Having founded and ran a media platform (video) startup since 2005 I’m not surprised by the recent reports that online video advertising is growing big time. This shows to some VCs who have been not so bullish on video and advertising that the online video platform business is real and relevant (note my VCs wanted to turn my vision of building a media advertising platform into a production company and PR agency).
The problem is that most VCs and new players to the online video market are having a hard time figuring out the business model. Not sure why – it’s pretty obvious it’s advertising. The problem or better yet said “opportunity” is that the ad unit needed to leverage these new networks, new content types, and syndication/aggregation technology just isn’t here yet. It will be soon. I know a few great companies working on that vision. As soon as the ad unit and enabling infrastructure supports performanced based contextual videos the money will flow.
Liz Gannes over at NewTeeVee has a good post on the recent Lehman numbers that online video is growing (she has other numbers as well from other sources).
Here is the text from Liz’s post:
The investment bank Lehman Brothers, which basically discounted the potential of online video advertising in a recent report on digital entertainment, now puts a number on that market: $1.1 billion in U.S. video ads this year, rising to $2.4 billion by 2010.
Lehman had previously forecast that video-on-demand and iTunes revenues for studios would climb to $2.5 billion in 2015 from $319 million in 2007, so paid content and ad revenues are at least in the same ballpark. Of course, they’re nothing like traditional television numbers.
The report isn’t available online.
The Lehman forecast for online video is pretty middle of the road, even a bit pessimistic compared to those of other firms (though most predictions tend to extend a couple years further out). Parks Associates sees $6.6 billion in 2012 in U.S. online video ads by 2012; Forrester is looking for $7.1 billion by 2012; and eMarketer says $4.3 billion by 2011. And In-Stat said today that it expects $4.5 billion in worldwide revenue from all online video business models by 2012.
In other revenue projection news (which there seems to be a ton of today; see Chris’ report on premium video revenue), eMarketer points to an iSuppli report that projects $3.8 billion in worldwide mobile advertising revenue by 2011, up from $427 million in 2008.
All of these discussions remind me of the early days of the web when then online advertising spend was always compared with traditional advertising spend. I think that it’s safe to say that the ad dollars are shifting online fast. At what pace will determine the magnitude of change of these forecasted numbers.
I’ve been recently bullish on live video as well as downloadable media. The combination of Live and Downloadable is very compelling.