Catherine Holahan from Business Week wrote “A study by eMarketer predicts the floodgates will open after 2011, when the lines between TV and Web video will be blurred.” I found two parts of this article particular interesting:
1. “Flood gates opening” means the industry is doing $4.0+ billion in annual revenue
2. The barriers to growth are primarily the lack of new (non pre-roll) ad units and cost
I would suggest that flood gates are officially open when the industry does $1B in annual sales, after 3-4 years of near triple digit growth with no end in site. This milestone is not far off and there are many folks that believe this will occur as early as 2008.
However, it is more interesting to discuss what is preventing these flood gates from opening. I agree 100% with the lack of compelling, and scalable, ad units beyond pre-roll and we have spent a fair amount of time working on this problem at BrightRoll. That said, pre-roll is the most successful unit in the market today because it “performs” under the metric of “being seen by the user” and because it scales across large amounts of inventory.
I fundamentally disagree with the cost assertion. In fact, pre-roll cost is comparable, if not cheaper, than similar inventory on television. Furthermore, this CPM comparison doesn’t take into account the fact that television CPMs are vastly under estimated due to Tivo, DVR and the “going to the kitchen” phenomenon that is unmeasured in the Neilsen world.
The other important barriers to growth that were left out of the article are:
1. Advertiser Access to Aggregated Inventory.
2. Standards for 3rd Party Ad Serving on Video Sites
3. Successful Content Filtration Systems on UGC Sites
4. Internet Rights Being Acquired for the Actor’s in Commercials
#1 is probably the most important, as no marketer will allocated significant budget until reach and frequency objectives are met. #2 and #3 are solvable problems and will be addressed by the large players and content providers. #4 is a larger problem than anyone thought, but will be phased out over time.
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