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emarklog030308.pngMore 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).

emark030308.pngSecond 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).


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