Online video advertising is the advertising solution for our fragmented times. Our collective appetite for on-demand video content grows every month, just as advertisers start to look for engaging online branding opportunities that are both targetable and interactive.
But despite the dramatic rise in the UK's online video consumption, which has been made possible by broadband and driven by an increasing number of video providers - both grey and legitimate - online video advertising remains a youthful practice.
Alex Marks, UK head of marketing at Microsoft Digital Advertising Solutions, says: "Video advertising is not yet a main channel for advertisers. But we will soon see significant growth. As we go into 2009, video will become a more mainstream advertising channel."
History tells us that not every potential mainstream advertising channel evolves to become the real thing.
However, given the technical capabilities of video ads and consumers' growing familiarity with video content, it is hard to see how this one can fail.
Suranga Chandratillake, chief executive of video search company Blinkx, says: "Any location offering advertising in televisual format will be very popular. But online video also offers the accountability and tracking that you get with online advertising," he adds.
Andrew Klein, chief executive of Dutch video advertising specialist Spotzer, says that the possibilities of online video advertising begin with its ability to target by region, by demographic and by behaviour.
He adds:"You can even target right down to individuals, which is controversial right now and still unproven, but is within the scope of the technology."
Why is online video relevant now?
There is a huge audience of video consumers massing online, which needs to provide revenue, and soon.
Nielsen Online figures put the number of British visitors to TV, video or movie-related websites at almost 21 million in September 2007: a 28% year-on-year increase.
In the same period, the online video content consumed by Britons in a month almost doubled - from 641 million minutes in September 2006, to 1.2 billion minutes in September 2007.
While the scale of our viewing indicates there is video content on the web for virtually everyone, possibly the most compelling reason for advertisers to pay careful attention to online video is the potential for targeting niche groups of consumers.
Phil MacAuley, head of planning and strategy at Yahoo, reports that his company's own video advertising inventory sold out completely in Q4 2007.
"Advertisers' demand for video online is very high," he says. "The sort of people who view video online don't watch much TV, so it is a really good way for advertisers to reach those groups."
What options do advertisers have?
There is the potential for video advertising wherever there is video online, and a range of different formats are already available.
Video advertising can model itself on commercial TV, using short pre-roll, mid-roll and post-roll clips before, after and during popular pieces of video content.
Alternatively, it can act like a conventional online ad, using banners, rectangles or pop-up subsites, or it can find an altogether new way to divert users.
Devices such as video delivered via e-mail and in-text video advertising, where a video box launches when a user rolls over a double underlined term, are examples of the latter.
There is also the advertorial approach. If an advertiser's content is compelling enough, it can stand on its own in an appropriate setting and with the right media partner, as Microsoft and Zurich have done with FT.com and Guardian Unlimited respectively.
However, a definitive approach is still a long way off. "Some things will work, while some will not - there is no golden bullet," says Spotzer's Klein. "The interesting question will be which environments lend themselves to particular ad formats."
Users seem to be more tolerant of spot-type ads, where quality video content is offered for free. According to Conchango's New Media Landscapes study, released in August last year, more than half of us believe that online media should be free and only one in five would pay for premium content, leaving advertising as the logical engine of the business.
The challenge is to ensure the ads do not do anything to discourage viewers. A YouGov survey of UK internet users, conducted in February 2007, found that 93% didn't mind viewing pre-roll video ads, providing they were no more than 15 seconds long.
However, concerns over the disruptiveness of pre-roll ads have already led AOL chairman and chief executive Randy Falco, a keen advocate of online video advertising, to state his belief that "pre-roll is dead".
YouTube appears to share Falco's view. Last August, YouTube introduced its first video advertising spots, running transparently across the bottom part of the screen and introduced at around 10 seconds into selected videos.
Who is doing it?
As the field grows, online video advertising will become an area of conflict on several fronts as TV and online buying departments debate whose natural turf this ought to be, and online and creative agencies do likewise.
The initiative currently lies with the online fraternity, whose networks and portals are major suppliers of bespoke video advertising content and whose specialist buyers typically buy it.
