Popularity Of Online Video Ads May Lead To Price Drop

by Sohini Bagchi    Sep 11, 2014

online video

Online video is growing faster than most other advertising mediums. Globally, video ad revenues will reach nearly $5 billion in 2016, up from $2.8 billion in 2013, while TV ad revenue will decline by nearly 3 percent per year during the same time period, according to a new report from BI Intelligence.

The report also estimates that Video ad revenue will increase at a three-year CAGR of 19.5% through 2016, which is much faster than any other medium other than mobile. Even though online video ads were significantly more expensive than other formats, it will see a huge drop in price in the coming months as more publishers are rushing into this format.

According to a comScore data, the American online video audience has swelled to 56 percent of the population, meaning that about 189 million Americans watch video online each month. That is almost 50 percent more than the percentage that turned out for the 2012 presidential election.     

Tech analyst and author Christophor Rick believes performance-based pricing is the vital driving force right now as it accounts for 65 percent of revenue for the whole digital advertising industry, of which digital video advertising is the key.

 “Several other factors pushing online video advertising forward are more expansive TV Everywhere choices, packaging of traditional TV ads with video on demand (VOD) and DVR ads, expanded use of gross rating point (GRP)-like metrics online, more innovative and interesting ad formats, and video advertising against mobile apps and games,” he writes in his blog.

With greater maturity, we’re starting to see more powerful video advertising tools and a more cohesive overall picture, he says , as newly launched video ad platforms have been among the companies to adopt programmatic tools, including real-time bidding, ad exchanges, and advanced analytics.

Boom time for India Video ad spends

In India too, experts are predicting heavy online video ad spends especially by ecommerce players and smartphone makers this year. One of India’s largest media planning & buying agency GroupM predicts the overall ad spends to grow 12.5% during January to December 2014. The most vibrant advertising segment includes digital marketing, including online video ads. According to the GroupM report while ad spends will rise in every media segment digital media continues to show the maximum growth with 35%, albeit on a niche base. By end of 2014 will account for about 8% of the total AdEx.

Another study by the Internet and Mobile Association of India (IAMAI) and IMRB International also estimates that in the next one year, spends on video advertisements will grow 56 percent annually and contribute 12 percent to the overall market share of digital advertisements. The study estimates the proportion of spends on search advertisements will reduce and spends on e-mail, video and mobile advertisements will increase.

In the first half of the year, the top sectors that had the highest spending on digital ads include smartphone and e-commerce players followed by FMCG companies and political parties. In fact, GroupM, which earlier predicted overall ad spends to grow 11.6% has raised its growth forecast to 12.5% with the coming of the festive season, where it expects a boom. In a recent interview with ET, CVL Srinivas, CEO, GroupM South Asia, “The first six months of this calendar year saw a 14% growth in ad spends at an overall level,” Srinivas said. “Smartphone companies have also increased their advertising spend although mostly towards the second half of the year.”

Srinivas believes that the heavy spending on online videos ads by ecommerce players and smartphone makers will also be reflected in the upcoming festive season which starts with Onam and continues until Diwali and Christmas. The outlook will also be strong for auto, durables and retail in the coming months.