Potential for Internet Video Monetization

Shashi Seth,

Not many of us were convinced in the year 2000 that people would be watching videos on the web. Rewind a few years, and you can literally watch the birth of Internet Video. She is still a toddler, who has learnt to walk, and speak – and has been told by the parents that she needs to go find a job and make some money. Tough job, but here is the good news:

Internet Video is being consumed by the bulk of the internet population

A study by ComScore revealed that nearly 75 percent of U.S. Internet users watched an average of 158 minutes of online video per user during the month.  Furthermore, 57% of online adults have used the internet to watch or download video, and 19% do so on a typical day. This is primarily because:

The growing adoption of broadband combined with a dramatic push by content providers to promote online video has helped to pave the way for mainstream audiences to embrace online video viewing. Three-quarters of broadband users (74%) who enjoy high-speed connections at both home and work watch or download video online.

The Pew Internet & American Life Project's first major report on online video also shows how many video viewers have contributed to the viral and social nature of online video. More than half of online video viewers (57%) share links to the video they find with others, and three in four (75%) say they receive links to watch video that others have sent to them. Video viewers who actively exploit the participatory features of online video, such as rating content, posting feedback or uploading video, make up the motivated minority of the online video audience.

New advertising opportunities seem to be emerging, and users seem to be accepting advertising on Internet Video

ComScore also conducted an analysis of U.S. video consumption by daypart, which showed that people were relatively more likely to view video on weekdays than on the weekend.  In fact, peak viewing occurred between the hours of 5:00-8:00 P.M. on weekdays, when video consumption was significantly higher than average.  This opens up some amazing doors when you consider that this slot is adjacent to Television primetime. Wouldn’t advertisers want a multi-channel campaign approach and supplement their TV campaigns with campaign on Internet Video?

In a recent consumer survey, Jupiter Research presented respondents with a scenario in which online video content was free if it was ad-supported. Only 20 percent of online video users said they would only watch online video if it had no ads at all. So, 80 percent of online video users accepted the presence of advertising as a trade-off for providing free online video content.

The inventory exists today

There is a plethora of great video content available on 100s of sites, with over 10 billion streams available every month. Moreover, there is a large amount of content being created by both professionals and users.  Indeed, some of it is being created exclusively for the internet. More and more content from various parts of the world will make it online, as will content that was created a generation back. In fact, I will argue that there may be better quality and quantity of video content available on the internet in 3-5 years, than web content.

Room for both Professionally and Originally Created Content

Original creators are becoming more and more savvy, and after seeing audiences connect with their content, they are beginning to explore whether they can make a living out of their craft. Sites like Revver, Metacafe, YouTube and many others are making this possible, opening the doors to higher quality and quantity of content from the users, catering to the long tail.

Size of the opportunity

Despite this rapid growth rate, online video still is a relatively small share of total ad spending, and accounts for less than 1% of the total TV advertising marketplace. It is estimated that the total revenue for online video will expand to $6.3 billion by 2012. Right now, online video content is responsible for an estimated $538 million in the US alone. That may seem like a small slice of the $20+ billion spent on online advertising in 2007, but consider this: while online ad revenues are growing 26% per year, online video ad revenues are growing 55.5% per year. The potential for Video monetization is clearly there – just a matter of when.