But, as the sector develops, the tables could easily turn. If the internet evolves as a major destination for premium TV viewing, as most broadcasters believe it will, a strong case will emerge for extending the TV negotiation to online.
On the creative side, the requirement for broadcast-quality content plays the ad agencies back into the game. "Video allows the traditional creative advertising agencies to get back in the online conversation again," says Microsoft's Marks.
"When it was all banners and buttons and search, their business was slowly eroding, but as the media has matured, it is no longer just about making bits out of Flash."
What type of advertising is it suitable for?
Even at this relatively early stage, certain common-sense front runners have emerged. Film studios are among those whose content is sufficiently compelling to present a welcome distraction for web users, even in a standard display format.
The Financial Times has been in the vanguard of the print publishers expanding into video online, posting its first video clips in October 2006, according to advertising strategy and global online director Rob Grimshaw.
"We saw phenomenal growth in 2007," he says. "We have gone from tens of thousands of people watching video every week, to more than 100,000. The revenue has gone from zero to around 10% of our online ad revenues, which is quite extraordinary."
FT.com's strategy has been to sell its video advertising spots as sponsorship opportunities for its various editorial video strands, with advertisers including Deloitte, Credit Suisse, BT, IBM, PricewaterhouseCoopers, Sony Ericsson and Microsoft.
In general media, advertisers are - and will continue to be - more mainstream. When YouTube launched its InVideo advertising platform in August, its inaugural video advertisers included BMW and 20th Century Fox for The Simpsons Movie.
As the medium develops, experts believe that its branding strength will attract big FMCG brands. "The first migration candidates will be the largest TV advertisers, because they understand the communicative power of moving images," says Spotzer's Klein.
Zurich's House of the Future campaign, for which it created a series of documentary clips on green architecture in partnership with The Guardian, is a case in point.
Zed Media business director Diane Rowe, account director on the campaign, says: "People were actively downloading what is essentially advertising content, albeit advertising with an editorial focus. We saw a threefold increase in spontaneous awareness of the Zurich brand just from that one campaign."
What does it cost?
If 2008 sees a continued rise in the number of users consuming online video and in the amount they consume, video advertising will become more cost effective.
Then and now, according to Rowe, the industry should expect cost to vary widely according to the format and the desirability of the content that surrounds it.
"Streaming an ad through a traditional format can be comparable to display advertising costs per thousand (CPMs)," she says. "But pre, mid-and post-roll formats are more expensive. When you look at the volume of impressions you are going to get, the CPMs look quite high, but as it becomes more mass, the prices will only become more competitive."
Amsterdam-based Spotzer has constructed its entire proposition on offering video advertising to companies that cannot afford to be present on television. "The cost of reaching any audience comes down dramatically when you can target," says Spotzer's Klein.
Premium spots on high-traffic websites and amid much-viewed content will rise to the top of the price list, but given the size of the internet and its ability to harbour niche audiences, a lot of video advertising will continue to be a cheaper alternative to TV.
How measurable is it?
One strength of online video is that it is theoretically as measurable as any other online advertising. For example, advertisers can measure the length of time watched, the number of users, the number of click-throughs, and the conversion of clicks to sales.
The problem is that this is by no means as easy as it sounds. In its Video Marketing Handbook, the IAB identifies the fact that video is a linear format, with a beginning, a middle and an end. "This means that it will no longer be enough to log the fact that the ad has been served (as in traditional online advertising), but to log that the entire duration of the ad has been delivered," the guide warns.
ABCe, Barb and the IPA are developing a new measurement tool for video, which will initially only cover broadcasters' simulcast services, not video-on-demand or downloads.
What are the challenges?
The first key obstacle to the widespread flow of advertising budgets into online video has so far been the lack of appropriate ads from mainstream advertisers, whose TV content isn't necessarily adaptable. The second challenge has been the lack of inventory, as traditional online and offline media owners have gradually built up their own portfolio of video content and introduced users to the idea of viewing it.
Video sites driven by content uploaded and/or generated by users have not struggled for viewers - far from it - but many advertisers have been put off by the nature of the content.
