Implications of the online video explosion
Cory Bergman March 12th, 2007
In the last week alone, here are some of the online video announcements:
- Former TV execs start web video company, 100 sites planned
- MTV Networks to build thousands of new websites
- Hearst to launch 12 video sites supporting key magazines
- Hollywood agency may launch video sites for each star
You get the idea. Here’s how I see it: As more niche online video makes its way on the web, it will draw large Long Tail audiences who are excited to find video programming that fits their unique interests. In two or three years, a good chunk of this online video will be watched on TV sets, and traditional TV ratings will experience even more downward pressure. The sheer volume of online video (inventory) will push down ad rates, ultimately leading to consolidation and the creation of vast video ad networks. Long-form advertorial and advertainment video will become the norm, but many online video projects will be abandoned because of low return. And to complicate matters, more and more talented people will produce video for other reasons than money, and this will throw a wrench into the economics. The best advice for media companies? Move aggressively into valuable niches. Keep costs low. Network niches together for maximum return. Distribute and share widely. And get ready for a wild ride.
3 Comments Add your own
1. Rocker | March 12th, 2007 at 12:19 pm
Agree with the general thrust of your post, Cory, but “sheer volume of online video will push down ad rates”? I don’t think so. Rates are not a function of the amount of video, they’re a function of the amount of time consumers have (opportunity for exposure), and they’re not making any more of that. And as more and more of what consumers view is not available to advertisers, the more the premium will go up on what is. That, combined with the inherent higher R.O.I. on targeted (”niche”) content, should actually serve to drive up effective rates. The other factor is the convergence of the traditionally separate “advertising” and (larger) “promotion” marketing budgets, which means the sources of funding for this advertising have significant upside.
2. Dan | March 12th, 2007 at 1:36 pm
Cory,
Why do you think the following (from your article)
“Long-form advertorial and advertainment video will become the norm”. ?
I produce infomercials and was wondering what is
happening today for you to predict this?
Dan
3. Cory | March 12th, 2007 at 11:20 pm
Rocker, good points, and by sheer volume I mean amount of video plus consumption, or streams served. Look at the blogs. Even niche blogs with respectable audiences are struggling to pull a decent CPM. Most run Google ads for an average of $1 CPMs. There’s too much inventory. Federated Media, which runs ads across a network of high-quality niche blogs including Lost Remote, does better on the CPM front, but not as well as you might think.
There’s a lot of novelty and excitement built into current video CPM pricing — I’ve heard some as high as $50 for news video — and I anctipate this will drop over the next couple of years. Again, there will be too much inventory.
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