The online video opportunity

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LongTail Video offers a line of products that allows everyone from individual bloggers to marketers of popular brands to incorporate online video into their websites. “We are WordPress for video,” said Dave Otten, LongTail Video's CEO.

LongTail's core offering, the JW Player, is used by more than 1.5 million websites and is responsible for more than 5% of all video streamed online each month, according to the company. LongTail is leveraging that market penetration as demand for online video advertising grows.

Its ancillary products help users manage content, promote their own brands and monetize video impressions. The company offers approved websites access to an advertising network that links their video to large advertisers.

“We anticipate the advertising business is going to be the fastest grower for us,” Otten said. The segment grew by 400% in the first quarter of the year compared to the same period last year, he said. Otten spoke with Digital Directions about the role his company can play in connecting content providers to advertisers in the online video market.

Digital Directions: How is the overall landscape for video advertising changing?

Dave Otten: There are a couple of big trends. In the United States in 2010 the market is about $1.5 billion. We're seeing more dollars coming from offline into video online, and we also seeing some allocation of advertisements that are carving online dollars from display and search into video. But the lion's share of dollars is coming from TV to online video. The market has finally arrived.

DD: What role do companies like LongTail play?

Otten: If you look at online video, it's pretty fragmented in terms of where video views are happening and where minutes are spent viewing. The top 15 sites account for roughly 60% of video views, but site 15 has about 0.2% of market share and 40% of all video views are happening from site 16 and beyond in the millions of sites out there. It's a really fragmented space.

The same trend holds true for minutes watched. I expect the trend of fragmentation to continue. The real opportunity is for companies that can figure out a way to unlock the mid- and long-tail market for advertisers, which requires someone to aggregate a lot of streams at scale and make sure that the video content is quality video that can be monetized. The company that can figure out how to unlock the potential of the mid- and long-tail at scale is going to be a leader in the marketplace.

People also are figuring out how to monetize video on the iPad. There are tech hurdles being overcome today to deliver content to the iPad or other mobile devices. But the company that can aggregate scale and streams across the devices will be a big winner. It's a race to own distribution there.

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