When YouTube, the largest such site, added advertising last year, it signalled its own belief that a kind of respectability had arrived. However, YouTube's ads were not to be found against just any clips, but only material from certain credible sources.
Yahoo's MacAuley believes that this distinction is highly significant. "The crucial thing with video advertising is that the sort of content you can put advertising against is not the user-generated content - it is the licensed content," he says.
How can it develop further?
Clearly, much needs to happen before video advertising can genuinely establish itself as a core medium. But, as broadcast platforms become increasingly interchangeable, effort put into evolving interactive ad formats will not be wasted.
"It is not only television versus the web; TV is going to become more like the web and the web is going to bring TV into it," says Spotzer's Klein. "There are going to be screens everywhere, all with different types of targeting, and it will start showing up on your cellphone, your BlackBerry and all those other screens as well."
In the meantime, rumblings that online ads could deal the fatal blow to TV should be taken with a pinch of salt, according to TV marketing body Thinkbox's research and strategy director David Brennan, who believes the two media will increasingly be seen as complementary.
"TV gets people with the brand narrative, the creative spin, and only TV can really do that, because of the way it is consumed," he says.
"But once TV has done that, other platforms, including online, can build on that central brand story."
ONLINE VIDEO ADVERTISING: WHAT YOU NEED TO KNOW
- The number of Britons visiting TV, video and movie sites was up 28% for the year ending September 2007
- Total time spent on these sites by UK users was up 91%
- Britons consumed 1.2bn minutes of online video content in September 2007 (Source: Nielsen Online)
- Pre-roll, mid-roll and post-roll are generally assumed to be the key models for online video advertising, although AOL chairman and chief executive Randy Falco has already stated his belief that "pre-roll is dead"
- A 2007 survey of UK internet users found that 93% didn't mind viewing pre-roll video ads as long as they were no more than 15 seconds long (Source: YouGov)
- Alternative formats include embedded rectangles on text pages, video over e-mail, in-text video advertising, pop-up subsites and advertiser-funded content
- YouTube moved into video advertising last August with its InVideo platform, offering short transparent ads during certain clips
- Challenges for the growth of online video advertising include a shortage of inventory, measurement, and a lack of appropriate advertising material.
But despite the dramatic rise in the UK's online video consumption, which has been made possible by broadband and driven by an increasing number of video providers - both grey and legitimate - online video advertising remains a youthful practice.
Alex Marks, UK head of marketing at Microsoft Digital Advertising Solutions, says: "Video advertising is not yet a main channel for advertisers. But we will soon see significant growth. As we go into 2009, video will become a more mainstream advertising channel."
History tells us that not every potential mainstream advertising channel evolves to become the real thing.
However, given the technical capabilities of video ads and consumers' growing familiarity with video content, it is hard to see how this one can fail.
Suranga Chandratillake, chief executive of video search company Blinkx, says: "Any location offering advertising in televisual format will be very popular. But online video also offers the accountability and tracking that you get with online advertising," he adds.
Andrew Klein, chief executive of Dutch video advertising specialist Spotzer, says that the possibilities of online video advertising begin with its ability to target by region, by demographic and by behaviour.
He adds:"You can even target right down to individuals, which is controversial right now and still unproven, but is within the scope of the technology."
Why is online video relevant now?
There is a huge audience of video consumers massing online, which needs to provide revenue, and soon.
Nielsen Online figures put the number of British visitors to TV, video or movie-related websites at almost 21 million in September 2007: a 28% year-on-year increase.
In the same period, the online video content consumed by Britons in a month almost doubled - from 641 million minutes in September 2006, to 1.2 billion minutes in September 2007.
While the scale of our viewing indicates there is video content on the web for virtually everyone, possibly the most compelling reason for advertisers to pay careful attention to online video is the potential for targeting niche groups of consumers.
Phil MacAuley, head of planning and strategy at Yahoo, reports that his company's own video advertising inventory sold out completely in Q4 2007.
"Advertisers' demand for video online is very high," he says. "The sort of people who view video online don't watch much TV, so it is a really good way for advertisers to reach those groups."
What options do advertisers have?
There is the potential for video advertising wherever there is video online, and a range of different formats are already available.
