The State of Online Video Advertising: Growing, Pricey, Fragmented


ADOTAS — There’s no denying it: Online video is growing exponentially.

The online video industry is expected to reach $28.72 billion in 2017, up from the $3.79 billion recorded in 2010 and the $11.14 billion expected in 20121. By 2016, it is estimated that it would take over six million years to watch the amount of video that will cross global IP networks each month, and consumer TV traffic will be 12 percent of consumer Internet video traffic. (Cisco)2

Consumers are watching more videos online, and that means that advertisers are trying to find ways to get in front of them. But as viewership and demand for online ad space grows, advertisers are also finding it difficult to justify the expense and to find the right ad formats that will appeal to online viewers.

The Growing Audience for Online Video

Because so many people spend so much time viewing and seeking online video, this medium does represent a great opportunity for advertisers. Video can bring massive web traffic, and there are a growing number of people watching videos online with a variety of devices.

  • 28% of smartphone owners watch videos on their phones in an average month. (Experian 2012 Digital Marketer: Benchmark and Trend Report)3
  • 40% of tablet use occurs outside of the home, and tablet users prefer to use their devices for watching video (67%) and shopping (52%). (Online Publishing Association, 2011)3
  • Almost 50% of users watch videos on their smartphones. (Google Blog, April 2011)3

In the coming years, it will get even easier for consumers to watch online video. Parks Associated expects that there will be 87 million connected TV households by 2016, and these owners represent high-income consumers that advertisers want to appeal to.1

Web video is expanding into all sectors, including education, medical, relationships, sports, health, food and fashion. This represents a massive opportunity for advertisers who want to get in front of consumers.

But Online Video Advertising Has a Ways to Go

Online video was the fastest growing ad format last year with nearly 55% growth (eMarketer)1, but the ad rates for video advertising are continuing to fall. The prices for ads on top-tier sites were down by 10% to 15% from 2011 according to estimates from BrightRoll.1

There are an increasing number of companies offering online video, including many traditional media companies that are now seeing the writing on the wall and hoping onto the online video medium. And because of this, the amount of online space available for ads is growing. Of the 39 billion content videos viewed on the web in December 2012, about 23% carried video ads – up from 14% a year earlier, according to comScore.1

Online video advertising is coming into its own

In fact, Google, Yahoo and AOL are hosting what is called an “ad-sale event” for marketers to showcase their capabilities as far as ad space and online video. They are also being joined by traditional publishers who are pitching new online programming plans – including online video advertising.

For example, Conde Nast has launched digital video channels for its GQ and Glamour brands to promote their products. is increasing its entertainment programming online and has ad opportunities to offer. The Wall Street Journal, New York Times and Time Warner will also be looking to enter the online video ad space as a way to offset the declines of their traditional advertising businesses.

More than 217 companies, including video ad networks and publishers, sold one million video ads in 2012. That may seem like a lot, but these opportunities are being spread very thin. By comparison, only 21 media companies shared ad spending of $54 billion on national TV ads (Kantar Media).1

The opportunities for video ad networks and publishers are abundant in terms of opportunity, but there are so many companies competing to sell the space that the experience is fragmented. In addition, some marketers think that the online ad prices are still too steep to invest heavily in online video advertising.

In short, the audience is there and the demand is increasing, but unless video ad networks and publishers can have some kind of consolidation and keep prices low, it won’t be a stable or predictable media buying market.





  1. […] The State Of Online Video Advertising: Growing, Pricey, Fragmented. Peter Koeppel at has a great breakdown of the online video advertising market, discussing some of the barriers that must be overcome if the lofty growth expectations are going to become a reality. If you’re beginning to dabble in this corner of the online ad market, Peter has some interesting thoughts and insights. […]


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