Onstream: Where Those Advertising Dollars Go Now

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by: Judy Weil

Onstream Media's numbers fell slightly short of analysts' estimates this quarter. But prospects for this company in the new world of telecommunicating and corporate cost-cutting look promising. Onstream notes the impact of internet video advertising on the recent U.S. elections.

From Onstream Media Corp.'s (NASDAQ:ONSM) FQ408 conference call:

Internet advertising and video conferencing;

The economic turmoil is increasingly forcing organizations to look for ways to reduce costs without reducing their customer interactions. Formally organizations would budget for face-to-face travel for sales personal and many enterprises held global user conferences bringing in hundreds of customers for events at hotels and convention centers. Today many of these events and expenses are not cost effective and organizations are turning to technology to bridge the gap. Onstream provides that bridge.

The days of spending the majority of an advertising budget on print are fading fast and organizations are also shifting their advertising dollars away from radio and TV to new media. The internet allows all the targeting of radio and TV but at lower costs.

Across the nation campaigns increasingly utilize video to reach out to potential voters. The Obama campaign was particularly good at this, embedding videos on the campaign website as well as in email sent to supporters… Onstream services were used by most of the candidates including Romney, Clinton, Giuliani, and Obama during the almost 2 year long process.

There is going to be billions of dollars shifted from the traditional media and television to the internet.

eMarket has predicted that this emerging market [online video advertising] will grow from nearly $600 million in 2008 to more than $3 billion by 2012 and $4.6 billion by 2013. This represents 800% growth in USA alone over the next 5 years.

Looking forward to 2009, we expect continued growth in all segments despite a very questionable economy and general business outlook…

Q: In today’s current world’s financial fiasco, are you seeing pressures on margins from the clients who are not willing to spend on a couple of the extra bells and whistles or trying to… cut across anyway they possibly can.

A: This may be a very good thing for Onstream in the long run because if there is a lot of shifting towards using online services and what communication services and such and away from travel and everything else.

As government grows:

The Federal Government’s Networx contract, the largest telecommunications contract ever, which Onstream has been awarded a stake in as part of the Qwest (NYSE:Q) team is expected to produce tangible benefits as the result of various requests for information and pricing recently coming from various government agencies. In addition, our technology was well received at the Government Video Show held December 2 in Washington DC where we generated more than 50 leads including several Federal Government departments and agencies and state and local municipalities. We believe we will experience significant growth during 2009 from government sector customers.

In the last six months, we have added government clients including the Nuclear Regulatory Commission, the US Department of Education, the NOAA Severe Storms Laboratory, the Federal Election Commission, The Institute of Museum and Library Services as well as state governments including California, Oklahoma, Louisiana, Massachusetts, and New York. We believe the government sector will represent one of most significant areas of growth during 2009 due to the Qwest contract, our relationship with the state of California, several new states that are using our services and the efforts we are making to target this growing opportunity.