Web Video Advertising To Grow 55% Annually - Faster Than Any Other Ad Format Online

Online-video advertising [1] spending looks to be growing again in 2011, even after an impressive 40% growth from 2009 to 2010. Media buyers surveyed by Deutsche Bank “Internet Industry Outlook” report. To fund online-video spending, many predict to cannibalize display advertising and some expect to move as much as 5% of television budgets.

According to an IDATE report titled, "The World Online Advertising Market," [3] - "Online video sites and services will be the first to benefit from this boom. Ad revenues from online video sites will grow at an average annual rate of 54.4%, to capture 13% of the Internet advertising market in 2014 with 11.2 billion EUR. Video will in fact be the largest of the three emerging markets in the US and Europe in 2014..."

So, What's Driving Video Ad Growth?

“Video advertising is set to become the most dynamic format in the online ad market, propelled by technical advances in the field and an “explosion” of online video consumption (source: UTalk [4])."

Why? It’s not for the “higher engagement” reasons that we’d expect: Media buyers cite less clutter, better targeting, more professional content available, and lower cost of production (relative to television). Indeed I’ve seen many CPG brands commissioning video production for web, and at costs approximating 30% of what they’re spending for television commercials.
The audience of online video, of course, continues to grow. In November about 172 million viewers consumed 35 billion videos in more than 5 billion sessions.

Digital Spending Vs. Offline Advertising

eMarketer, like Deutsch, reports double-digit percent growth for online advertising overall, and it’s poised to overtake newspaper advertising spending in 2011.

What strikes ReelSEO as particularly interesting is that online advertising (as it surpasses $30 billion) is not just overtaking print (newspaper), but becoming a larger and larger percent of the overall advertising mix. Online ad spending was, just years ago, a paltry 3-5 percent of the marketing budget. Now it’s well into double digit percents. This could change more dramatically if media buyers move even small portions of those bloated television budgets to fuel online-video advertising.

Will online-video dip into those beefy television budgets? ReelSEO thinks it will this year, but much more so in 2012 as advertisers become comfortable with the medium and viewing becomes increasingly easier and mainstream.

Consumption Changes

Online-video used to be the workplace escape. But we’re seeing those Wednesday online-video view dips, and stronger weekend views (see Tubemogul/Brightcove report [8]), as people become more comfortable watching content on web-TV devices and gaming consoles. We’re also seeing broadband subscriptions grow to 500 million.

Online-video is converging with the large screen we call HDTV (devices are proliferating [10] and long form consumption is on the rise [11]), the medium will benefit more naturally from the far heftier and less scrutinized television budgets.

Source: ReelSEO, 1/21/11

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