Video advertising can model itself on commercial TV, using short pre-roll, mid-roll and post-roll clips before, after and during popular pieces of video content.
Alternatively, it can act like a conventional online ad, using banners, rectangles or pop-up subsites, or it can find an altogether new way to divert users.
Devices such as video delivered via e-mail and in-text video advertising, where a video box launches when a user rolls over a double underlined term, are examples of the latter.
There is also the advertorial approach. If an advertiser's content is compelling enough, it can stand on its own in an appropriate setting and with the right media partner, as Microsoft and Zurich have done with FT.com and Guardian Unlimited respectively.
However, a definitive approach is still a long way off. "Some things will work, while some will not - there is no golden bullet," says Spotzer's Klein. "The interesting question will be which environments lend themselves to particular ad formats."
Users seem to be more tolerant of spot-type ads, where quality video content is offered for free. According to Conchango's New Media Landscapes study, released in August last year, more than half of us believe that online media should be free and only one in five would pay for premium content, leaving advertising as the logical engine of the business.
The challenge is to ensure the ads do not do anything to discourage viewers. A YouGov survey of UK internet users, conducted in February 2007, found that 93% didn't mind viewing pre-roll video ads, providing they were no more than 15 seconds long.
However, concerns over the disruptiveness of pre-roll ads have already led AOL chairman and chief executive Randy Falco, a keen advocate of online video advertising, to state his belief that "pre-roll is dead".
YouTube appears to share Falco's view. Last August, YouTube introduced its first video advertising spots, running transparently across the bottom part of the screen and introduced at around 10 seconds into selected videos.
Who is doing it?
As the field grows, online video advertising will become an area of conflict on several fronts as TV and online buying departments debate whose natural turf this ought to be, and online and creative agencies do likewise.
The initiative currently lies with the online fraternity, whose networks and portals are major suppliers of bespoke video advertising content and whose specialist buyers typically buy it.
But, as the sector develops, the tables could easily turn. If the internet evolves as a major destination for premium TV viewing, as most broadcasters believe it will, a strong case will emerge for extending the TV negotiation to online.
On the creative side, the requirement for broadcast-quality content plays the ad agencies back into the game. "Video allows the traditional creative advertising agencies to get back in the online conversation again," says Microsoft's Marks.
"When it was all banners and buttons and search, their business was slowly eroding, but as the media has matured, it is no longer just about making bits out of Flash."
What type of advertising is it suitable for?
Even at this relatively early stage, certain common-sense front runners have emerged. Film studios are among those whose content is sufficiently compelling to present a welcome distraction for web users, even in a standard display format.
The Financial Times has been in the vanguard of the print publishers expanding into video online, posting its first video clips in October 2006, according to advertising strategy and global online director Rob Grimshaw.
"We saw phenomenal growth in 2007," he says. "We have gone from tens of thousands of people watching video every week, to more than 100,000. The revenue has gone from zero to around 10% of our online ad revenues, which is quite extraordinary."
FT.com's strategy has been to sell its video advertising spots as sponsorship opportunities for its various editorial video strands, with advertisers including Deloitte, Credit Suisse, BT, IBM, PricewaterhouseCoopers, Sony Ericsson and Microsoft.
In general media, advertisers are - and will continue to be - more mainstream. When YouTube launched its InVideo advertising platform in August, its inaugural video advertisers included BMW and 20th Century Fox for The Simpsons Movie.
As the medium develops, experts believe that its branding strength will attract big FMCG brands. "The first migration candidates will be the largest TV advertisers, because they understand the communicative power of moving images," says Spotzer's Klein.
Zurich's House of the Future campaign, for which it created a series of documentary clips on green architecture in partnership with The Guardian, is a case in point.
Zed Media business director Diane Rowe, account director on the campaign, says: "People were actively downloading what is essentially advertising content, albeit advertising with an editorial focus. We saw a threefold increase in spontaneous awareness of the Zurich brand just from that one campaign."
What does it cost?
If 2008 sees a continued rise in the number of users consuming online video and in the amount they consume, video advertising will become more cost effective.
