announced General Motors (NYSE: GMW - news) (GM (NYSE: GM - news) ) would sponsor six of the prime time shows it runs on CBS Innertube, its advertiser-supported, online video-on-demand service. As part of the deal, three commercials advertising GMC trucks and Hummers will run with the video.

The growth of video advertising is being fueled by the increased availability of broadband Internet connections that let computer users quickly receive the large amounts of data necessary to watch online video. More than two-thirds of active Internet users had a high-speed connection as of earlier this year, compared with 55% in early 2005, according to Nielsen//NetRatings (NTRT - news) .

Another impetus for online video advertising is the increasing dependence of television watchers on DVRs such as TiVo (TIVO (TIVO - news) ), which let users fast-forward through commercials. Analysts estimate that between 20% and 40% of television audiences will be using such devices next year [see BusinessWeek.com, 5/22/06, "The Sound of Many Hands Zapping"]. If advertisers can't get their message across on TV, goes the thinking, spread it online.

A Captive Audience
Many advertisements attached to online video content can't be skipped. They either play on a constant loop on a page, or are programmed to play through before the user can see a requested video. As a result, advertisers are shifting more of their ad budgets from television, radio, and print -- where, after all, even full-page ads can be skipped just by turning a page -- to online, says Hallerman. "The ad spend online is growing much faster than the total media spend, which implies that there is a shift on money online," says Hallerman.

Not that advertisers are by any means abandoning traditional media. The almost $3 billion expected for online video ads in 2010 will represent less than 3.3% of the total devoted to TV commercials that year. And it's barely more than 1% of the $284 billion that eMarketer anticipates advertisers will spend in total in 2010.

One reason online advertising isn't gobbling up more of the ad budget: It's hard to control online content. Unlike on television, where advertisers trust networks to append messages only to properly licensed content with which they want to be associated, parts of the Web are uncharted territory. Advertisers who append commercials to clips that syndicate through platforms like Google (NASDAQ: GOOG - news) 's (GOOG) AdSense network and on YouTube, for example, risk having an ad show up on pages that include content with which they may not want to be associated.

Not Quite Ready for Prime Time
Similarly, advertisers are wary of putting content on user-generated sites where it could be attached to illegally uploaded, copyrighted content. Though user-generated sites such as YouTube and Revver have programs in place to filter out such content, it is nearly impossible to identify all copyrighted content -- particularly when the content is owned by smaller producers -- and sometimes copyrighted videos can leak through the cracks.

Difficulties in searching online video are another impediment to video advertising. To date, many video-search engines index content through "tags" supplied by content producers or users. Trouble is, producers don't always correctly tag their videos and some tags may be too general to attach appropriate advertising -- though search engines are hard at work on improving the system [see BusinessWeek.com, 10/11/06, "Google's Video-Search Challenge"].

Google, which largely relies on text tags to search video, acquired Neven Vision, a company that has face recognition technology. Blinkx, one of the most well-known video-search engines, uses a combination of surrounding Web page text, tags, speech recognition, and visual identification technology to provide context for the video and target its subject matter. Others, such as PodZinger and Nexidia, have concentrated on speech technology that can locate individual phrases or words from a video conversation. Still others, such as Gotuit Media, use people to provide extensive logs of all the conversations and actions in a video. These logs are then appended to the video, so that when users search, the computer is trying to match their criteria from within a much more detailed text tag.

Searching for Specificity
Such video-search features let advertisers append messages to particular points within videos, says Gotuit CEO Mark Pascarella. For example, users on Major League Soccer's Web site, which uses Gotuit's technology, can search for videos of particular players performing certain actions, say, a favorite forward scoring a goal. Advertisers that pay to be associated with those players or actions, or both, then have ads included in the breaks in the videos that match the results.

Conceivably, as new videos are uploaded and logged in real time, ones matching the purchased search results would also include the specific advertiser's message. "As longer form video goes online, finding exactly what you want is particularly important," says Pascarella, adding that advertisers will be willing to pay to be associated with specific parts of a video, rather than a video as a whole.

Drew Lanham, Nexidia's senior vice-president of media, says that he can see a future where advertisers bid on spoken keywords within videos just as they now bid on search terms through Google or Yahoo (NASDAQ: YHOO - news) ! (YHOO). When a video is uploaded to YouTube with those keywords, the advertisers' video can be appended to the beginning, end, or middle of the clip. "It is not happening now because we are in the very early days with this," says Lanham.

Better Tools Needed
Forrester Research (NASDAQ: FORR - news) analyst Josh Bernoff says such video advertising models are also not happening because, overall, video-search technology still has many kinks to be worked out. "For one, speech recognition is far from perfect, and two, recognizing the words in a video does not really tell you what the words are about," says Bernoff. "There is an enormous demand for video, but the tools to navigate it have not kept up."

While a video advertiser could reasonably append a commercial to clips on a site with a certain word, it would be much more difficult to append it to a group of words or to ensure that the word is in a context with which the advertiser wants to associate. A car manufacturer such as GM, for instance, would not likely want to put ads indiscriminately next to videos that mention GM, in case some videos are critical of the company. Placing an ad in such a context could appear to be an endorsement of the criticism.

Still, both Bernoff and eMarketer's Hallerman say that the future where video advertisements can be as targeted as a text search ad is just a couple years off. And the sooner such technology becomes widespread, the faster advertisers are likely to gravitate to online video advertising. Says Hallerman, "When a marketer or agency can prove to their bosses that it is effective, they are going to spend the money."