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Online Ads Benefit From Networking

Jan 25, 2009  •  Post A Comment

Internet television executives and advertising buyers are predicting that Web video will outpace other ad mediums in this bleak economic year—but by how much or how little varies widely depending on whether you ask a portal, ad network or advertiser representative.
There’s one thing most experts agree on, however: Online video ad networks are in the best position to post healthy returns because they aggregate Internet audiences.
As a benchmark, research firm eMarketer is betting on 45% growth in Web video ad revenue this year. That sounds about right for Break.com and Veoh.com, said the CEOs of those sites. Online video ad networks such as Brightroll and Tremor Media predict they will finish ahead of the market.
Not so fast, advertisers say. Most media agencies are expecting a 15% increase in online video ad spending this year. Any increase is enviable in this recessionary environment, but the widely fluctuating projections underscore both the tough macroeconomic environment and the unique challenges facing the online video ad business.
Look for category growth of 10% to 15% this year, said Adam Kasper, senior VP and director of digital media at Media Contacts. “The biggest challenge to that growth is the CPMs on video are two to five times higher than display ads and there is not proof that ROI justifies the additional cost.”
Media agency Magna is revising its Web video ad spending growth percentage projection downward into the teens, said Elizabeth Herbst-Brady, president of MAGNA.
Michael Hayes, executive VP of digital at Initiative, also is seeing a slowdown. “We do not believe it will grow at the rate of the current industry research,” he said. “There will be growth, but it will be much slower—no more than 30% at the most.”
The recession is dampening spending, but Web video faces endemic hurdles as well, he said. Many advertisers haven’t produced creative for Web video, and inventory remains scarce in brand-friendly programming. Many of the 13.5 billion videos Americans view online each month aren’t appropriate ad vehicles, so achieving reach and frequency can be challenging online, Mr. Hayes said.
That’s where ad networks come in. Advertisers can corral more impressions in an ad network buy because they aggregate video across multiple sites. “Video ad networks solve some of the problems because they can aggregate and provide reach, as long as they are in an environment that is brand-friendly,” Mr. Hayes said.
Mr. Kasper agreed. “With a complex market of publishers out there, except for a small handful of video destination sites, buyers need to find scale and efficiency quickly and they will go to networks for simplicity,” he said. “Agencies are also getting squeezed on income and thus don’t have the bandwidth to make scaled buys by going to individual publishers, thus the need for networks.”
Tremor Media expects to outpace the market because it prices deals according to performance, an attractive metric in a difficult economy, said Jason Glickman, the company’s CEO.
Brightroll anticipates 2009 revenue growth of nearly three times last year’s based on commitments advertisers have already made for the year, said Brightroll CEO Tod Sacerdoti.
Others are more cautious because advertisers are angling for cheaper deals. “The largest spenders are looking for extreme value and ripping up existing contracts to write new ones,” said Matt Wasserlauf, CEO of video ad network Broadband Enterprises. He estimates 30% growth for his company, the same as last year.
Popular Web portals are leaning closer to eMarketer’s 45% growth prediction.
Based on first-quarter ad buys, Veoh expects to reach the eMarketer mark for the year, said CEO Steve Mitgang. Break CEO Keith Richman expects the same, though he said he won’t be surprised if the final numbers are up anywhere from 25% to 75%, given the shifting economy.
Hulu also said it expects ad revenues to grow each month.

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