The explosive growth of online video in the last couple of years has generated plenty of inventory, from major studios to high school kids with a camera phone. The eyeballs have followed. The missing piece of the puzzle has been the business model. The two questions have been: what will it take for advertisers to bite? And will viewers tolerate advertising on something they’ve enjoyed until now without it?

With respect to the first question, finding advertisers, it seems, has depended on the nature of streaming video. Studio-quality, broadcast television shows from networks like ABC, CBS and NBC have been sponsored by big brand advertisers such as Intel and preliminary studies (NBC, MediaPost) suggest they’re getting their money’s worth through this new distribution channel for existing, vetted, “safe” content. Although the traffic pales in comparison to that of YouTube’s, ABC reports 37 million episodes watched in May. Keep in mind these are US-based viewers only (viewing is only enabled if you have a US IP address), and the depth of engagement with a half-hour or full-hour feature show is substantial.

The problem continues to be user-generated video, genuinely new, long-tail content, where neither the advertiser nor the video hosting platform tend to have a whole lot of control over the nature of the material. Advertisers are understandably skittish. As I mentioned in a previous post, there are solutions becoming available that will help UGC platforms identify and weed out content that doesnt’ meet the site’s—and advertisers’—standards (UGC platforms are in the business of moderating content instead of producing it like their forebears).

The reality is that UGC—no matter how well moderated—carries with it a certain risk to advertisers, although so can live television events, too. If UG video continues to grow, then advertisers might be willing to live with a queasy stomach and direct more spend to where viewers have flocked to.

Another significant factor affecting viability and adoption of video ads is their format. Battles have raged over what’s acceptable to viewers, among preroll/midroll/postroll, overlay, adjacent/companion ads and non-overlay invitation ads (VideoEgg has an excellent solution called AdFrames).

The IAB recently released its standard video formats and display guidelines, but there hasn’t been any clear indication on what viewers are willing to accept broadly until a recent Ipsos study, suggesting most viewers will tolerate advertising for broadcast-quality television, movies, music videos and news clips, even the widely-loathed pre- and mid-rolls, but most draw the line for amateur/homemade clips (it’s unclear if that will change once YouTube and other popular platforms begin to allow amateur content producers to generate income from their material).

Here are companies that are providing online advertising for video:

• YuMe
• Tremor Media
• VideoEgg
• Jivox
• Adap.TV
• BrightRoll
• Move Networks
• Adotube
• ScanScout
• Ooyala
• Kiptronic
• Broadband Enterprises
• and, of course, Google AdSense

Costs: Valleywag has some estimates based on format and network.

This entry was posted on Friday, July 25th, 2008 at 4:54 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.