Competition in Online Video Ad Industry Drives Down Prices

Last week, I highlighted a study that noted how media companies are attempting to cut the inventory  available onlinevideofor static display ads in order to increase their value. Could a similar trend be coming to the online video industry?  Consumer interest in online video is rising, as is the available inventory, just as we go into the ‘upfront’ season.

Analysts believe marketers will pour $4.1 billion into online video advertising this year. This will mark a 41% increase over last year. At the same time, the rates advertisers are paying are down 15% from a year ago.  Industry operator, Brightroll, notes that the CPM (cost per thousand) for online video at a top media site runs between $15 and $20. Overall, consumers viewed 39 billion content videos last year and a significant portion of these, 23%, were partially funded by ad money.

The online video market is growing so important that large site owners will be part of the traditional ‘upfront’ season where they will sell their programming and space to marketers. A recent Wall Street Journal article points out that no less than 217 companies are competing in the online video market. The competitors in this industry include traditional print media firms who need a way to make up the shortfall they’re facing in the print ad industry. In the slower-​growth, established TV ad industry, 21 media companies compete for advertising money.

Meanwhile, advertisers are shifting money from their print and TV budgets into online video. Many believe the rates for online video need to drop further. Critics say there may be a higher level of engagement with online video but the format doesn’t have the reach large marketers hope for.

Are you working with ad buyers that are shifting to online video? If so, are they happy with the outcomes of their campaigns?

[Source: Vranica, Suzanne. Web Video: Bigger and Less Profitable. WSJonline​.com. 14 Mar. 2013. Web. 27 Mar. 2013] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.