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Terrestrial television has been gutted by commercial fast-forwarding, but online that is not an option. And as much as people complain about pre-roll ads, they are increasingly watch them. As Brian Stelter notes in The New York Times today: "News Web sites are starting to look a lot less like newspapers and a lot more like television."

Can the networks reproduce the success of their old business model online by creating a limited quantity of quality video programming? Yes and no.

Television ads may have been gutted by the invention of commercial fast forwarding and the wealth of online information, but traditional video creators are slowly realizing that online viewers will sit through ads if it means accessing content they want to see.

The online video segment is quickly growing.  quality videos have been performing well online. Digital video earned $477 million in revenue in the first half of 2009, which is an increase of 38% from the same time period last year according to the IAB.

Of course, that's a tiny market compared to online search, which is estimated to be a $10 billion market this year. But that growth is good news for struggling media companies. Especially since online views are not poaching traditional TV viewers.

During the daytime, online is popular, but at night viewers are switching to television. In September just under 10% of totals videos viewed online were video ads.

The amount of time that viewers can spend watching video is also limited, but the comparitively nascent ad market for video has plenty of room for growth, which is why so many news networks are investing in it now.  

ComScore found that the total number of internet video viewers grew over 10% in the last six months, to 168 million people. They say the number of videos viewed total and in the entertainment category grew 55% and 42% respectively in the last six months.

Meanwhile, news companies are producing video and selling ads against it as quickly as they can. The Wall Street Journal has started airing a twice daily show called The News Hub that offers pre-roll for an impressive $75 CPM. Last fall it was selling at $50 per thousand views.

However, the advertising revenue does not always grow with popularity. And hard news, which is available in abundance online, is a harder sell for advertisers.

But as in television programming, the key so far has been the limited availability of video on these sites. Brian Quinn, vice president of digital ad sales for The Wall Street Journal’s digital network tells The Times of video ads:

“I wish we had more, since we’re sold out."

The never ending supply of ad inventory is often what drives down online ad prices. But while media companies no longer have the luxury of the set "news hour" that dictated programming for so many years, they do have the popularity of their brands and quality production teams to boost their online programming.

In the longterm, merely reproducing TV content online at a quicker pace is not likely save the networks. At ad:tech New York last week, Todd Teresi, chief revenue officer at Quantcast, had this to say:

"We need to get to solutions that are as elegant as search. The power of the search marketplace is that google does not sit there and tell you what you should buy. Google gave people control. That fundamentally is why that marketplace works so well."

But traditional media companies are learning that for now, producing quality videos and sound bites for the web brings viewers and dollars online.

Meghan Keane

Published 11 November, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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