The Video Advertising Revolution

June 28, 2010

According to Comscore, digital consumers watched about 30.3 billion online video clips during the month of April. The New York Times points out this is the equivalent of 253,652 years, I repeat, YEARS of video. That much consumption provides fruitful territory for advertisers. A point that Google's Nikesh Arora, recently reinforced in an interview with Mike Arrington, positing that in the near future 50% of consumption will be digital.

Naturally, YouTube is at the forefront of this revolution - NewTeeVee reports that display ads on the home page of the video-sharing site fetch a whopping $175,000 per day and this ad space is sold out 90% of the time. Barclay's Capital Analyst Doug Anmuth believes that YouTube revenue could grow up to 55% year over year.

Online video can, and will one day, be very profitable, but Arora also points out that it isn't 'that' you advertise, it's 'how' you advertise. In the same interview he says that figuring out how to monetize web video will be "the biggest revolution in our lives." Hulu has been experimenting with video advertising since its inception, compelling users to contribute to market research by asking them to choose their own ad experience and give feedback about whether or not an ad is 'relevant.' Relevance is paramount when it comes to web-based advertising of any kind - never before has ad placement been so important.

Online audiences value targeted and customizable experiences. An advertiser can't just cut and paste a TV ad into a digital space and expect results - interactivity and creativity will win out. Perhaps this is why Facebook video ads do so well, content is more relevant if it is given to you by your friends. In some cases users can gain points or currency within applications and games by sitting through ads. Such interactivity represents a fluid exchange, you reward me with something I like as a consumer, and I reward you with attention. This type of advertising is in its infancy but look forward to a creative revolution as more advertisers trod this new terrain.