There’s just one problem — it won’t happen anytime soon. According to consulting firm PwC’s annual media report, online video will increase from $2.3 billion in 2012 to $5.9 billion by 2017. The figure represents 9 percent of future online ad spending, but this is still a small amount compared to TV ads — which PwC predicts will pull in $81.6 billion, or 37 percent of all ad dollars in 2017 (the figure includes ads “around broadcasters TV content” so adjust accordingly.)

This slow growth forecast jibes with the assessment of industry experts who spoke at a VideoNuze ad event last week in New York City. Their explanation was simple enough — brands already feel their budgets are spread thin by TV and they’re not in a mood to experiment.

“If you followed viewers across all screens, we’d have to add at least 70 percent to the budget … our clients say ‘we don’t have have any more money and everything’s more expensive,’” said Michael Bologna, Director of Emerging Communications at GroupM.

Bologna and Digitas’ SVP of Media, Adam Schlachter, both said that media companies’ recent “NewFronts” in New York (a boozy, glitzy preview of new shows intended to resemble the Upfronts in LA), had at best “sparked a conversation” but did not lead to any resolutions to turn on the cash spigots.

The main problem, for now, appears to be a lack of consensus on how to measure the effectiveness of online video ads. Here’s how PwC puts it:

There are [..] challenges facing audience-measurement researchers seeking to provide more accurate data for their clients: …Until progress is made on these, migration of advertising revenues from traditional TV to online video platforms will lag consumer adoption of these new services.

The ongoing status quo (whatever its cause) appeared to frustrate at least one audience member at the VideoNuze event, who demanded that someone explain why TV stations charged more even as they bring brand messages to fewer people.

“We don’t want to pay the failure tax any more. It should be more like the stock market [where value declines with performance]. The agency must say, if your audience goes down, you get less.”

The panel host, Forrester’s Jim Nail, suggested a culture of risk aversion may explain the status quo: “Nobody gets fired for buying ABC, NBC, CBS and Fox.”

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Tubemogul wants to use the new infusion of money to accelerate its hiring and open up additional international offices. “New offices will be in Austin, Sao Paolo, Berlin and Tokyo,” the company’s communications director David Burch told me via email, adding: “We plan to significantly grow existing offices in Sydney — our biggest satellite — London, Toronto, Singapore, Kiev and throughout the US (New York, Chicago, L.A.).” With this round, Tubemogul has raised a total of $35 million.

Readers who’ve been following the online video space for some time may still remember Tubemogul as a company that used to provide syndication and analytics for online video makers. Tubemogul sold that part of the business in January, and has been exclusively concentrating on video advertising ever since. That change of focus seems to be working for the company: Tubemogul served 1,125,866,000 video ads in November, according to comScore. The company hired 57 new employees in the past six months, bringing the total headcount to 132.

The most recent infusion of cash tells us two things: First of all, hiring talent in the Bay Area is getting more and more expensive. And secondly, online advertising is ramping up, with a lot more growth potential ahead. Tubemogul and its investors are betting that a significant portion of that money is going to be spent via so-called real-time-bidding on ad slots. And analysts seem to agree: A recent Forrester study, which was commissioned by one of Tubemogul’s competitors, estimated that real-time bidding for video ads will reach $667 million in 2013.

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The redesign expands Vibrant Media’s in-text ads – which pop-out when people mouse over double-green underlined words in an online article – to “in-context” ads that also surface under relevant editorial images. The new strategy also includes additional visual cues for consumers to signal that an ad is about to pop up and a wider range of ad formats for marketers.

In an interview, Irvine said the redesign is meant to make Vibrant Media’s ads more transparent and interactive so that the company can win over consumers and, ultimately, advertisers.

“Consumers are becoming more demanding in their expectations about advertising – especially digital advertising,” she said. “They want control and choice with how they interact with ads and they would also like to see more engaging ads with higher production value.”

She also said that even though people are learning to ignore certain parts of a web page and fast-forward through TV commercials, through social media and other digital channels, users are also learning to interact with advertising.

As part of the redesign, users won’t just see double green lines under ad-enabled text, they’ll also see a new icon (a double-facing arrow) that Irvine said serves as an extra signal of an upcoming ad. After a user mouses over the ad-enabled text, they’ll first see a progress (or countdown) bar, which gives them an opportunity to disengage, before the ad opens. The process, Irvine emphasized, is user-initiated, as a user needs to hover over the text for a little under three seconds before it activates (in Europe, it’s three seconds).

The new design also features a full-screen rich media ad unit, called Mosaic, that includes branded videos and photos, social media commentary and the option for users to participate in social conversations.

