Online Video is Not Yet Delivering on its Promi$e

Written on
Mar 20, 2013 
Richard L. Tso  |

ADOTAS – Traditional journalism has been on the decline for decades, and the emergence of online video content has been successful in attracting eyeballs for technology blogs like Mashable and TechCrunch. Even mainstay outlets like The New York Times and The Wall Street Journal have started video news reporting initiatives. While video content has become ubiquitous, monetization is still in its infancy as publishers are scrambling to turn a profit.

The video-ad company BrightRoll reports that online video-advertising rates continue to fall, estimating that prices for ads on top-tier sites last year were down by 10% to 15% from 2011.

This begs the question: At what point does the popularity of video outweigh the monetary gain of providing this form of content to consumers?

As publishers continue to push video, this in turn, is fueling the explosion of excess online ad inventory waiting to be filled, and advertisers haven’t been able to keep up. According to comScore, of the 39 billion content videos viewed on the Web in December, only 23% carried video ads, up from just 14% a year earlier.

AdWeek reported this month that Facebook has a team of 150 employees tasked with creating video tools for users and businesses that might make it easier for media companies to deliver more videos on the site and perhaps even place pre-roll ads in these clips. In this sense, Facebook would be following the YouTube model for video ad delivery.

“Whether it’s user video or brand supported, video is a highly engaging medium and it has the potential to grow engagement significantly on Facebook,” says Clark Fredricksen from eMarketer. “As it so happens, it can help them grow their ad revenue substantially as well.”

Like television, viewers are most receptive to brand advertising between 8 p.m. and midnight according to a recent report by TubeMogul. Viewers exposed to an ad during that time period remember a brand message 6.6% more than viewers that did not see an ad, more than double the day’s average (3.0%). Similarly, lift in brand favorability more than triples to 6.9% from 2.1%, and purchase intent goes up slightly, to 1.8% from 1.6%.

This is all fine and dandy, but what does the rise of digital content and video ultimately mean for the newspaper business? The Atlantic recently reported a frightening statistic about the industry: “In 2012, newspapers lost $16 in print ads for every $1 earned in digital ads. And it’s getting worse, according to a new report by Pew. In 2011, the ratio was just 10-to-1.”

Print ads have fallen from $45 billion to $19 billion since 2003, while online ads have only grown from $1.2 to $3.3 billion. The means that the total ten-year increase in digital advertising isn’t even enough to make up for the average single-year decline in print ads since 2003.

Print lost approximately 55% of its lifetime value of a customer (LTV) while online content added a mere 5%. Yikes! As Adotas recently reported, the move to subscription-based models may indeed be a signal of publishing’s spiraling decline.

Could it just be that the introduction of new platforms like mobile and new forms of content such as video are simply creating more and more channels that are stealing shares away from print, display and television? When will publishers wake up and realize that diluting content through new forms of media is also wrecking havoc on the lifetime value of a customer, and top-line growth?

Earlier this month, Condé Nast launched a new digital video initiative for its GQ and Glamour brands, in attempt to capitalize on the trend that online video ad spend is expected to top $4.1 billion this year, up 41% from 2012 according to eMarketer. Dawn Ostroff, president of Condé Nast’s entertainment division, said she believes Condé Nast has a good chance of standing out among the surge, thanks in part to the popularity of the company’s brands.

“Ultimately, the dollars will have to come from television. Will it come from television tomorrow, I don’t know,” said Ostroff.

This gap between print and online is staggering and no matter how we spin it, write it or communicate it through video. It all points to the fact that publishers are in for a bumpy ride.

Richard L. Tso is a reporter for Adotas and an avid writer covering the intersection of technology and advertising, fashion and music. With over 12 years of experience in the Advertising, Marketing and Public Relations industries, Richard has held executive positions at global agencies and technology companies and is founder of the interactive communications firm Pseudosound Consulting LLC. A classical cellist and painter, he believes that sometimes sound carries more weight than words. He is a graduate of Stanford University.

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