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Broadband Reaching Critical Mass in U.S.

Study Predicts Major Changes in Online Advertising This Year

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NEW YORK ( -- Broadband has reached a critical mass that is likely to shake up the mix of Internet advertising this year, said Jeff Lanctot, vice president of media at Avenue A/ Razorfish and author a just-released report, "The 2005 Online Media Outlook."

The broadband future of advertising is about to happen, according to an Avenue A/Razorfish study.

With broadband penetration among Internet users now above the 50% mark, consumers have embraced the sight, sound and motion that video on the Web delivers, and this year advertisers will follow and target those consumers in earnest, Mr. Lanctot predicted.

Avenue A/Razorfish is aQuantive Inc.'s interactive agency, specializing in corporate Web design and online media buying and related market studies.

Major portals
Concentrated content inventory that accommodates video is still largely limited across the Web to the major portals, news sites such as ABCNews and CNN, ESPN, MSN and Yahoo. The last two portals represented 11% of Avenue A/Razorfish's $312 million in media spending in 2004.

"In a fragmented media landscape that can overwhelm marketers, the reach the portals offer is compelling," Mr. Lanctot wrote. He equated MSN and Yahoo's reach with the broadcast TV networks, and portal home pages as the new hit network shows.

With the introduction of MSN Video in 2004, MSN has a bit of a head start, but "it's very early in the race," he said in an interview.

Video priority at AOL
America Online has considerable "homegrown" content from parent Time Warner and "has made video a priority," as it pushes broadband on its new site, which will be open to non-AOL members.

And Yahoo is increasingly entertainment-focused since the hiring of Lloyd Braun, former ABC Entertainment chairman, to head its media and entertainment division. One example is Yahoo's branded entertainment deal with Mark Burnett Productions' TV series The Apprentice. Another is the portal's deal to be the exclusive distributor of the new JibJab animated feature about President Bush's inauguration.

Short films and music videos
Smaller sites, such as AtomFilms, IFilm and TheFeedRoom, have become destinations for users seeking video content like short films, animated features and music videos.

How video advertising develops will depend on how the portals handle pricing and inventory demand this year, Mr. Lanctot wrote.

Advertisers have seen the impact online video ads can play in their campaigns, but most are still in the testing phase. So, price, duration, standard formats, tracking and reporting "are still very much in flux," said the report.

Video search
What's the hottest innovation in online video? Video search, Mr. Lanctot said. (Indeed, Yahoo this week announced a video search feature in beta on its portal, and Google isn't far behind.) "Imagine going to Google, typing in an actor's name and seeing a clip from a film" instead of just getting a link in search results, he said.

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