shrinking expectations:
web-video ad revenues nosedive

In their August 14th story entitled Online Video Ad Spending Growth: Get Ready for a Stream of Dollars,Emarketer.com reports their 2008 web based video ad revenue estimates have been more than halved. One is left to wonder if Emarketer’s present estimates are overly optimistic.

The Difference Between Click-Throughs (CPC) and Impressions (CPM)

One reason that revenues are falling short of estimates may have to do with how ad revenues are determined. Online video advertising generally includes in-stream (pre-roll and overlays), in-banner, and in-text ads (delivered when users mouse-over relevant words). If, due to a lack of data, analysts failed to accurately distinguish video content from other forms of content such as text, images, or audio, then ad click-through estimates were likely inflated.

Click-through rates associated with text, image, an audio content exceed click-through rates associated with video content. The visually dynamic nature of video more fully and more continuously attracts a viewer’s attention. When situated in a room with an operating television, regardless of the content, a person will continue to regularly look back top the screen.

Absent the introduction of a new advertising/presentation model, it’s likely that web video revenues will continue to primarily depend upon impressions rather than click-throughs. Given that impression based ad revenues are generally far lower than click-through ad revenues (assuming even small click-through rates). Additionally, it’s likely that impression based revenues will decline as advertisers realize that the value of advertising impressions is lower than originally thought as well.

If analysts continue to assume that people will click on ads in conjunction with video content, or that revenue/impressions will remain stable, then their estimates will continue to remain high. The euphoria surrounding web video could quickly sour, depressing investment until a more profitable advertising or presentation model is introduced. Given that I’m presently developing a new presentation/advertising model, I remain optimistic. Biased, and optimistic.

Summum Bonum