Irvine said about 4 percent of users stay on the countdown bar to launch the video and then 40 to 50 percent of users complete viewing a 15 second spot.

Given consumer “banner blindness” and the ease with which Internet  users ignore web ads, Vibrant Media’s in-context ads certainly give brands a better shot of getting noticed. And their expansion in rich media makes plenty of sense given the growth in online video and social media marketing. The risk is that consumers could continue to find the in-context approach to be too obtrusive. The extra signals do give consumers extra time to stop an ad before it fully opens but, within three seconds, a consumer could still accidentally hover over ad-enabled text and feel annoyed by the extra activity on the screen.

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And that bottleneck is … advertising. While developers and publishers have evolved to support a digital video eco-system, advertisers are a step behind. The problem is common to all sorts of media transitions: the impulse to replicate old experiences on new platforms.

YouTube’s director of product management, Shiva Rajaraman, summed up the situation at this week’s Mobilize conference. Rajaraman explained that many conventional constrains of video advertising — especially the 15 or 30 second time limits — are artificial and dictated by the strictures of traditional TV. But in the online digital environment, many of those conventions don’t apply and there is endless opportunity for new types of creative ads.

Ad agencies, however, have been slow to pick up the ball, according to Matt Minoff, the CEO of Selectable Media. Minoff’s company makes a business of dropping short video ads into places where viewers might encounter a paywall or an offer to buy something. In practice, this might means that a video game player can receive virtual goods in exchange for watching a video. The player might see a screen like this:

If the player wants to earn the virtual cash, they can choose from a variety of videos:

After watching the video, the viewer receives a benefit such as virtual goods credit or access to an article. Minoff says publishers are embracing the ads and viewers are willing to watch them. His company is profitable and growing but he says appropriate ads are in short supply.

“What holds back advertisers from taking advantage of new platforms is that have to repurpose creative built for TV. They’re utilizing 30 second TV spots online and for mobile.”

Minoff believes that ad agencies should consider reallocating their budgets to create more custom content for online platforms. While this would take a larger investment into creative, the potential pay-off could be large if it improves advertisers’ ability to deliver the rights ads in the right situation.

(Image by Jacek Chabraszewski via Shutterstock)

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The TrueView format, which launched a little more than a year ago, has quickly taken over as the dominant unit for video ads that appear on the site. With TrueView, ads generally play for about five seconds before viewers have the opportunity to skip them. The beauty of the TrueView ad is not only that viewers can ignore them, if they don’t find them relevant or appealing, but that advertisers don’t pay for skipped creative.

The incentive is then on advertisers to make good creative, and on YouTube to target the ads appropriately to increase engagement. So far, that appears to be working: Wojcicki said engagement ranges from 15 to 40 percent when viewers choose to actually watch an ad all the way through.

As a side note, CEO Larry Page noted that YouTube still had a lot of growth ahead and expected an increase in advertising on the site. But Page said that growth wouldn’t necessarily come at the expense of TV budgets, as advertisers generally weren’t shifting spend from other parts of their video budgets when committing to YouTube.

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adRise offers up a real-time bidding exchange for video advertising on connected devices, enabling advertisers to serve into a number of different connected devices without having to do the hard work of integrating with various device platforms themselves. The startup has already integrated with Roku, Google TV, Boxee, Samsung, Yahoo Connected TV and other device platforms, with more on the way. adRise does all the device detection, transcoding, insertion of video assets on its end, so advertisers need only feed their existing Flash creative into its system once to have those assets reach a number of different devices.

On the publisher front, adRise provides a software development kit that publishers can use so that videos delivered to the TV through a Roku, Samsung TV or other device can serve up the same advertising. The startup has already teamed up with ad networks Tremor Video and Brightroll, and plans to announce partnerships with other major publishing and ad partners later this fall. According to CEO Farhad Massoudi, adRise has seen its ad inventory double every month over the last three months, and he expects that trend to continue at least through the end of the year.

The startup solves a problem not just on the delivery side of things, but on the reporting side as well. While Nielsen ratings are nice, there’s no substitute for the type of granular, deep-dive analytics that advertisers can get from IP-based delivery. adRise measures a number of unique characteristics, allowing advertisers to drill down into viewership by device, as well as to see how long ads were watched, if viewers clicked through to learn more about a product.

As more viewership happens on connected devices, advertisers will need a way to reach those viewers and publishers will need a way to monetize those views. Platforms like adRise seem well positioned to offer a solution to both.

