According to Brian Wieser, senior vice president-director of industry analysis at Magna Global, online video ad sales will increase by 55.5 percent to reach $365.5 million during 2007. For 2008, growth will be similar, increasing by 53.2 percent to finish at around $560 million.
The percentages look impressive, but in reality it's a drop in the bucket compared to overall ad spending, and is less than 1 percent of the total TV advertising marketplace.
Wieser says that even over a five-year period, by 2011 TV advertising will still eclipse online video by about 90 times, even with the rapid growth.
It's impossible to know if these projections are going to pan out, but the overall theme is true.
There are a number of reasons why growth will be so slow. Here are five major ones:
1. Lack of Professional Video
A number of agencies have said they would love to put their ads online, but there isn't anywhere near enough professional video online to meet the demand. Until that happens, agencies will in general stay on the sidelines.
2. Copyright Protections in Place
The video industry has watched what happened with the music industry, and are working to ensure that their copyrighted content isn't handled in the same way. There won't be a full blitz by the industry until this is worked out.
3. Better TV Convergence
Until the transfer of video from computers to TV is available in a simple, but fast service, people will be slow to adopt Internet video as their preferred way of consuming the medium.
4. Platforms not built out yet
The push to offer professional video online is underway, but it'll take some time to mature. You have companies like Joost and the upcoming unnamed venture between News Corp. (NWS-A) and NBC Universal (GE) which have promise, but they will also take time to get going in any meaningful way.
5. Faster Downloads
Amazingly, the U.S. has some of the slower bandwidth of a lot of countries. The time needed to download video here isn't near being consumer-friendly at this time. That's an area of improvement that is needed to make online video an accepted means of viewing. Online professional video won't truly take off until people can watch it on their television sets.
All of these things will need to be improved before online video supported by ads becomes a much larger part of the picture. The desire and will are there, but until these steps are taken and completed, it will remain a fast growing industry in comparison to itself, but slow when compared with the overall advertising business.
This doesn't mean that money can't be made with video ads, just that the market penetration will be slow going, and it won't be something that happens strongly over the short-term. Long-term, it will become a powerhouse industry. It'll take years to get there, no matter how much hype is put forth.
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