Wednesday, November 19, 2008

OnlineSpin: Advertisers Will Not Lead Online Video Advertising -- They Follow

Last week Cory wrote "My Five (Early) Predictions for 2009."

Michael Sprouse wrote in response, "On your #5, I agree that there will be consolidation in the ad network space.

But not because 'there are just too many' and not because they are all competing for the same inventory.

In fact, they're not all competing for the same inventory.

The reason why there are so many is because there is so much inventory, and supply is still greater than demand (and this will remain true).

The reason why some consolidation will occur is because a lot of companies entered the space without sustainable business models, without enough cash reserve or credit capacity or without strong management.

The one-trick ponies might be out of luck, but the networks that combine the benefits of scale and efficiency with diverse competencies and pricing models will remain.

I think you'll see that the best networks who do remain are not 'bottom feeders.'

My $.02, thanks for covering this topic."

Martin Edic wrote, "Social media marketing will supersede SEM in 2009 and will become the primary marketing medium in 2010. Not advertising, engagement. Be prepared for an upheaval."

Wednesday, November 19, 2008
Advertisers Will Not Lead Online Video Advertising -- They Follow
By Cory Treffiletti

While engaging in a discussion this week on the "Truth in Online Video Advertising,"  I came to the quick realization that many of the people and companies involved in online video share a distinctive similarity: impatience.


If you know me well, then you know I'm an impatient man. This character trait makes me extremely well-qualified to take note of the same trait in other people.

Everyone involved in online video asks the same question; "When will advertisers, specifically brand marketers, begin to support online video as a viable advertising vehicle?" The proof that they are not yet supportive becomes obvious when you view premium online video programming and are exposed to the same advertiser and the same ad running throughout the entire "broadcast" session. The fact is that the advertisers will support the medium when they feel the time is right and all of their questions are answered!

The mass acceptance of online video is still growing. I personally feel that 2008 was a breakout year for online video because of the success of Hulu, among other things that began to drive consumers to view long-form video content and not just the three-minute videos on YouTube and other sites. The mass audience is starting to "get" that online video is a viable option, but there are four primary issues that hinder widescale acceptance and need to be addressed:

1.The audience is not fully "there" yet. This is still the biggest hurdle. Even though almost everyone online watches video at some point, the mass audience is not yet watching long-form content in high enough volume to be interesting to advertisers. We have not yet reached critical mass. The audience is beginning to go there and interact in that manner, but it is not yet mass behavior. Once we achieve that tipping point, advertisers will come. This is the most important challenge: The advertisers will go where the audience is and they are just not "here" yet. Patience and time will bring your audience.

2.There is no proven method for measuring the effectiveness of the medium. Too many online advertisers are still looking at click rates -- and too many offline advertisers are still blindly convinced that "TV works." I can't efficiently counter the argument on either end because there's not enough evidence to the contrary. I know that click rates against online video are poor, but can I confidently tell you that online video builds brands? Not yet. I think so! I can point out lots of one-off studies, but they're not proven yet because the medium itself is still not completely mature. It is hard to prove that an immature medium has matured as a tool for brand advertisers, and what metrics should a brand advertiser be using to judge their success? Once again, patience is an issue and patience will not improve with a worsening economic climate.

3.Most advertisers still pay far too much to create video advertising, so it's not cost-effective. This is a fact of the business: Agencies charge a lot for creating commercials, and, as they get squeezed on margins, commercials are still their bread and butter. The industry needs to find ways of creating video assets on a smaller budget. These methods do exist; whether it's in general production tools or leveraging crowd-sourcing efforts, it can be done. This is not an act of patience, simply an eye opening that will occur.

4.The online video publishers need to learn the language of advertising. This final hurdle is one that became apparent to me just recently. All these publishers proclaim to be the next big thing or to have a "cool" way of reaching the audience. Mainstream advertisers may say they want "cool" and "innovative," but they really don't. They want what they know will work and they are very risk-averse. Online video publishers need to speak in terms that TV advertisers know and love. They need to speak in terms of reach, frequency, GRPs and impact. They need to use the language of advertising more and invoke less of the language of the Internet. Go to where the advertisers are and bring them to you -- rather than standing in your own little section of the world and shouting for them to come over and join in the fun!

I still stand by the fact that online video advertisers will see growth and they will see budgets, but they need a little more patience. Do your best to know and speak the language, make your audience feel wanted and appreciated, and the advertisers will come. They follow the audience; they don't lead it.

Do you agree?

Cory is president and managing partner for Catalyst SF.

Online Spin for Wednesday, November 19, 2008:

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