Videoegg: Yahoo's Ticket to the Online Advertising Coop?

As if television ads weren't annoying enough, online video ads are even more bothersome to viewers. But while tv ads work for the marketing industry, online video ads do not.

Ad spots that appear before a video starts playing are called pre-roll ads. These ads, which could be as quick as 15 seconds, test the viewer's attention span. In this high octane, 'want it now,' information age, marketers know that people don't like to wait those precious seconds. Usually viewers are chatting online with their friends, or listening to music while waiting for pre-roll ads to just roll by.

An even worse idea are post-roll ads. As the name suggests, these ads play after a video has finished rolling. How ridiculous it would be to expect viewers to standby after watching the video just to view an ad!

Social networking sites, such as YouTube, are increasingly utilizing video content on the web, and the marketing industry is paying attention. By one estimate, spending on online video advertising will reach $1 billion by 2010, up from $300 million in 2005. While a billion is a large number, it will only represent about 11.5% of the total online marketing expenditure. So there still is room for improvement.

Enter VideoEgg, the California startup that promises to revolutionize online video advertising. The company's technology allows for small banners of advertising to show in videos, and viewers can actually choose to click on the banners. Once clicked, the video pauses while the ad spot rolls.

This sounds very promising as viewers can now have a choice to watch ad spots, and this can also be utilized in the same manner as text link advertising. Already, big time advertisers have signed on with VideoEgg since the service was launched in October of 2006.

VideoEgg's CEO did not give any details but did hint that by giving viewers a choice, the click-through rate was higher than the online marketing average.

Both Google (GOOG) and Yahoo (YHOO) would love to get their hands on VideoEgg's technology. Especially since buying YouTube, Google has constantly been working on integrating its popular text link advertising platform into videos. There is one little problem however; VideoEgg is a video sharing site in itself! How would Google integrate VideoEgg with YouTube?

Yahoo, criticized for being late to the text link advertising game dominated by Google, would surely gain some respect in the industry with a buyout of VideoEgg. Not only would it acquire a promising technology platform but it also would have a video sharing site to rival YouTube! This might seem like a dream scenario for Yahoo, especially since it failed to acquire Google a few years ago.

While Google is the powerhouse in online marketing, Yahoo stands to gain the most with VideoEgg. I would suspect that Google would be developing an in-house technology platform similar to that of VideoEgg's.

Google will also be concentrating on another promising venture in online advertising, in-game ad spots. Google bought AdScape Media just recently to gain a foothold on video game advertising; with a buyout of VideoEgg, the company would absolutely destroy Yahoo's chances of online click advertising success. Google might buy VideoEgg just to prevent Yahoo from doing so.

This might be Yahoo's last chance at competing with Google, but historically it has failed to show its willingness to reach deep into its pockets. Just a couple of years back, before Google was a publicly traded company, Yahoo declined to offer what Google executives were asking for, which was only a fraction of what the company is worth now. Yahoo was criticized for being tight fisted with its large cash position.

Well, it seems that Yahoo has another chance to redeem itself.

Comments

[Francis Potter:]

It's amazing that VideoEgg is doing as well as they are, considering that their upload plugin is basically too broken to be useful to even a technologically savvy user.

2007 Feb 22 01:25 AM