Web Video Market: Who Will Win The Big Ad Money?

GoogTube is already well on its way of growing its market share lead for the video audience -- 60% as measured by HitWise -- while the many dozens of competitors going after the same ad pie may have to settle for crumbs, if anything.

Video is definitely the next online frontier. There just isn't enough harvest to feed every pioneer, and those quickly following in their footsteps. EMarketer estimates that $385 million will be spent on online video ads, equating to just over 2% of the total $15 billion or so in online advertising estimated this year. Indeed, it is. It's so hot that venture capitalists and angel investors are chasing the opportunity by pouring money into new ventures that hope to make money via advertising.

So far this year, 53 video-related Internet companies have received a total of $521 million in funding, according to DowJones VentureOne. That's up from a total of 48 that received $294 million last year. And this year isn't over. Just this week, I went to an event for startups called SG Forum Search SIG. I caught the very end of the event where the founders of PostRoller and VideoEgg stood on stage to discuss their plans to help publishers and distributors of video clips make money by showing ads. Another advertising agency, Booyah Networks, just rolled out SpotXchange, a platform to help publishers place ads in their video content. These guys get a cut of the ad fee.

There are also a host of white-label broadband channel developers and tool providers that hope to get a piece of the ad pie as well. Brightcove helps publishers deliver video, and provides analytical tools for publishers to measure visitor traffic and trends. DAVE.tv is trying to build social network video platforms around affinity groups for media companies. Check out the Stargate social community site DAVE.tv built for MGM. I haven't even mentioned News Corp (NWS), whose MySpace members watch a significant number of YouTube videos. To wit: YouTube saw 20.7 million unique visitors in September, according to comScore. But YouTube had over 30 million unique streamers, suggesting that a number of the YouTube videos are viewed elsewhere, like MySpace. It's my prediction that News Corp. will want ample advertising compensation for bringing YouTube and Google an audience.

So, who wins? I chatted with Mark Cuban via email about this. He thinks small content producers will be the losers, making less than minimum wage. Big media, like Viacom (VIA), News Corp, Warner Bros., Walt Disney (DIS), etc. will just repurpose their content for the new medium and receive free money, provided they don't cannibalize their DVD sales. Aggregators will win, as long as they can get enough traction. And, Cuban thinks platform and toolmakers will have nice little businesses.

Mike Sheehan, CEO of Booyah Networks, emailed me with this response:

I think there are certainly a glut of video sites out there. However it’s surprising how many of them get sizeable amounts of traffic. Granted, they are not doing a good job at monetizing those videos right now. Similar to the bust in ’00 where business models and revenue didn’t matter. However many sites began to come back as a result of integrating paid search results from Google and Overture. I think the same thing will happen in video market. Many of these video sites are going to rely on video ad networks to help monetize their traffic.