Nailing Down the Video Ad Market

After we quoted the CEO of VideoEgg this week as saying that the market for overlaid video advertising would be a smaller than previously expected, we got a lot of feedback from his competitors. When it comes down to it, they don’t disagree with VideoEgg’s estimates, they just think their own approaches are better. But along the way they shared some interesting quotes and numbers.

Tremor Media Chief Revenue Officer Randy Kilgore:

“If your perspective is that you have only user-generated content that you’re trying to monetize, then overlay is right, but where we work the commitment between the user and their content is much greater. Then you’re far more likely to appreciate the fact that the ad is helping make that content available for free. So that’s a huge market.”

Translation: Pre-roll is where the money is. “It’s working,” Kilgore said. “It’s not sexy.”

His market size estimate: Kilgore referred to eMarketer’s estimate of $1.35 billion in online video advertising spending this year, calling it “conservative.”

Brightroll CEO Tod Sacerdoti:

“It is April, 2008 and VideoEgg is now realizing that the bulk of the video ad business is in pre-roll and in-banner video? We have [been] expressing this belief (and building a business around it) since a year and a half ago, and it shouldn’t take burning through $32 million in financing to figure it out.”

Translation: It’s not that I agree with you, it’s that you agree with me.

His market size estimate: Sacerdoti said he sees $500 million in advertising placed against video content this year: $200 million in pre-roll, $50 million in in-video/overlay, and $250 million in display. And a kicker: “I would be shocked if there was $10 million in non-YouYube in-video in the entire business. If you take out YouTube I think it’s just literally irrelevant.”

To sum up the arguments so far: After VideoEgg determined that overlays on video content were a small market, it found other content (Flash games, Facebook apps) on which to overlay ads. Tremor Media and Brightroll agree that overlays are a small market, but they think other opportunities to monetize online video content are more promising. So buck up and watch the pre-roll, already.

If you want to keep the conversation going (especially if you have numbers to back up your argument), please contact me or leave a comment.