November 30, 2005

Will the strong growth of Internet video advertising spell bad news for TV advertising? Not exactly, but read on...

"In fact, television as we know it today combined with the Internet will most surely find ways to complement each other. However, winner-take-all is not how it will be played," says David Hallerman, Senior Analyst at eMarketer.

"Video represents common ground for the two media, not a field of battle", adds Hallerman.

eMarketer estimates that spending for Internet video advertising in the US will nearly triple in 2007 to $640 million from this year's $225 million.

By the end of the decade, advertisers will spend at least $1.5 billion on video ads online.

One of the main drivers of online video advertising is broadband adoption in the home.

According to eMarketer, the number of US broadband households will more than double from 2004 (at 34.3 million) to 2008 (at 69.4 million).

The key barrier was passed earlier this year, when more than half of US online households connected via high-speed access. Advertisers seeking a mass audience can now look online. By early 2008 more than half of all households — online or not — will log-on via broadband.

All this is very good news for advertising agencies. Now the products they do best — film and video commercials, or "spots" — can be transferred to a new medium, new markets.

"In real-world terms, what that means is marketing campaigns can extend TV's reach to the online space, enticing the target audience to spend more time with a particular brand," says Mr. Hallerman.

"It also means using the Internet's ability to track consumers in ways that match up television commercials with online (and offline) activity."

He adds: "And it means combining the content offered on the tube with the control individuals take for granted on the Internet."

Full-service shops will become increasingly important as advertisers look to extend video assets across media.

Agencies that specialize in online more than offline — or vice versa — will need to pursue partnerships, mergers and experienced personnel to provide both online and offline services.

"More than any other advertising format," says Mr. Hallerman, "Internet video has the potential to blend hot marketing elements together — branded entertainment, paid search, viral marketing, consumer generated media, behavioral targeting, website brand marketing and online gaming."

Source: eMarketer