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Online Video Ad Growth Slows, But Remains One Of Fastest Emerging Media

 

April 27, 2009 by Joe Mandese

. . . estimates for the rate of ad spending for online video has slowed down considerably in recent months, but it remains one of the fastest growing of any "emerging" medium, according to new estimates scheduled to be released today by one of Madison Avenue's leading forecasters. Advertisers are projected to spend $699 million on online video ads this year, an increase of 32% from the $531 million spent on online video advertising last year, according to the new forecast from Brian Wieser, global director of forecasting for Magna, a unit of Interpublic's Mediabrands division. As healthy as those projections may seem, they are a significant downward revision from last summer, when Wieser issued a report calling for online video ad spending to rise 45% to $805 million this year.

Noting that his previous estimates were made prior to the escalation in the U.S. and worldwide recession, Wieser notes that online video advertising's gains still "will likely outpace growth rates for most other emerging media platforms."

. . . Wieser's last report had online video rising at the fastest rate nine months ago, surpassing the growth rates of online search, social media, mobile, gaming, advanced TV, and emerging out-of-home media - . . . Updates for the others, which presumably have also been revised downward due to the recession, will be released over the next several weeks.

One reason for online video advertising's relative staying power during the recession, Wieser says, is its ability to "reach their consumers in a more targeted and cost-effective manner" than traditional media. Another factor is that . . . there has been a marked increase in the availability of premium online video advertising from network and cable TV programmers, and the penetration of broadband Internet access has risen to nearly two-thirds of the U.S. population. The combined effect, Wieser estimates "led to a 24% increase in time with professionally produced online video during 2008," the kind most desired by conventional national advertisers.

While growing fast, the rapid expansion of online video consumption and availability still is no significant threat to the most ubiquitous form of video advertising: conventional broadcast, cable and satellite TV. During 2008, Weiser notes that Americans spent 490 billion person-hours viewing traditional television, according to Nielsen estimates, which is equal to 244 times more consumption of all the professional online video consumed that year.

Assuming last year's rapid rate of growth was to continue through 2012, Wieser noted that traditional TV would still represent "98 times more consumption" than online video that year.

. . . Those combined factors, Wieser says, will contribute to a continued expansion in advertising dollars spent on online video, which will break the $1 billion mark by 2011, based on a compound annual growth rate of 36% through that year.

For more of Interpublic's views on the growth of online video advertising, check out Mediabrands TV's latest installment, including an interview by Wieser of Mark Mackenzie, Head of Technology, Media and Telecom Venture Capital, AllianceBernstein.