Summary:

Digital advertisers hardly need to be reminded that video is the fastest rising spending category for online media, but that speed is impede…

Another example of watching video.

Digital advertisers hardly need to be reminded that video is the fastest rising spending category for online media, but that speed is impeded by the continued hurdles to the buying, planning and creative options, as well as the lack of premium inventory and simple self-serve options. Studies from two different ad networks offer a pretty good snapshot of the opportunities and challenges for online video’s otherwise impressive growth over the next few years.

An online study from ad tech firm Casale Media and researcher Ad Perceptions of 157 agency/marketer and “decision makers” found that that 38 percent said the planning phase for web video ads are still too difficult, while 40 percent say video is plagued by creative problems, while 35 percent point to the execution part is the most painful. Despite the complaints, the study says that video spending should rise 25 percent over the next year, accounting for 23.8 percent of total online ad budgets — up from 19.1 percent in the last year.

Meanwhile, a separate study from video ad network YuMe shows that major ad categories are ramping up their online video ad spending. For example, consumer packaged goods, the top category among YuMe’s 1,500 publisher sites, remained the top spender in Q3 with a 23 percent share of the market, up from 17 percent in Q2.

Video is attractive for obvious reasons: it tends to command more attention than text or audio alone, and therefore provides the kinds of engagement metrics that brand marketers value. So perhaps the pain points aren’t so bad. The problem is that online video’s growth may be huge, there is still a perceived lack of premium ad inventory available. At least that’s the percent of many media buyers I’ve spoken to. The report breaks down the issues agencies and marketers have with online video:

– 40 percent cite the inability to accurately determine ROI
– 38 percent say spending doesn’t equal the ROI than can be determined
– 26 percent find it too hard to do precisely target audiences
– 21 percent find video ad networks lack transparency

In spite of those issues, Casale argues that video has clear advantages over TV, particularly in targeting. For example, while TV can hand advertisers vague demos through types of programming (Monday Night Football, daytime talk shows), online can pinpoint reach, frequency with a lot more color, even without the use of tracking cookies. For example, Facebook users offer an average of 220 points of personal data and interests on 800 million users, the study says.

Social media isn’t the only method available. Ad exchanges are starting to offer more clarity and targeting when it comes to video, though the amount of ad inventory available through real-time bidding operations is still very small.

Overall, eMarketer has estimated that 68.2 percent of U.S. adult Web surfers (158 million people) will have watched some form of online video at least once a month in this year. In contrast, just 54.9 percent of that group (86.8 million) will watch a TV show online at least once a month. Even with all the obstacles in the way, online video ad spending still has room to maintain and exceed its current momentum, if only because of the natural shift from traditional to digital that consumers and advertisers have both been making.

But video’s relative smallness to the market also needs to be pointed out. This year, U.S. online video advertising revenues of around $2 billion, eMarketer says, while the total online ad market will be about $30 billion.

In terms of categories, search currently represents a 46 percent share of total online spending, compared to banner ads, which is the second largest slice at 24 percent, according to the Interactive Advertising Bureau’s latest quarterly spending figures. In comparison, online video represents just 7 percent of all online ad spending.

As YuMe’s report noted, pre-roll remains the most popular format. While it’s engaging — most viewers are willing to put up with about 15 seconds of an ad, there have been some improvements to that mode and the mid-roll designed to make sitting through a commercial message less vexing.

Recent experiments, such as the large, engaging “masthead” units on YouTube’s homepage or Hulu’s Ad Swapping system, which lets users switch from one ad to another based on how relevant it is to them – should begin to open up more premium inventory.

The rise of online video has also been driven by the increased use of self-serve options. As the Casale report shows, making it easier to buy, place and create an online video will unlock more money from agencies and marketers. But the bottom line is that until online video can increase viewing times to a point that users will tolerate several spots within a commercial pod, dollar amounts relative to the rest of the internet will remain slower than it otherwise could be.

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