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Why Advertisers Need to Start Taking Online Video Seriously

2011 November 2
by Greg Satell

“Just put it on the box,” has been a constant refrain of marketers for decades and not without reason.  In the post-war era, television has been the workhorse of the consumer culture.  Nothing has been more effective across categories and timelines as the 30 second spot.

So when technology made online video possible, it seemed as if a new day had dawned.  There would not be just a “box,” but a “three screen world,” in which online video would rule.
Strangely though, the opposite seemed to occur.  TV has actually gained both audience and ad share in recent years.  Therefore, many traditional media advocates have closed the book.  However, that’s premature.  Today, online video is finally coming into its own.

A Sad History

We are now well into the digital age and video is indeed “always on.”  We watch TED videos at the office and catch up on YouTube while we wait in line at the store.  Yet audience numbers have hardly budged.

On the revenue side, TV has been prospering as well.  After taking a brief dip at the end of the 90’s, the old “box” has been on a roll lately and clearly is experiencing a renaissance of sorts.

And there, for many, is where the story ends. However, there’s more to it than that.

The Missing Media Money

The missing link is that we only track what we can measure and there is some indication that conventional measures might not apply.

Media spend and GDP are intrinsically related.  The more an economy produces the more it promotes. Consequently, the Ad Spend/GDP ratio has been relatively stable historically.

So it’s of considerable note that, since 2002, GDP has been outpacing media expenditure, especially given that much of that span was made up of boom years in which ad spend usually gains ground on GDP.

The gap widened during the crises and may narrow a bit in the future, but the fact that the overall trend is consistent across cycles is a good indication that something is truly afoot.  As  of 2011, the shortfall is equivalent to about $65 billion, some of which is surely going to innovative uses of online video that have flown under the radar.

A Wealth of Opportunities

While online video viewing still pales in comparison to TV, the numbers are substantial and growing.  By the end of 2010 there were 1.2 billion video views each day by over 89 million Americans. The ad spend on online video has also grown from only $324 million in 2006 to $1.4 billion.

And no wonder.  There’s lots going on in the online video space.  Here’s a quick overview:

Digital Signage: The declining costs of digital screens costs also means that screens capable of delivering videos will be everywhere. The expansion of more screens to more environments will demand a stronger alignment of video strategy at the point of sale.

Online Channels:  Branded YouTube channels present new opportunities to connect with consumers through online video. L’Oreal’s Destination Beauty is a great example of how a brand can use online video to build relationships with customers through product demos, tips, and discussions.

Video Convergence: The new wave of set top boxes and Internet-connected TVs from companies like Samsung are very literally turning video created for online into video to be viewed on televisions.

Today 30% of consumers view online video from a device other than a PC/laptop.  Further, there have been recent whispers over at Apple suggesting a breakthrough TV product by 2013.

Digital Narratives: Telling stories online has traditionally been confined to text and photos. Online video adds a new layer of depth to your brand’s digital narrative. Text, photos, and social can now serve as entry points for driving consumers to online video.

Even a quick survey of the online video landscape reveals the underlying truth.  Online video will not be the “new TV,” but something much more:  a crucial element of integrated storytelling that we will have to master as marketers go boldly forward into a post-promotional age.

The Future Will Not Fit Into The Containers of The Past

The strange story of online video is not all that uncommon.  A great new innovation comes along with loads of potential, but it’s crappy.  It doesn’t do the job as well as the old good an trusty stuff.  Some quirky people like it enough to keep it going for a while and it just hobs along.  Then a few new connections are made and boom! the world changes.

As Rishad Tobaccowala likes to say, the future will not fit into the containers of the past.  Those paradigms were built around old ideas and new ideas need new ecosystems.  Just like modern shopping malls need modern suburbs which need a certain level of car ownership and gas stations to support them, online video needs the right kind of connected devices to gain momentum.

We’re not quite there yet, but we’re moving fast.  Marketers are moving some budgets that way, consumers are increasingly eager to co-create and 4G connected devices are gaining penetration quickly.

Has online video taken over?  Not yet, but it’s time to start taking it seriously.


Note: Special thanks to Simeon Spearman and the Ad Contrarian for helping with this post.

2 Responses leave one →
  1. November 15, 2011

    Hi Greg

    It’s a good piece but I think misses a few critical points around to why ad spend hasn’t transitioned more aggressively to the online space… yet.

    For example here are but 3 reasons (I can think of a few more but don’t’ want to hog the comment space!)

    1. Content acquisition is still a command/control rights model – although a zero sum game there is a real fear and isolationist movement out there to continue to protect access to content. Rights are nothing but an expression of the value of the content which is still firmly rooted in accessibility and it’s derivative exclusivity. This is stopping the “in demand” shows from making it into the “online video” space. In fact today’s world is all about content rights warehousing which is keeping the content under lock and key – Big Media is establishing it’s own Fox Knox.

    2. MVPDs are creating a private distribution networks levering Internet technology and not the WWW. Using DVR and IP big players like Comcast and BSkyB are bypassing the open WWW and allow for catchup TV only on their networks with lip service paid to the open network. This is probably one major reason of why TV audience figures continue to rise and online video continues to struggle to get access to primetime audience

    3. Advertisers still operate under the ‘Reach Model’ – brands want to be part of the halo effect created by top quality video entertainment wherever that content goes. With this content still tightly controlled brands have two choices: stick with it and it’s keeper (low risk low cost same reward) or strike out on their own (high risk high cost but potential high reward if timing is right). When coming to the WWW you innovate (and fight the uncertainty headwinds and associated costs of discovery) and find yourself needing to choose to be associated with ‘alternative’ content like UGC (low quality and of questionable repute) or untested sources of new content that can’t make it on the large screens; or you create your own content at the intersection of entertainment, viewer utility and marketing – a very small target indeed to get a bulleye’s on. The new models of hyperconnectivity and collaboration that make up the WWW are extremely foreign to advertisers and brands.

    To cap it all off advertisers are very much like a herd of wildebeasts who are currently doing their mass migration to the new grass lands. They have hit the proverbial river and waiting for the first to make the jump to keep the crocs busy before heading up behind.

    It’s a matter of time certainly before online video becomes THE place an advertiser NEEDS to be but there are many hurdles to cross yet.

    — Cameron

  2. November 15, 2011

    Good input. Thanks Cameron.

    – Greg

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