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Video On The Web
Loretta HoDecember 13, 2004
Fordham Business School
Introduction
Over the past several months, video on the web has become something of a
phenomenon. Streaming media has become a mainstream media format accessed by
millions of people daily. The growth in the number of videos streamed has exploded in
the last year alone. In fact, in 2003, the number of videos served/streamed was 7.87
billion, up 104% (See Table 1). In the first half of 2004, that number was already at 5.6
billion streams served.1
Table 1.
Most of this streaming growth took place on several selected big aggregator
platforms, such as Real Networks, ESPN (including Motion downloaded streams) AOL
1999
2000
2003
2004
2005
2006
2002
2001
and Yahoo. The proliferation of broadband access has also had a huge impact on the
growth in the number of video streams. Broadband streams made up 78% of total
streams accessed/served in 2003, up from 63.8% in 2002 (see table 2). As broadband
becomes more ubiquitous, streaming video and video advertising is becoming a more
viable solution to stagnant content. Improved quality and better delivery has also helped
make video advertising the most recent darling of online advertising.
Table 2.
Types of Streaming Media
There are several main ways to deliver streaming media using differing
technologies. The most common is streaming video on demand. A video will start
playing if it is called up when a page is loaded (advertising) or if a user specifically
requests the content (new, sports, entertainment). This is very convenient for the user
since they can view the requested document without having to wait for the entire clip to
download and videos are generally available on demand from the web site. It is also cost
effective for the content providers since they only have to pay for delivery of content that
is requested by a user. However, the video quality can suffer due to bandwidth
limitations and other factors. The use of buffering technology can cause hiccups and
pauses in the playback. While quality has been steadily improving, it is still not to the
point of television-like quality.
Another popular type of online video is the live webcast. Live webcasts use the
same type of buffering technology as streaming media, but the content is delivered live.
In other words, the user will be able to view content in real time. The benefit of live
webcasts is evident for content such as breaking news or coverage of an event. Here, the
video quality is often slightly worse than streaming video due to smaller buffers.
One of the latest methods of delivering video is through pre-caching. With this
method. the user will download a program that allows the content provider to pre-load
video onto the users hard drive during off-peak hours. Once the download is complete,
the user will be notified and be able to watch the video. The value of this type of service
is that the video quality is television quality since the entire clip is loaded onto the hard
drive before it is played. There are no gaps in the stream and the clarity of the picture is
comparable to television. On the down side the content provider has to pay for the
delivery of content that might not be consumed.
Popular Content Categories
Over the past several years the viewing pattern of online video has remained
fairly constant. Music videos, news and sports clips continue to be the most popular
content categories on a monthly and yearly basis. Of the total of 5.6 billion streams
served during the first half of 2004, 1.86 billion, or 33.2% were music videos. Slightly
over 1 billion (18.2%) were news and information videos. Approximately 17% were
sports videos, which includes download and embedded and or pre-cached video
applications such as ESPN Motion2 (See Table 3).
Yahoo!’s Launch is one of the most popular sites to view music videos. The
Launch site at Yahoo! has attracted almost 6.7 million Unique Visitors each month over
the past year.3 Launch streamed 200 million music videos in May to free and for-pay
consumers. Yahoo!'s Launch music service is a popular and frequently cited destination
of marketers and a popular venue for broadband video advertising. Overall, Yahoo!
counted 5.8 million fee-paying customers as of March 31 who subscribe to services such
as hosting, extra mail storage, LAUNCHcast Plus and others.4
News is also a consistently popular category for online videos. More and more,
traditional news outlets are producing news content specifically for an online audience.
CBSNews.com launched an online edition of the Evening News in September of 2004.
This shortened 7-8 minute clip features Dan Rather summarizing the day’s news and is
written and produced explicitly for the web site. The daily clip is available for free to all
users. In October, Gallup.com also launched a free daily newscast to talk about the
company’s latest polling data and what it reveals about current events.5 Even local online
newspapers are getting into the action. Delawareonline.com has debuted a twice-daily
online news webcast focusing on breaking news and top stories.6
1 Accustream iMedia Research: Streaming Media 2003: Brand, User and Audience Share Analysis2 Accustream iMedia Research: Streaming Video Viewing Share: 1999 - 2004 YTD: A Content Category Analysis3 Nielsen//NetRatings, October 20044 Elkin, Tobi. “Big Three Move On Broadband Video Sales.” Media Daily News 16 June 2004 <http://www.mediapost.com/PrintFriend.cfm?articleId=255589>
The next most widespread types of content are sports clips and film. Included in
the sports category is pre-cached video, which is used heavily by ESPN. Examples of
sites that offer film clips are iFilm.com and AtomFilms.com. Whereas AtomFilms.com
has original short films, iFilm.com aggregates film and television clips into one space.
