Where Is the Online Video Advertising Revenue Going?

According to eMarketer, the size of online advertising revenue is $1.35B in 2008.

Since launching WatchMojo.com in 2006, I’ve had some questions about that figure… so here goes:

Definition of Online Advertising Revenue is Unclear

I’d be interested to know what falls into the category: if it’s only video pre-rolls, post-rolls or mid-rolls, then we leave out companion display ads, which on a site like YouTube account for the vast majority of revenue. Moreover, accounting departments need to standardize this definition. On this item, we need transparency and clarity in accounting definitions and guidelines, I’d be curious to see if an eMarketer spokesperson can address this.

Rich Media vs. Video Ads

When I was running sales for a mid-sized publisher, I recall that rich media ads (Unicast, Eyeblaster, Eyewonder, etc.) were bundled in with video ads because many rich media ads contained video. Is this still true? I am not sure. Why?

Because…

In-banner vs. In-stream

Video ads can be in-stream or in-banner. In the latter case, it would be a video ad in a 300×250 that is rich media, Yahoo! (YHOO) has loads of these; then there are in-stream video ads, which go before, during or after video content. MSNBC has oodles of these. This is a very important nuance.

Double counting for partnerships?

Say FOX Sports has a partnership with MSN, who books that revenue? This kind of stuff is fairly standard, think of all ad representative firms who collect and remit ad revenue. But in MSN’s case, for example, it also has a partnership with NBC Universal on MSNBC.com. It’s somewhat useful to know how that is all booked. Is it case by case or is there an accounting rule that is actually respected industry-wide?

Ad Networks

Say an ad network such as Tremor Media, Brightroll, Video Egg, Broadband Enterprises, etc. place some of these ads, they need to be accounted for somewhere. The questions is: where are they accounted? My take is that like it was with display ad networks, video networks will touch 15% of the video pie.

Here’s our breakdown:

Using the figure from eMarketer for total US online video advertising revenues at $1.35B, up from $750M in 2007, as a benchmark.

Yahoo.com = $200M

Yahoo! did over $7B in total sales… with over $5B coming from ad revenues. Yahoo! has a lot of video content along with plenty of rich media on its site. As the world’s largest property, I could easily see Yahoo! doing even $250M in video-derived ad revenue, but when you consider that video accounts for less than 5% of the online video advertising pie, then we will assign a 4% share to online video for Yahoo! total ad revenues.

Viacom = $125M

I think Viacom (VIA) generates a larger than normal share of its online advertising revenues from online video ads. Last year I noticed MTV.com running a good dosage of video ads when my wife was watching The Hills on their site (I swear she was watching it). I also think that between Nick.com, MTV.com, NeoPets.com, iFilm/Spike, Atom.com and Comedy Central.com, one reason why Viacom is making a big deal about piracy on YouTube is that it sees just how good the online video advertising business can be.

AOL Time Warner = $120M

Time Warner’s (TWX) sources of revenue from online video includes AOL.com, TMZ.com, CNN.com, Time.com and many other prominent places. In fact, while TW does have the cable assets, if AOL TWX had more video assets, I think it could generate $200M per year from video, easily.

News Corp. (NWS)/Fox Interactive Media = $100M

This is seemingly bullish, but note a few things:

Fox Interactive Media did $900M in total revenues, with MySpace.com doing $750M alone. Of that, it’s worth noting that MySpace is #2 behind YouTube, with MySpace TV making a push to get lots of premium content… leveraging News Corp.’s sales team, to boot.

Moreover, between AmericanIdol.com and IGN Entertainment (which includes IGN.com, GameSpy.com, RottenTomatoes and my old stomping grounds AskMen.com), this is actually quite feasible.

(Disclosure: WatchMojo.com is a content partner to MySpace TV)

NBC Universal = $100M

When it is not hosting the Olympics, literally, I think NBC Universal does about $75M from online video, when you consider that NBC’s online portfolio includes its namesake assets including NBC.com, MSNBC.com and the recently launched NBCSports.com. However, bear in mind, NBC also owns iVillage and Healthology, both sites that use a decent amount of video, and thus, generate online video ads. I think one reason why eMarketer pumped up its estimate to $1.35B is precisely because of the Summer Games in Beijing, which should generate loads of revenues for NBC and parent GE (GE), I would put the 2008 take to $100M.

