Video Advertising Is Expected To Lead Web Resurgence in ’10

January 4, 2010 – Here’s a good start to the new year – a bellwether research firm is forecasting a rebound in online media spending in 2010, led by the emergence of video as a major force in Web advertising.

eMarketer predicts that online advertising will grow 5.5 percent this year to $23.6 billion, compared to a decrease of 4.6 percent in 2009 when Internet ad spending finished the year at $22.4 billion. While most online segments will experience modest growth, video advertising is set to spurt ahead by nearly 40 percent in 2010 to $1.4 billion, up from $1 billion in 2009.

Predicted growth in 2010 will make video one of the top three categories online, behind online banner ads and search. By 2014 video ads will generate more than $5 billion, search ads will corral about $16 billion in ad spend, and banner ads will produce about $6 billion, eMarketer says.

Video is the only category that can be expected to continue growing by big amounts in the years ahead, the firm says. “Video ad spending growth will far outpace any other online format, running in the 34 percent to 45 percent range from 2009 through 2014,” says David Hallerman, an eMarketer senior analyst. “These extremely high growth rates are the result of video ads moving from the sidelines to center stage, becoming the main form of brand advertising in the digital space.”

In contrast, spending on rich media is slated to rise 5.5 percent this year ($1.6 billion by year-end) and banner ads by 3.3 percent ($5 billion by year-end). Other online ad formats contributing to the total include email, lead generation, classified and sponsorship.

Marketers are warming up to video advertising because it’s more effective and it’s also familiar to them. They can also easily shift budgets and creative onto the Web.

According to comScore, brands using online video or rich media ads have seen lifts in incremental buying of anywhere from 20 percent to 40 percent or higher compared to other ad forms. ComScore tracks the impact of online video ads by measuring, for instance, whether Internet users who saw an online video ad then went on to visit a site or buy a product.

But in the near term, don’t expect major advances in video formats online. Pre-rolls will continue to dominate on the Web, because most advertisers prefer cutting down existing TV commercials into 15- and 30-second spots for online pre-rolls. According to online video ad network YuMe, about 95 percent of the ads YuMe, and most other video networks serve, run in the pre-roll format.

But there is a growing body of evidence that advertisers can generate a higher return on investment when they create Web-tailored ads, often using a pre-roll as the springboard.

Both YuMe and competitive online video ad network ScanScout have found that engagements rates with video ads are three to four times higher when a marketer uses custom spots, new creative and interactivity than they are for pre-roll ads.

YuMe recorded more than three billion views of video ads in the first nine months of 2009 and found that when advertisers customize the creative for the online video medium they can garner much higher click-through or engagement rates. “We see up to five percent click yields when people really take the time to develop creative that is online-specific and have the opportunity to engage the audience versus taking a TV ad and sticking it in front of the content,” said Michael Mathieu, CEO of YuMe.

Traditional types of pre-rolls clock in at about one percent interaction, YuMe found. Some of the clients YuMe has served up tailored ads for include Axe, Dove, Vitamin Water, Universal Pictures and Land Rover.

Because of the success with tailored ads, YuMe is exploring additional types of online video ad formats such as embedding ad units in the video. That could include contextually relevant ads layered on top of the video itself.

Competitive video ad network ScanScout has also found that customized spots yield much higher engagement rates. Interactive ads that let customers participate in polls, for instance, are generating four times better click-through rates than standard pre-rolls, said ScanScout, citing data from a recent Vaseline campaign run across its network.

The Vaseline campaign included a pre-roll unit that allowed users to vote on their favorite features of the lotion. Interactivity can also include letting viewers opt in to receive coupons or more information on a product.

As advertisers shift more dollars to the Web and as more studies pointing to the effectiveness of interactivity and customization emerge, marketers are apt to experiment with those video formats more frequently. Still to be determined is whether the Web audience is ready to accept a shift from pre-roll placements to ad breaks in the content.