Many b-to-b media companies are starting to explore the online video opportunity as they make their plans for 2006, and a few have already started experimenting with it. A very small number-including CMP Media, CNet, Forbes.com and Ziff Davis-are making significant commitments to video with the hope of gaining an early lead.
Broadband video advertising has become so popular recently that some agencies have reported client demand exceeding available inventory. "[This is] a virtually unknown concept in the advertising industry," said Will Richmond, president of consulting firm Broadband Directions.
Richmond uses the term broadband-delivered video to distinguish between video delivered to a computer from a remote server via Internet Protocol (IP) and video distributed to television via a set-top box, which is commonly known as IPTV.
Although the underlying technology may be the same, he thinks the difference will be important when it comes to making money, with IPTV depending on subscription fees and broadband-delivered video mirroring today's Internet model. That means users will expect online video experiences to be free and media companies will depend on advertising support.
Fortunately, Richmond added, "big brand advertisers are increasingly redirecting their budgets from traditional 30-second television ads to online ads in general and broadband video ads in particular."
One reason is defensive. "Advertisers and the big agencies are observing consumers shifting their TV viewing patterns to video-on-demand and DVR, both of which marginalize the role and efficacy of traditional TV advertising," Richmond said. Another reason is opportunistic: "Studies have shown that broadband video ads result in much higher brand engagement and purchase conversion, leading to improved ROI on the advertiser's spend as compared with other media placements."
But, the "killer app" that made broadband-delivered video comfortable for users and friendly for advertisers was the consistent formatting of video players across different types of sites. Whether the player was a branded Windows Media Player, Quicktime or Real Media player, or a flash-based player developed by any number of companies, users quickly became familiar with the pop-up boxes and how they worked.
As advertising was loaded in, consumers were not surprised, given the similarity between online video and TV. In fact, many commercials are the same ones run on network and cable television.
Agencies had no problem understanding the concept of a pre-roll or post-roll commercial or ad insertions within longer programs. They had the video assets and were intimately familiar with the cost per thousand (CPM) pricing model. The Internet's additional measurement and interactive capabilities are mostly a bonus at this early stage.
"There's been a profound shift from subscriptions as a way to monetize broadband video to the advertising model," said Tom MacIsaac, president-CEO of Lightningcast, an advertising management system for online video that is used by such media companies as AOL, Disney/ABC, MSN, MTV and Scripps Networks. He estimated that 90% of online video advertising is now being shown on video-in-a-box players.
This model provides a very comfortable environment for advertisers and consumers, MacIsaac said. "This is a very familiar exchange. Branded advertisers are buying ads to go with content they're comfortable buying from the networks they are comfortable buying it from." While this model allows advertisers to make an easy transition from television to broadband video, MacIsaac said he expects the equation to change "as you have a whole new crop of Internet-only broadcasters developing video content that fully leverages the interactivity of the Web."
Streaming video technology has been around for years, said Sarah Kim, VP-media for agency Avenue A/Razorfish. "The challenge was bandwidth. We're now at a point where broadband video can be distributed widely," she said. After taking a wait-and-see stance for many years, advertisers are suddenly demanding video content that will engage viewers and create a rich media environment for their commercials. "Right now, it's the big buzz," Kim explained. "There's a me-too atmosphere."
In the longer term, Kim said she does not expect online video advertising to significantly outpace the growth of other forms of Internet marketing. "I think it will continue to grow steadily along the same lines as online advertising in general as technology evolves," she said.
Kim, however, cautioned the media that "marketers are going to be creating their own content especially for the Web, and some of that will be streaming video. They are looking to communicate with their customers in more of a one-on-one way via the Web." It remains to be seen what form that will take, she added.
According to John Cate, national media director, Carat Fusion, the current buzz around online video "is the outcome of a lot of work on our part to understand this medium. One reason people didn't use broadband video in the past was because they couldn't find it. Over the past 18 months, the players have become more prominently placed, so they are getting increased visibility, and marketers are learning how to use video better on the Internet."
Placing TV commercials directly online may be comfortable for advertisers, but it's not necessarily effective, Cate said. "If a commercial is not shot specifically for the Internet, you get problems with luminosity, for instance. Also, advertisers have to adjust for people turning off the audio," he said. "We make sure we use graphics that can tell the story without sound; we often spell out essential information within the video."
Cate has placed commercials for clients on CNet's News.com and Forbes.com, but said advertisers may have a different mind-set when they're placing video ads with b-to-b titles with niche audiences.
With the big business sites, "we're not trying to get clicks. We have done pre- and post-awareness studies, and we're able to see online video move the needle on brand metrics," he explained. "As you get further into niche b-to-b audiences, you start relying more on direct response metrics. So much of what we do in direct response is lead generation, so you have to ask, `Where does online video advertising fit with lead generation?' "