February 2010 – Online Insights: Online Video

Online Video Trends for 2010

Q1 is here again. It’s the time when companies of all stripes strive to put their strategies into place for the new year. Budgets are set, marketing plans are approved, product roadmaps are locked in and headcount allocations are finalized.

For those of us in the digital advertising industry, the start of 2010 and of the new decade is no exception. So what will be the major story for the kickoff of the new decade in online advertising? For me, 2010 will be focused on video.

More Screens, More Content, More Eyes, More Dollars
At the Consumer Electronics Show (CES) conference earlier this year, one of the most dominant topics of discussion was the introduction of the iPad and other new tablet PC form factors along with other larger-screen mobile devices. Together with advancements in the smartphone market and their increased video capabilities, tablets will continue to move the needle in the total consumption of online-based video content. The introduction of these new hardware options and the increase in available content will be the core growth driver of digital video advertising inventory. Wherever consumer eyes wander, you can be sure that advertising will follow–and the rate at which consumers are watching video on their PCs, their mobile devices and internet-based TVs is growing rapidly. According to the Nielsen third quarter Three Screen Report, online video usage is on the rise, with Internet users watching 53 more minutes of video online in Q3 ‘09, a 34.9-percent increase from last year. In addition, the number of people watching mobile video has grown 53 percent year over year.

With more video being consumed on these alternative-screen devices, brands will find new ways of advertising around or during this content, and will subsequently continue to spend more on video-based ad formats. Forrester predicts that video will be the fastest growing area of display advertising over the next five years.

Ads Need to Get in Touch with Their Interactivity
As the inventory for online video ad placements has increased, advertisers have been quick to fill it with simple in-stream ads (pre-roll, mid-roll and post-roll). As a result, a customer experience issue has arisen–and the viewing experience is critical to users consuming online and mobile video content. This is a different beast than your traditional cable or broadcast viewer. Online consumers are driving innovations in our industry with the power of their clicks and engagement. Don’t expect them to sit through 15- or 30-second in-stream spots that have been repurposed from your broadcast campaigns; online consumers are demanding and expecting more.

In 2010, advertisers, publishers, agencies and technology companies will continue to push the innovation curve with advancements in online and mobile formats by focusing on developing highly customized, interactive and engaging video-based ad formats. Premium content publishers like ABC, CBS and NBC have had huge success enabling their premium full-episode player environments with custom, immersive advertising experiences. In 2010, look for new technologies, formats and features that truly engage consumers and offer opportunities to do way more than just watch the seconds count down until their video resumes.

“True” 3D–Coming Soon to a PC Near You?
3D movies like “Avatar” and “Up” have been a hot topic over the past year, with ticket sales reaching record numbers as audiences have lined up at theaters for these incredible movie experiences. One of the questions spurred by the technological advancements in production of films like Avatar is where this 3D technology will take us next. Will 3D make its way into our TV and PC viewing experiences in the near future and will advertisers be forced to hop aboard the 3D train?

The topic of 3D can be a confusing one as it relates to the interactive world, when compared to the “stereoscopic” 3D world of movies like Avatar that we see in IMAX theaters. Digital technology companies like my own are pushing the envelope with rich media technologies (like Papervision3D) that enable the delivery of real-time, rich, three dimensional online and mobile ads.

You’ll certainly hear a lot more about 3D in 2010, but 3D comes in many shapes and sizes–especially in the online advertising world. I wouldn’t be surprised to see companies emerge with software and hardware solutions for online stereoscopic (“Avatar-like”) video in the future, but I wouldn’t hold my breath if you are waiting to see it in an ad near you in 2010.

HD Online–Gaining Some Traction
High-definition content has become commonplace in our living rooms. The question for online advertisers is, “why haven’t we seen the same adoption curve in online video content?”

The simple answer lies in the economics. The cost of serving an HD video file over the web is still much higher than a standard-definition video file. This, along with the variability of serving cost when offering users the choice between HD and standard video viewing, has made advertisers reluctant to expand heavily into HD video for their ads. In 2010, look for continued reductions in serving costs and alternative pricing models that will begin to empower advertisers to explore options for HD video ads.

Continued Online/ Offline Integration
Now that video is completely digitally based, it seems inevitable that the two distinct advertising operational structures that we see today across advertisers, agencies and publishers will eventually converge and realize efficiencies of a truly unified model for video-based ad operations across traditional broadcast/cable and online/mobile platforms.

Integration is definitely a hot topic. According to a recent Forrester 2010 Predictions report, online technologies and processes are “seeping into television media. Television buyers and sellers should spend 2010 learning from their online brethren how to target, optimize and automate bid-based buys in order to be ready when the television upfront takes a backseat to the ‘online-like’ rules of order.”

The reality is that there are a lot of factors that will prove to be influencers of, or barriers to, this convergence. There is not yet a consensus in our industry on truly how much these two video workflows should converge, or how. In 2010, I expect that the following trends will continue to make this topic one to watch:

• Growth in the prevalence of online video (in terms of both content and consumption);
• The continued shift in budgets being allocated toward online and mobile video-related media buys;
• The desire for more robust and consolidated metrics and analysis around video campaigns across mediums;
• Economic conditions and the forced reduction of staffing models employed by agencies, publishers and advertisers; and
• Technology advances in TV, mobile, cable and PC hardware.

From online consumer trends to ad interactivity, 3D and HD technologies and innovations and online/offline integration–2010 is shaping up to be the year of video for the digital advertising industry.

Bryan Hjelm is vice president of marketing at Unicast, a leading rich media and video ad server and service provider. He can be reached at bryan.hjelm@unicast.com.