One of their most popular segments is the viral videos section, which contains popular,
talked about clips.
Table 3.
The content for live webcasts is slightly different from the streaming media
offerings. The programming for live webcasts has also been expanding into new areas.
Where it was once the territory for news, entertainment sites are beginning to create live
shows to be streamed online. Breaking news and coverage of events, such as the Scott
Peterson verdict draws large amounts of viewers who want to be involved in watching
live news but may be at work and not near a TV. The live webcast has also become
5 Walker, Leslie. “Gallup Poll Moves Online With Webcast.” The Washington Post 10 Oct 2004 <http://www.washingtonpost.com/wp-dyn/articles/A19290-2004Oct9.html?nav%3Drss_technology&sub=AR>6 “'News Journal' Launches Twice-Daily Local Webcast.” 18 Oct 2004 <http://www.editorandpublisher.com/eandp/departments/online/article_display.jsp?vnu_content_id=1000673723>
popular for business uses including training sessions and viewing investor relations
meetings. Many large companies now offer a live webcast of the investor relations
meeting for those who are unable to attend in person.
The market for Internet TV rose substantially in the first half of 2004, to a 14.5%
viewing share (up from 6% in 2003) on the strength of cross platform programs such as
Survivor and Big Brother, but also AOL for Broadband offering broadcast network
previews for shows such as Jack and Bobby.7 House Calls was an Internet Talk Show
about Big Brother 5 produced just for CBS.com. Based on the success of the format,
CBS.com currently produces a similar show regarding Survivor: Vanuatu and plans to
continue the effort.
Disney has pioneered applications for the pre-loading of videos onto the hard
drive with the invention of ESPN Motion. Video and other data is streamed in bits,
downloaded, and then played automatically whenever the application is opened. The data
is replaced when the content is refreshed. Downloads avoid the quality issues by pre-
caching the video onto users' hard drives. For this reason, Disney, Sony Pictures Digital
and Universal Pictures have opted to preload content onto users' machines with their new
services. However, pre-cached video is also by its nature less immediate. For example, a
sports junkie wanting to see a replay couldn't get that clip with pre-downloaded sports
highlights. Despite its negative attributes, ESPN has seen such success with its Motion
service, that ABC (a Disney company) launched its own Motion services shortly
thereafter. In fact, ESPN estimates that about 1.6 million people have installed Motion
and about half that audience (800,000) watch clips daily.8
7 Accustream iMedia Research: Streaming Video Viewing Share: 1999 - 2004 YTD: A Content Category Analysis8 Olsen, Stefanie. “Disney to 'push' ABC over the Net.” CNET News.com 12 June 2003 <http://news.com.com/2100-1025_3-1016486.html>
The Growth Of Online Video Advertising
With so many people watching videos online it naturally follows that online video
advertising has also experienced an explosion. Analysts have proclaimed video to be the
latest rage in Net advertising, representing 11% of online spending. Online video
advertising spending is projected to rise to $657 million by 2009 -- five times this year's
spending level ($121 million) (see Table 4).
Table 4.
One of the reasons for the growing popularity of videos ads is that video ads can
get CPMs as high as $65. This is compared with rates as low as $1 to $5 for standard
banners. While this is obviously beneficial for the content provider in terms of revenue,
there are advantages for the advertiser as well. While the average click through rate for
banner ads is 0.5%, the average click through rate for a video ad is much higher, at
around 4% (See Table 5).
Table 5.
2.38% - 7.43% 5.05%Interaction rate
1.68% - 7.28%4.02%Click-through rate
14 - 31 seconds18.04 seconds
Ad Display Time
RangeAverage
2.38% - 7.43% 5.05%Interaction rate
1.68% - 7.28%4.02%Click-through rate
14 - 31 seconds18.04 seconds
Ad Display Time
RangeAverage
Source: Unicast Format Norms
Additionally, the consumer response to video commercials has been extremely
positive, especially compared to the attitude towards interstitials, pop-up and pop-under
ads. According to research conducted by Dynamic Logic on behalf of Unicast, only 27%
of consumers found online video commercials to be annoying. This can be compared to
78% of consumers who are annoyed by pop-ups (source: Gartner) and 38% who find TV
commercials to be annoying (source: Harris).9
Table 6.
