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TelevisionWeek contributing writer Daisy Whitney is blogging about the pinnacles and pitfalls facing viewers who want to consume television in new ways. Check in frequently as Daisy kicks the tires on the new media juggernaut and dishes on which services do -- and don’t -- make the cut.

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Trial and Error



When Will Online Video Pay Off?

July 13, 2008 4:59 PM

In the last three years, investors have shoveled more than $8 billion into the online video business, but have yet to see much in the way of return on investment. That’s the conclusion of a Silicon Alley Insider report on the so-far sorry state of making money on Web video.

And if you look at the ad predictions, it may be quite some time before investors make back that $8 billion. Forrester Research said advertising in streaming video hit $471 million last year and should reach $7.2 billion in 2012. That’s still less than the total investment. While advertising is not the only revenue stream – online video technology firms for instance get paid license and delivery fees – it is ultimately the financial foundation for the industry.

The industry has yet to produce a profitable company, Silicon Alley Insider reporter Michael Learmonth said in his report. He arrived at the $8 billion figure by adding together venture funding numbers from Dow Jones VentureSource as well as acquisitions, like Google’s $1.65 billion bet on YouTube.

Still, Learmonth concludes the money spent is not “outrageous” because online video is still new, consumers are watching a lot of Web video, and advertising will keep flowing into the business.

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