EType Video will sit under eType managing director Rob Gay's remit and will be staffed before Christmas.
Matt Cannon, online sales director at eType, said: "We've been running video campaigns for eight months and the level of growth both here and in the US has been huge.
"The big media agencies are understanding that brands need a bit more to their online advertising and that video offers them this."
As part of the development, eType has inked a deal with VideoEgg, the video advertising network for online communities.
VideoEgg delivers video ads across popular social networks including Bebo, Hi5 and Flickr. The deal with Etype is one of the first European deals that VideoEgg has secured since receiving $15m (£7.2m) in venture capital funding in September.
The two companies intend to cash in on the rising number of Facebook applications by developing a joint revenue stream through selling ads around video content.
EType parent company MIG last week acquired US online ad network Dedicated Market Solutions and plans to make similar acquisitions in the European market.
Alan Greaney, chief executive of MIG, pointed to interesting opportunities in the affiliate, search and mobile sectors and said there remains a requirement for consolidation in the search sector. He added that the DMS acquisition was "the first of several deals on that scale".
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