Brand impact of video commercials has also been shown to be far more effective
than standard online ads across several different measures (See Table 7). Message
9 Unicast Video Commercial Final Report, April, 2004. Conducted by Dynamic Logic
association, brand awareness, purchase intent and brand favorability all show over 50%
lift for video commercials. This is far more successful than traditional online ads, whose
lifts are only between 6-24%. This translates to videos ads having roughly 10 times more
lift for each measure.
The success of video ads has been a boon to many content providers and several
media companies have begun to sell integrated advertising packages in the traditional
broadcast network up-fronts. According to AdAge, ESPN has had success selling video
ads to big clients, such as Gatorade and Lexus as part of the TV upfront. The three
biggest online sellers; Time Warner's America Online, Microsoft Corp.'s MSN and
Yahoo! have also been pitching broadband video offerings as part integrated deals in
conjunction with marketers’ upfront broadcast media buys.10
Table 7.
10 Elkin, Tobi. “Big Three Move On Broadband Video Sales.” Media Daily News 16 June 2004 <http://www.mediapost.com/PrintFriend.cfm?articleId=255589>
Despite all the advantages that online video ads have, there are still many
challenges that may hamper the mass adoption of video ads. First, there is a shortage of
slots for video commercials. Due to their large audiences, advertisers are competing for a
limited amount of spots on major portals like MSN and Yahoo!. Marketers believe that
the audience is too small on other sites to make video advertising worth the investment.
Another major concern is the ability to obtain reliable metrics on the efficacy on reaching
potential customers. Right now, different companies use varying methodologies to track
the effectiveness of video ads and no one standard exists.
Other concerns include ability to optimize online video advertising performance
across different platforms and connection speeds. This is a problem because while many
video watchers have broadband connections, dial-up users should not be discounted just
yet and video providers should have an option for these users. In addition, marketers will
need to determine and be able to control the frequency with which video ads should play
as to avoid annoying the consumer. To this end, video ads should also include a “skip
this ad” feature, yet this will lower the number of ads served and seen. Table 8 provides
other reasons that US marketers are reluctant to buy online video advertising.
Table 8.
Despite concerns over the current viability of online video and online video
advertising, it is clear that it is becoming the next big thing on the Internet. Many big
media companies have recently shown their commitment to online video by launching
video exclusive sites. MSN launched MSN Video in January 2004 and it has already
been a huge success. In less than a year, MSN Video has started serving an average of
one million streams a day, with about 5 million visitors a month. AOL is following suit
by introducing a free, ad-supported video service, AOL Video.11 The new services will
feature on-demand video entertainment, with advertising spots similar to those on
broadcast television. Some clips will be freely accessible over the Web, while others will
be available only to AOL members. AOL expects to create and audience of 100 million
or more per month for all three video services together. While this is an ambitious goal,
AOL believes that its top programming will be able to attract the mass audience it
desires. Their strategy involves playing up the content and programming ties it has to a
media conglomerate parent, as well as its links to Hollywood to obtain compelling
content for its video services.
MSN, AOL and Yahoo! all expect broadband to continue its exponential growth
and are thus preparing for expected consumer demand for video. They believe that there
will be more and more consumer and advertiser demand for a more TV- like experience
on the Internet. In the end, the goal for all three media companies is to attract an
audience large enough to draw in big advertising dollars. With audience sizes becoming
closer to mass-market audience sizes like TV draws, advertisers will have fewer reasons
not to divert advertising dollars online.
11 Olsen, Stefanie. “AOL cues up free video.” CNET News.com 19 Nov 2004 <http://news.com.com/2102-1024_3-5460390.html?tag=st.util.print>
Conclusions
The future of online video holds many exciting opportunities, such as peer-to-peer
video file sharing and transferring videos to mobile devices. Currently, much of the
video online is promotional in nature (Internet TV shows, short film clips) so there is not
that much concern over piracy, but as more exclusive content is made available online,
we can expect piracy concerns to increase especially with P2P video file sharing on the
rise.
It is clear that with the growth of households with broadband connections and
improving video quality, video clips and video advertising is quickly becoming
ubiquitous online. Consumers are demanding a more TV-like experience online, a
natural extension of the belief that a person can get anything on the Internet. The major
media conglomerates have recognized this trend as the future of online entertainment and
have accordingly integrated video into their online properties. As these major portals
accumulate mass-market sized audiences, advertisers are scrambling to secure online
video advertising spots. There is no denying that online video has arrived and is here to
stay.
Endnotes
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