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Affine accomplishes that with a semantic video ad technology, which scans videos frame-by-frame and then groups them together based upon specific content categories. By doing so, it’s able to reach a scale of audience for ad buying that wasn’t previously available for most online video campaigns, while also ensuring brand protection for brands and agencies that want to serve ads against those videos.

Due to worries about the content of most online video, many brands and agencies stay away from a large percentage of that content, preferring to launch campaigns against professionally produced videos. But with Affine’s technology and repository of online videos, media buyers a much larger inventory to choose from. The company provides tools to enable advertisers to create custom video channels to target. And once their ads have been served, Affine provides full transparency into where those ads appeared.

Over the last several years, Affine has worked to get integrated with non-premium video distributors such as YouTube, as well as all the major ad networks. It’s done so by doing its own media buying during that time, building campaigns and serving them up while it perfected its technology and built its database of available videos. Now, it’s hoping to take advantage of that work by offering a platform to the ad community.

For advertisers, the result is that Affine reduces the pain of placing ads online, while drastically increasing the scale of inventory that can be purchased. And publishers are now able to increase monetization with more ads being served against their videos and higher CPMs than they were able to get as purely remnant inventory.

Affine has raised a total of $8 million from investors such as Highland Capital Partners and Crosslink Capital. The company, which was founded in 2007, now has 13 employees and is headquartered in San Francisco.

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TubeMogul’s new ad platform is aimed at providing advertisers with transparency and targetability in a market that is missing from some other ad networks. The PlayTime platform not only allows advertisers to see on which pages a video ad ran, but it also gives detailed information, such as whether the ad is click-to-play or auto-play, as well as how long an ad or a video played before a viewer clicked away. Not just that, but the platform uses TubeMogul’s analytics to help target ads to users that are most likely to view them, which can increase click-through rates by 200 to 400 percent above average video ads, with viewing times up some 30 percent.

TubeMogul had seen some success before the platform was even made generally available, with the fledgling ad business pulling in more sales than its existing reporting and analytics business despite still being in testing.

The early success has led TubeMogul to expand its workforce with two new hires and the opening of a New York office aimed at capturing even more ad dollars. The company has added Jeff Valente, formerly of AudienceScience, as its new new vice president of East Coast sales, and Lee Freund, formerly of Pointroll, as its director of East Coast sales. According to TubeMogul marketing director David Burch, that team could expand significantly if it meets early targets.

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What video viewers really want is choice, the research suggests. Hulu’s Ad Selector unit gives its users the option to choose between two comparable ads — meaning that viewers are opting in to watch an ad that is somewhat relevant to their interests. Or at least, it gives them the feeling that they’re choosing an ad that’s relevant to their interests, rather than showing an ad that might be completely unrelated.

Ads run by a number of online publishers were analyzed, including some on AOL, BBE, CBS Interactive, Discovery Communications, Hulu and Yahoo. Participating marketers included Publicis clients such as Allstate, Applebee’s, Capital One and Nestlé Purina PetCare.

The research did not include ads from other ad agencies or marketers that aren’t Publicis clients, however, which has caused some marketers to question the VivaKi’s findings.

VivaKi spent 16 months and more than 230,000 hours of analysis examining different ad formats to determine which were most effective in reaching online video viewers. The analysis included 29 different video ad models that were shown to more than 25 million customers.

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The company took a look at how viewers interacted with more than 1.8 million video streams over a 48-hour period, and found that about 16 percent of them clicked away rather than watch a pre-roll ad. The report took a look at 10- and 30-second-long pre-roll ads that ran against short-form content, typically videos that are 3-10 minutes long. The ads shown were served from a wide range of video ad networks, including AdTech, BBE, Google and Tremor Media.

User behavior differed depending on the type of content that was being served up. Users were more patient when waiting for content from large broadcasters, with about 11 percent clicking away during ads. However, users were much more likely to abandon videos served on newspaper and magazine publisher web sites, clicking away nearly 25 percent of the time.

One thing the research didn’t take into account was how different length pre-rolls performed against different lengths of short-form video. For instance, do users have a higher tolerance for a 30-second pre-roll against a 10-minute video, as opposed to a 10-second pre-roll that runs against a 3-minute video?

The report did note, however, that publishers and advertisers need to determine the definition of an “impression” or a “view” for videos that have pre-roll ads run against them based on whether viewers actually watched the entire ad. Logging an impression at the beginning of a pre-roll leaves open the possibility that users could have clicked away before the ad finished.

This is the latest in a string of research reports that TubeMogul has issued about user response to different conditions while watching online video. The company previously reported that 81 percent of all online video viewers click away if they encounter a video clip buffering during the stream.

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