MSN.com = $100M

Depending on the accounting, MSN.com can be making anywhere from $100-250M, but seeing how NBC and Microsoft (MSFT) remain 50-50 partners in MSNBC.com, yet Microsoft has reduced its stake in the television network to 18%, I suspect most of the accounting revenue falls to NBC, who then remits a cut to Microsoft’s MSN unit (I could be wrong on this). Anyway, between MSN.com and MSN’s video assets, I think MSN does $100M in annual revenues from video advertising.

Disney = $100M.

Disney (DIS) consists of ESPN.com, Disney.com and ABC.com. That is a lot of video inventory.

Moreover, Disney is actually quite the king of online media. Well, at least it was, before News Corp. and CBS (CBS) spent $2B in 2 years to accelerate their efforts. But the bulk of Disney’s $1B+ digital sales come from ticket sales at its themed parks, as well as merchandising… however, you know online advertising figures prominently, and video advertising growing quickly.

I had done an analysis previously, with Disney’s range coming in at a monthly low of $1M to a high of $7M.

Is it right? Who knows… do I look like Nostradamus? Unless you have a better idea, let’s assume the math makes sense… however, given a few factors, I now put Disney on the higher range, and give them an annual revenue from video advertising of $100M.

Hulu = $75M

Using AlleyInsider’s range of $45-90M in revenues, we’ll peg Hulu’s revenues at $75M this year in revenues. Hulu is now a top 10 video site, according to both Nielsen and comScore.

(Disclosure: Hulu is a distribution partner of WatchMojo.com, as well.)

Google/YouTube = $65M

The bulk of that $200M comes from display banners. The only part I would attribute to “video advertising” is the sum of revenues from promotional/commercial videos that YouTube runs off its main page. At an run rate of $65M per annum, that is $175,000 per day, times 365 days. It comes from Forbes’ analysis. I should state, all the way back in 2006, one month before Google (GOOG) bought YouTube, I said “YouTube should be making $15M per month, or $180M per annum”. No comment.

(Disclosure: WatchMojo.com is a content partner to YouTube.)

CBS = $60M

CBS made $24M from March Madness, mainly from banners, but some videos, too. And CBS has been growing very rapidly, of late, launching its syndication network. I am not sure if CBS was doing much more than $5M per month on video ads because its reach was largely on third party sites that consisted of the Syndication Network, and let’s face it, once you embed ads, no one embeds your content on third party sites.

So if CBS was doing more than $60M in online video advertising in 2008, then more props to Quincy Smith and his team.

CBS only recently cracked the Top 10 list of largest web properties, thanks to its acquisition of CNET, which takes us to:

CNET = $40M

CNET probably does $40M in video advertising, which out of a revenue of $400M is 10% of its total. Considering that on your average site online video accounts for less than 5% but CNET was an early mover here, I think that sounds about right… and yes, I am guessing here.

The clones (Metacafe, DailyMotion, Veoh, Break.com, Joost, etc.): $50M

I use the term clone affectionately, but I suspect that combining all of the players looking at becoming #3 in the online video distribution space would give you a figure north of $25M but less than $50M. Why? Too much UGC content holds them back…

To really avoid double counting, I am omitting all video networks, such as Brightroll, Yume, Tremor, Broadband, etc.

Rest of Web: $220M

Doing the math means that the rest of the Web is fighting for just under a quarter of a billion dollars.

What do you think? Does this breakdown make sense? Who are we missing?

Comments

[doug estadt:]

I'd sure like to know where the video ads even exist outside of the largest portals? None of our ad companies can even provide them to us and we have exclusive video of CEOs for a Wall Street audience, not dogs on a skateboard videos.

2008 Jul 15 12:02 PM

[scott broom...:]

Well, two things are for certain:

1. The people who crack the code on this will be very successful, and

2. The business models will need to change if someone cannot figure out how to monetize the long tail.

2008 Jul 15 09:48 PM

[Asmodeus:]

Blinkx is becoming an increasingly significant player, lots of ads can be seen on their channels on blinkx.com

This is worth a read for some background on blinkx, but there is a lot more to blinkx than Red Label, for example Ad Hoc and BBTV:

AN FRANCISCO, CALIF. – JULY 16, 2008 - blinkx, the world’s largest and most advanced video search engine, today announced the availability of blinkx Red Label, a complete, flexible solution that enables customers to harness the Video Web and capitalize on the thriving online video advertising market. Under the terms of a Red Label agreement, blinkx will deploy and power its patented video search technology on customers’ sites, delivering new revenue through advertising. Implementing blinkx Red Label is fast and free of charge, and gives customers access to the largest and most diverse index of video on the Web, as well as blinkx’s industry-leading search technology.

