Borrell: Cable positioned to win big in online video advertising

New eMarketer data reported by Online Media Daily reveals strong growth for online video advertising, including a whopping 89% increase this year. The report projects growth rates near or above 40% through 2011 and notes that next year should provide the watershed moment for online video, when over half of all web users in this country will be watching it.

This shouldn’t surprise anybody watching this space, but the report’s author, David Hallermam, has two concerns that make future estimates problematic:

One concern, he said, is uncertainty about what the audience will accept in terms of video ad content, placement and length. The other concern is the difficulty in gathering enough video ad inventory, with questions about ad placement and how to monetize the billions of user-generated video streams.

“Video ad inventory” is one of those mass marketing statements that presupposes static systems. That may be a concern to traditional marketers, but it misses one of the key points about online video: it doesn’t have to be “attached” to somebody else’s content (e.g. “The Smart Show” by Holiday Inn Express). Video classifieds are going to explode, and all of this bodes well for local media companies.

Gordon BorrellAnd nobody knows local media online revenue like Gordon Borrell of Borrell Associates. Borrell agrees with the eMarketer numbers, but he tells me that they will be boosting their own projections later this year.

The eMarketer consensus estimates are pretty much on target with what we’re seeing at the ground level for online video advertising — which is only to say that everybody tracking the actual numbers are coming up with similar estimates. However, our numbers — part of the eMarketer estimates — are going to be adjusted upward significantly this fall. We’re seeing a great deal of growth at the local level as smaller advertisers buy online video commercials, but we’re seeing some incredible growth at the national level that no one seems to be tracking accurately at the moment. Automotive, packaged goods, telecommunications and job-recruitment are the key categories. Real estate has begun to explode as the agents try to market themselves and find snazzier ways to move higher-priced homes.

There was a time when many media company executives scoffed at the Borrell projections, but Gordon’s wisdom is being validated every day. One thing he’s always pointed me to has been the online ad significance of local cable franchises, and he says they are the ones to watch as online video advertising grows.

The sleeper in all of this is local cable operators. Their lower-priced TV commercials have sold nicely, but the “on demand” aspect of online video seems to be capturing advertisers’ attention more. Cable operators already have the systems in place to reach the type of advertiser eager to buy video. They know how to produce the video at low cost. The Internet has given them an extra weapon in their arsenal: Not only will they air the commercial spots, but they’ll also put it online where people can view it 24 hours a day. And they own three very powerful marketing vehicles: their own cable avails, a gateway page for their broadband subscribers, and the envelope that contains the monthly bill. In short, local cable operators are likely to seize the online video advertising opportunity faster and more successfully than their broadcast competitors in the market.

As I’ve said before, it’s hard to convince broadcast sales people to accept commission on lower-priced sales when they view their time as better spent chasing big ticket advertisers. I’m not sure that will continue to be a valid argument for long, but it does underscore the need for local media companies to dedicate sales people to work the web exclusively.

I agree with Gordon that the local cable operators are ideally positioned to score big hits in an online, on-demand world. The only question is are they smart enough to see that?

Comments

  1. It’s no joke that video advertising is getting bigger and bigger. Just look at how video classifieds sites like iMoondo.com are popping up all over the place.

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