Forecast: In-Stream Ads and Video Banners to Dwarf Overlays

Video overlay ads of the sort offered by YouTube will command just $184 million in ad spending by 2013, according to new research from JupiterResearch.

While that represents a significant rate of growth over the estimated $20 million marketers will spend on overlays this year, it’s tiny compared to the nearly $1.9 billion Jupiter believes they’ll sink into their in-stream buys, and the $1.3 billion it says they’ll invest in video banner ads.

“Advertisers aren’t very interested in [overlays] yet, and maybe won’t be,” said Jupiter analyst Emily Riley, who presented the findings at ClickZ’s Online Video Advertising Forum in New York yesterday.

YouTube continues to dominate video consumption. According to Jupiter, Google sites represent 34.8 percent of all video views on the Web, while none of its contenders command more than 7 percent. Yet, Google faces continued obstacles to monetizing YouTube’s vast audience and repository of clips. That’s partly because marketers prefer pre-roll to overlays and partly because they’re not comfortable with user-generated content environments, Riley said.

About half of advertisers feel comfortable with user-generated content, and many of them seem to be uploading content and creating branded channels on YouTube and other sites — as opposed to buying media. Also at the Video Ad Forum, Starcom USA Video Innovation Director Chris Allen indicated many of his agency’s clients have created branded channels, while few have placed in-video ads.

In the same panel, YouTube sales manager Brian Cusack acknowledged the site needed to do a better job explaining its value proposition to users. He said the company had seen improved acceptance with some categories and agencies.

Riley and other panelists suggested spending growth is coming from ads placed in professionally-produced content. Hulu VP of Sales Kevin McGurn noted the site is serving ads against “the vast majority” of its streams. Hulu’s content is all professionally-produced. YouTube on the other hand, serves ads on a maximum of 3 percent of its streams.

Meanwhile, semi-professional video content produced exclusively for the Web, such as Wallstrip and RocketBoom, have attracted loyal audiences but will likely need to pool their ad inventory into vertical networks to appeal to advertisers. “We do see this maintaining its niche appeal,” Riley said. “The better you can aggregate this content, the better advertisers can get access to it.”

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