Then and now, according to Rowe, the industry should expect cost to vary widely according to the format and the desirability of the content that surrounds it.
"Streaming an ad through a traditional format can be comparable to display advertising costs per thousand (CPMs)," she says. "But pre, mid-and post-roll formats are more expensive. When you look at the volume of impressions you are going to get, the CPMs look quite high, but as it becomes more mass, the prices will only become more competitive."
Amsterdam-based Spotzer has constructed its entire proposition on offering video advertising to companies that cannot afford to be present on television. "The cost of reaching any audience comes down dramatically when you can target," says Spotzer's Klein.
Premium spots on high-traffic websites and amid much-viewed content will rise to the top of the price list, but given the size of the internet and its ability to harbour niche audiences, a lot of video advertising will continue to be a cheaper alternative to TV.
How measurable is it?
One strength of online video is that it is theoretically as measurable as any other online advertising. For example, advertisers can measure the length of time watched, the number of users, the number of click-throughs, and the conversion of clicks to sales.
The problem is that this is by no means as easy as it sounds. In its Video Marketing Handbook, the IAB identifies the fact that video is a linear format, with a beginning, a middle and an end. "This means that it will no longer be enough to log the fact that the ad has been served (as in traditional online advertising), but to log that the entire duration of the ad has been delivered," the guide warns.
ABCe, Barb and the IPA are developing a new measurement tool for video, which will initially only cover broadcasters' simulcast services, not video-on-demand or downloads.
What are the challenges?
The first key obstacle to the widespread flow of advertising budgets into online video has so far been the lack of appropriate ads from mainstream advertisers, whose TV content isn't necessarily adaptable. The second challenge has been the lack of inventory, as traditional online and offline media owners have gradually built up their own portfolio of video content and introduced users to the idea of viewing it.
Video sites driven by content uploaded and/or generated by users have not struggled for viewers - far from it - but many advertisers have been put off by the nature of the content.
When YouTube, the largest such site, added advertising last year, it signalled its own belief that a kind of respectability had arrived. However, YouTube's ads were not to be found against just any clips, but only material from certain credible sources.
Yahoo's MacAuley believes that this distinction is highly significant. "The crucial thing with video advertising is that the sort of content you can put advertising against is not the user-generated content - it is the licensed content," he says.
How can it develop further?
Clearly, much needs to happen before video advertising can genuinely establish itself as a core medium. But, as broadcast platforms become increasingly interchangeable, effort put into evolving interactive ad formats will not be wasted.
"It is not only television versus the web; TV is going to become more like the web and the web is going to bring TV into it," says Spotzer's Klein. "There are going to be screens everywhere, all with different types of targeting, and it will start showing up on your cellphone, your BlackBerry and all those other screens as well."
In the meantime, rumblings that online ads could deal the fatal blow to TV should be taken with a pinch of salt, according to TV marketing body Thinkbox's research and strategy director David Brennan, who believes the two media will increasingly be seen as complementary.
"TV gets people with the brand narrative, the creative spin, and only TV can really do that, because of the way it is consumed," he says.
"But once TV has done that, other platforms, including online, can build on that central brand story."
ONLINE VIDEO ADVERTISING: WHAT YOU NEED TO KNOW
- The number of Britons visiting TV, video and movie sites was up 28% for the year ending September 2007
- Total time spent on these sites by UK users was up 91%
- Britons consumed 1.2bn minutes of online video content in September 2007 (Source: Nielsen Online)
- Pre-roll, mid-roll and post-roll are generally assumed to be the key models for online video advertising, although AOL chairman and chief executive Randy Falco has already stated his belief that "pre-roll is dead"
- A 2007 survey of UK internet users found that 93% didn't mind viewing pre-roll video ads as long as they were no more than 15 seconds long (Source: YouGov)
- Alternative formats include embedded rectangles on text pages, video over e-mail, in-text video advertising, pop-up subsites and advertiser-funded content
- YouTube moved into video advertising last August with its InVideo platform, offering short transparent ads during certain clips
- Challenges for the growth of online video advertising include a shortage of inventory, measurement, and a lack of appropriate advertising material.