Which Online Video Ad Format Will Prevail?

Authored by Jay Baage on March 24, 2008 - 1:34pm.

From Future of Television Forum West – It is clear that the television industry is fundamentally changing since it was shaken up by Google’s $1.65 billion acquisition of YouTube in October 2006. In the panels and keynotes at the first day of the Future of Television Forum West on Monday, the big issue was still… wait for it… how to make money in this new online universe.

Yup, the television networks are still struggling to adapt to all the new technologies, devices, and platforms for their programming that are disrupting the way they do business and sell advertising. However, it is clear that the digital transition now has much more urgency to it in the ivory television towers.

TiVo, Bittorrent and Veoh have already shown that the 30-second spot might soon be a thing of the past. Perhaps huge cable TV bills might also soon be history.
“Much like (teens) might not sign up for a (phone) land line (ever), they might not sign up for $80 cable either”, said Joe Patrick, EVP, North American Television Distribution, MGM.

So, while disruption similar to what has happened to the music industry is expected for the television industry, new sustainable business models for the television industry are surprisingly scarce. Even YouTube, with the backing of online advertising giant Google, are still struggling with monetizing an effective video ad unit.
“95% of YouTube’s ad revenue is from display ads”, said Steve Mitgang, CEO, Veoh Networks.
“Overlays tend to perform better than prerolls in the tests we have done”, said Steve Jang, CMO, imeem.
“The ticker that runs across the screen is a new trendy ad unit”, said Greg Clayman, EVP, Digital Distribution & Business Development, MTV Networks.

Whatever ad format prevails, the television industry is well positioned to make good money off video-on-demand (VOD) a few years from now, at least according to predictions from the research firm Parks Associates.
“Only 10 percent is monetized today, but we believe up to 40 percent will be so by 2012,” said Kurt Scherf, Vice President & Principal Analyst, Parks Associates.

However, the audience was quick to respond on the interactive text-messaging board saying that advertisers largely shake their heads at VOD - there is so much content up for free, so why should people choose to watch the stuff that is available for purchase or even with embedded ads?

“It should feel LIKE free then people will accept it”, said Marc DeBevoise, SVP, Business Development & Strategy, Starz Media Group and pointed to Apple’s iTunes store as a good example of how to sell TV programming.

But, except for iTunes, the reality is that there are still few success-stories to refer to from a straight revenue perspective when it comes to online video.
“Apple is still the 800-pound gorilla, or even 850 pound gorilla if you look at marketshare, said Brett Bouttier, SVP, Digital, Warner Bros. Television.

Can the traditional TV advertising and distribution model evolve to adapt? Is the future of television a pluralistic, democratic one? I think that answer is still – remains to be seen.

Joakim Baage