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Is online video advertising undervalued? The online video ad market is estimated to grow to between $2 and $7 billion by 2012. But that's still a drop in the bucket compared to the $70 billion television ad market.
Online publishers and advertisers are frantically creating new formats and content to entice viewers online, but the hurdle in online video ad profitability may have less to do with the quality of the advertising than the quality of the audience.
Today, AdAge has a listing of some new ad formats that hope to reinvent online video advertising and halt the practice of simply moving television ads online.
Among the new items are a feature at CBS's TV.com that lets users acrew points by watching ads. Tremor Media is incorporating interactivity into its ad units, enabling viewers to dig deeper into the ad content, and engagement pricing now charges advertisers for specific actions by users instead of clicks. Also, both YouTube and Hulu are allowing viewers to choose which ads they views with videos.
More targeted and useful advertising can only help the business of online video. But blaming uninventive ads for the stagnancy in the online ad market is not entirely fair.
Chris Allen, VP of video innovation at Starcom USA tells AdAge: "As prime-time audiences decrease, it makes sense to go where the audiences are going."
The problem is that right now, most audiences are still watching high quality video on their televisions.
According to ComScore, 99% of all video viewing happens via television. And while nearly 80% of the U.S. online audience watches video, that 1% of the audience watching online, is just a drop in the a $70 billion video ad market.
And just last week, we learned that teenagers are not as television phobic as it might appear. According to Nielsen, teenagers are watching more teleivsion now than ever before, up 6% over the last five years.
But when audiences move online, the money will follow. Proof of this is evident in the news last week that advertisers are paying more money on Hulu than on network television airings of "CSI" and "The Simpsons." Advertisers are more interested in the Hulu audience because the site offers up fewer ads that have higher brand recall with audiences. But also, the dedicated Hulu audience that actively seeks out shows is more valuable to advertisers than passive television viewers.
That is good news for the future of online video. But until more people start consistently watching video content online, new formats can only do so much.