IPG’s media and audience research group, Magna, forecasts a 32 percent increase in online video ad spending this year. The availability of more premium content and the continued rise of broadband penetration in the U.S. are factors in the anticipated growth.
According to the forecast, which represents a reduction from a previous estimate, video advertising revenues will rise from $531 million in 2008 to $699 million in 2009. Magna believes spending will exceed $1 billion by 2011, implying a compounded annual growth rate of 36 percent each year between 2006 and 2011.
Network and cable TV stations are aggressively pushing their programming online, creating high-quality environments of the sort that appeal to major advertisers, Magna observed. Streaming video aggregators like Hulu and Fancast are offering content from multiple networks, expanding alongside network-owned sites from NBC, CBS and others.
However premium video content still represents a limited volume of top-tier inventory. “Few large advertisers can achieve broad reaching objectives solely by using an online video-only campaign if there are any content preferences involved,” the report states. In 2008, consumers watched 490 billion hours of traditional television, according to Nielsen. That represents a consumption rate 244 times that of professionally produced video watched on the Internet. In 2012, traditional TV will still account for 98 times more viewing time per individual than online video.
Advertisers are often reluctant to spend on user-generated content, another common video format, due to its unpredictable nature.
The rise of broadband penetration and other technologies have also boosted the video ad marketplace. Broadband now reaches over 75 percent of U.S. households.
“The chain of Internet video is only as strong as its weakest link,” said Mark Makenzie, head of technology, media, and telecom venture capital firm AllianceBernstein, who was interviewed by the report’s authors.