In Depth

Problems Emerge Measuring Web Video Ads

Product Placements Left Out of Estimates

Web video advertising may be plagued by some of the same squishy metrics that have bedeviled traditional television ratings for years. New problems in estimating the size of the market suggest that the supposedly quantifiable Web is in fact sometimes too difficult to quantify.

Some market research firms forecasting the size of the online video ad economy aren’t counting money spent on brand integration and product placements.

Influential media research firm eMarketer recently revised its annual online video ad-spending numbers downwards by two-thirds to $505 million, citing a change in methodology. But neither its initial nor its revised projection accounts for money flowing into brand integration, product placement and host mentions in Web video.

“The share of the money going to product placement is a bit harder to gauge,” said David Hallerman, senior analyst with eMarketer.

Mr. Hallerman pointed out that most TV ad spending numbers do not take product placement into account either. eMarketer measures pre-rolls and other ads that look like TV ads online.
Mr. Hallerman said product placement should be counted, perhaps as a separate category.

“The medium may be more measurable, but ad spending isn't necessarily,” he said.

That suggests the size of the Web video economy is being underestimated by the amount of ad dollars flowing into high-profile Web shows such as NBC-backed “Gemini Division,” EQAL-owned “LG15: The Resistance” and Revision3’s “Diggnation.”

That’s a problem because they generate most of their ad revenue from brand integration and host shoutouts, as do many Web studios including Next New Networks, Revision3, ManiaTV and For Your Imagination.

“The vast majority of revenue we derive for our shows are from brand integration,” said Greg Goodfried, one of the executive producers of “LonelyGirl15” and its spinoffs, which have inked deals with MSN, Disney, Paramount and Procter & Gamble.

The uncertainty surrounding market estimates touches nearly all parties with a stake in the Web video business, including media agencies that use macroeconomic figures when evangelizing the medium and venture capitalists who search out growing markets.

Research by its very nature is imprecise. Bill Tancer, the global head of research for online audience-measurement firm Hitwise, urges everyone to be skeptical when evaluating studies.

Mr. Hallerman explained that eMarketer sliced its previous $1.4 billion online video ad projection by two-thirds after the Internet Advertising Bureau said earlier this summer that online video ads had pulled in only $324 million in 2007. The IAB measures “digital video commercials” or “TV-like advertisements” that appear before, during or after a variety of content, but not brand integration.

“We believe we are capturing the biggest part of a growing market,” said David Doty, senior VP, thought leadership and marketing, at IAB.

People creating Web shows disagree.

“Brand integration is one of the biggest segments of the online video ad market, maybe bigger than pre-rolls,” said Raj Amin, CEO of HealthiNation, the online video health information network.

Lehman Brothers and Forrester Research also forecast the overall online video ad economy. Lehman has said advertisers will spend $1.1 billion on online video ads this year, but did not respond to requests for comment on its methodology. Forrester Research expects online video ad spending to hit $989 million this year, up from $471 million last year.

Forrester Research analyst James McQuivey said his company’s survey methods leave room for interpretation by agency respondents. To estimate the online video ad economy, Forrester asks advertisers if online video ad spending is trending up or down. That can be a complicated question to answer because a large chunk of online video ad spending comes from multiplatform buys in the broadcast upfront.

“We have found it to be difficult to disentangle what should be the online video ad spend when a Nissan sponsors ‘Heroes,’ for instance,” he said. “There is a lot of room for error.”

Still, Mr. McQuivey expects his original $989 million estimate to be close to the final tally at year’s end. While YouTube has faced difficulties in monetizing its ads, a site like Hulu has grown faster than expected, balancing things out, he said.

There are no current estimates on the size of product placement deals in Web video. But Web TV networks such as Revision3 and For Your Imagination said they charge $60 to $80 on a cost-per-thousand basis for such buys.

The silver lining in the prickly numbers debate is that most Web-content creators and distributors don’t rely on market estimates to sell their inventory to marketers. Instead, Revision3 touts that 100% of its viewers can recall at least one advertiser, Next New Networks talks up its 20 million monthly views and HealthiNation sells ads based on engagement with its content.

Mr. Amin relies on internal figures from online TV technology provider Brightcove indicating that HealthiNation viewers watch 2 million total minutes of its programming per month, with the average session lasting three minutes. “We run persistent banners during the videos and our deal sizes are three times what they were a year ago,” he said.

Still, advertisers want market estimates to include all formats, including brand integration.
“We would love for it to be broken out by category,” said Michael Hayes, senior VP of interactive at Initiative North America.

Forrester’s Mr. McQuivey said he’s likely to break out spending by format next year. eMarketer’s Mr. Hallerman said he does not have plans to do so at the moment.

Mr. Hayes said he’s not troubled by the fluctuating estimates. What’s important is the big picture: Online video ad spending is increasing this year, whether it’s by 56%, according to eMarketer, or by more than 100%, according to Forrester.