The promise of broadband video advertising

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online_video_small.jpgADOTAS EXCLUSIVE — There is no shortage of anxiety in the advertising business these days as the economic slowdown takes its toll on advertisers and media companies alike.

However, one sliver of light in this otherwise gloomy picture is the broadband-delivered video sector. While not immune from ad spending pressures, most forecasters still expect 2009 will show a year-over-year increase for broadband ad spending. The sector is benefiting from two key factors: dramatic growth in consumers’ broadband video usage over the last several years and rapid technology progress that has made the broadband medium increasingly attractive for advertisers to pursue.

Recent broadband video usage is well-documented. According to comScore’s statistics, the total number of monthly video views in the U.S. alone grew from 7.2 billion in January 2007 to 14.3 billion in December 2008. In total, 78.5% of U.S. Internet users watched some broadband video this past December, with the average monthly viewership totaling 309 minutes (or just over 5 hours). While that’s still a fraction of the average viewer’s monthly TV usage, broadband’s growth trends are all positive.

Simply put, consumers love broadband video. The combination of convenient on-demand access, broad content selection – ranging from premium broadcast network programs to quirky user-generated video, and limited commercial interruptions has created a strong tailwind driving consumer adoption. That tailwind is poised to strengthen further as consumers begin connecting their TVs to broadband through devices such as Xboxes, TiVos, Rokus, Blu-ray players and others.

Advertisers are clearly taking notice of all this and are embracing the medium in earnest. Advertisers’ interest and expectations of continued strong growth in consumer usage has helped fuel a bonanza of innovation in ad technologies and infrastructure, often by venture capital-backed early-stage companies.

Anywhere you look on the ad infrastructure continuum there is innovation underway: ad networks, sponsored content distribution, targeting, ad creation and insertion, syndication and business rule management, reporting and analytics and so on. In fact, there is no shortage of ingenuity and entrepreneurial energy being directed at broadband video advertising. These entrepreneurs recognize that broadband video delivery and innovative new technologies are going to fundamentally reshape the advertising business.

Still, while there is a lot of promise in broadband video advertising, there is also a lot of important work that must be done so that advertisers can scale their spending free of the significant friction that still exists today. At the top of the list is standardizing formats and reporting, so that advertisers can more readily understand how broadband video ad buys relate to traditional TV advertising using well-understood metrics like GRPs. More work also needs to be done to determine the acceptable levels of advertising frequency in longer-form programs. And of course, there’s much more to be learned about what kinds of ads actually work best and drive the best ROIs.

None of this will happen overnight, but as the puzzle pieces come together, the payoff will be significant. For advertisers, broadband video offers the promise of a higher return on their spending and far greater accountability. For media companies, it offers the promise of far better monetization of their current and archived content. And for consumers, it offers the promise of actually seeing ads that deliver valuable and relevant information with the ability to dive deeper and learn more.

To be sure, broadband video is causing plenty of disruption and change. But for those dependent on advertising in one way or another for their success, it also promises loads of opportunity.

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