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Is internet advertising switching to online video?

Busi­ness savvy adver­tis­ing sales man­agers are increas­ing­ly boost­ing online adver­tis­ing sales by tun­ing in to the grow­ing shift in con­sumer view­ing habits toward video.

Accord­ing to research firm eMar­keter, the explo­sion in devices capa­ble of dis­play­ing online video lies behind the move, dri­ving spend­ing on video ads up by 46 per cent in 2012 — out­strip­ping dis­play ads and search ads to become the fastest expand­ing form of inter­net adver­tis­ing. New inter­est in social media and inter­net-enabled TV and DVD play­ers has spurred busi­ness devel­op­ment man­agers to focus more atten­tion on them as dis­tri­b­u­tion gateways.

The trend to video

Nikesh Aro­ra, Google’s Chief Busi­ness Offi­cer, says that YouTube’s top 100 adver­tis­ers increased their video ad spend by 50 per cent dur­ing 2012, while Yahoo’s erst­while finance chief, Tim Morse said:

“One of our high­est pri­or­i­ties was to cre­ate more online video expe­ri­ences, because that’s where the demand is for advertising.”

Video ads, he says, are appeal­ing increas­ing­ly to adver­tis­ers because of their resem­blance to TV: “It’s the clos­est to what they’ve had offline. They’re look­ing for the same kind of medi­um where they can con­nect with consumers.”

Web pub­lish­ers, too, are increas­ing­ly regard­ing video ads as good busi­ness: ban­ner ads yield a few dol­lars with every thou­sand views, but video ad rates can climb to $20 per thou­sand, eMarketer’s David Haller­men explains.

Mark Mahaney, an ana­lyst with RBC Cap­i­tal mar­kets, notes that to date, all inter­net adver­tis­ing “has come from print sources” but, he adds, “We’re at a point where tele­vi­sion ad bud­gets are like­ly to come online.”

A bud­get shift?

That could her­ald a major tran­si­tion. eMarketer’s fig­ures show that video ad spend­ing in the Unit­ed States hit $2.93 bil­lion last year. That may seem big, but it’s small fry com­pared to the share that goes on TV adver­tis­ing and rep­re­sents just 10 per cent of the lat­ter (Kan­tar Media esti­mates that the TV adver­tis­ing spend in 2011 was $68 billion).

At present, brands and agen­cies tend to fund online video ads from Web ad bud­gets, not from the vast­ly bet­ter resourced bud­get for TV. But that could change. As Mahaney observes, the num­ber of con­sumers watch­ing TV is stag­nat­ing and pos­si­bly declin­ing, while the num­ber switch­ing to the inter­net for enter­tain­ment is soaring.


“It almost inevitably dri­ves these TV bud­gets online,” he says.

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