More than 154 million Americans will watch online videos this year, according to eMarketer’s latest report (purchase required). That’s a 12.1 percent increase from last year. But online video growth is supposed to level off in the coming year, with a projected 3.8 percent annual growth rate in 2012, eMarketer believes, as the market reaches saturation.
Most people, meanwhile, are still busy watching lots of television — 4.5 hours per day, according to Nielsen. And, in fact, broadcasters are looking forward to strong ad sales this year, even as online video startups struggle to monetize.
But it is missing the point to suggest that TV will continue to dominate online video. First of all, online video technology is rapidly improving to allow for faster streaming of longer videos — it’s not currently possible to get a quality, TV-watching experience over the web, but it will be soon. For now, the most popular online video formats are short news, comedy and movie clips, as the eMarketer report demonstrates (see chart).
Second of all, many people — especially people below thirty — are spending hours on social networks, where they can interact with their friends and create their own content, rather than watching pre-packaged shows. Social networks are a great distribution platform for short clips, but they will also likely evolve to be a platform for longer-form videos because they already have the attention of users.
So yes, the shift is happening. That’s why media executives like ex-Disney chief executive Michael Eisner have switched to creating online videos (and finding some success), and why MTV is creating a show featuring chart-topping songs — as voted on by Myspace users. And, that’s why new media funds are popping up, that blend Hollywood, Silicon Valley and Madison Avenue. Examples: Velocity Interactive Group (our coverage), the rumored fund put together by Draper Fisher Jurvetson and Hollywood agency CAA (our coverage), and most recently, the fund put together by Accel Partners, Venrock, Hollywood agency William Morris and AT&T (our coverage). It’s also why more traditional investment banks, like Allen & Co. are busy networking in Silicon Valley (our coverage).
Tags: co:emarketer3 Comments
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Rob Shambro said:
Eric,
I think this prediction is good for each year going forward from here on out. Monetization is still somewhat of a problem. We are at the stage of online video as music was right before Apple made the iPod. Someone needs to make the The IPTV to put this video where its supposed to be. Then commercials are no big deal. Channels could be created. Essentially a global cable company down one pipe. Problem with that is that distribution rights will be at risk and violated, a step “A” video content providers will have to cross sometime. I personally thought that would have happened by now. Apple needs to make a uPod that puts the video in front of the couch. iPod put music in the pocket. Then video will explode. Just a thought.
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Rob Shambro said:
One more thing: Apple, Akamai, and the Territorial leading DSL prodivers like Verizon should team up to form this service and put the mainstream videos at the DSL headends. Cable companies cannot do it since the content competes with their existing relationships. Then video will EXPLODE, finally. Over and out.
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Tim Reha said:
One of the main key points to online video is “Universal Search” where Google and others are now listing videos (thumbnails) in search results.
The opportunity here is to “make media” and rich videos that drive direct response results and traffic back to your website. This is tied with new SEO techniques that will gain higher rankings in the search engines and displace your competitions text only search results.
This year and next year companies should start to create short form videos that are not “commercials” but rather “how to” or other that provide your audience with information that lead them to a purchasing decision.
Then when there is enough video media out there and standardized measurable formats, we will see video advertising really take hold.
One huge opportunity is connecting Video with QR Codes. The QR Codes are simple bar codes that may be read by mobile phone camera’s. The camera sends the images to a server that resolves the QR Codes to a URL that links to a video. This is standard in Japan.
Just this month, you are able to download the first QR Code Reader to your iPhone. QR Codes + new smart phones + WFI or quick internet connections (3G) will create a new flood of mobile video opportunities.
Creativity and perfect timing will create a wave for new startups to create a new paradigm for media. Internet Video + Mobile Video will rule.
Cheers, Tim Reha, Venture All Stars, Seattle