With the ubiquity of broadband, consumers today want and expect video to be part of their online experience; blinkx Red Label enables customers to incorporate rich media into their Web sites, enhancing the user experience and appeal of the site, while increasing its potential for monetization. The solution leverages blinkx’s patented, award-winning video search technology, and draws on the 26 million hours of premium video content in the blinkx index.

blinkx Red Label is an end-to-end solution that will be offered in two tiers based on the size of the portal or Web site: one for larger customers that will involve blinkx services, and the other a self-service portal for smaller sites.

“Whether you’re launching a new Web site, or want to integrate rich media into an existing site, blinkx Red Label delivers a complete solution for your video needs,” said Suranga Chandratillake, founder and CEO, blinkx. “We offer immediate, up-to-date access to the Web’s largest index of top quality video in addition to the world’s most powerful video search technology, with fast, easy integration.”

Unlike other search engines that attempt to repurpose technology built for the Text Web, blinkx uses a unique combination of patented conceptual search, speech recognition and visual analysis software to find and qualify online video more effectively than any other service today.

Benefits of blinkx Red Label

Fast, Easy Integration: There are no setup or professional services fees to deploy blinkx Red Label, and the average implementation takes just three hours. There are two available models for implementation:

• Fully Hosted: search results are hosted at blinkx.com, with the look-and-feel of the customer’s site
• XML: provides customers with complete control over display and on-page integration

Broad Flexible Functionality: A broad range of functionality enables customers to integrate blinkx Red Label in a variety of ways to best serve their site’s design and purpose. From advanced sorting and filtering features, including language and family filters, to innovative display and integration options, such as the unique blinkx Video Wall, blinkx Red Label can be customized to meet customers’ needs.

Instant Monetization: Online Video Advertising is the fastest growing segment of online advertising. Forrester Research predicts the market will reach $7.2 billion by 2012. blinkx Red Label enables customers to maximize revenue by using their own ads or ones delivered by blinkx. Highly targeted advertising can be delivered in a variety of innovative, user-friendly formats which yield a high CPM.

Complete: With access to 26 million hours of content from a wide range of sites across the Internet, blinkx Red Label delivers the most comprehensive, most current and most accurate Web video index in the world. blinkx’s 350 content partners include top tier media companies and premium niche content producers.

For more information on blinkx Red Label, please visit blinkx.com/products/Re....
About blinkx

blinkx plc (LSE AIM: BLNX) is the world's largest and most advanced video search engine. Today, blinkx has indexed more than 26 million hours of audio, video, viral and TV content, and made it fully searchable and available on demand. blinkx's founders set out to solve a significant challenge – as TV and user-generated content on the Web explode, keyword-based search technologies only scratch the surface. blinkx's patented search technologies listen to – and even see – the Web, helping users enjoy a breadth and accuracy of search results not available elsewhere. In addition, blinkx powers the video search for many of the world's most frequented sites. blinkx is based in San Francisco and London. More information is available at blinkx.com.

2008 Jul 16 10:02 PM

[Asmodeus:]

Doug,

Its been reported that blinkx have been getting CPM's above $60 for ads run against content like ITN news clips, and this deal was recently extended.

Blinkx have deals with hundreds of others ites that want to monetize their content, it may be worth you getting in touch with them? see the partners they have here: www.blinkx.com/partner...

and see this article below:

SAN FRANCISCO, CALIF. – July 2, 2008 – blinkx, the world’s largest and most advanced video search engine, today announced that it has won an extension contract that will augment the scope of its advertising partnership with ITN, one of the world’s leading news and multimedia content companies. Under the terms of the new agreement, ITN will use AdHoc, blinkx’s patented contextual advertising platform for online TV and video, to serve advertisements on the ITN website and its syndication partner sites, including Bebo.

Through AdHoc, ITN has already been effectively monetizing its premium news content on the blinkx.com network for over six months. During this time, ITN achieved a significantly better return, greater search volume, and higher monetization through blinkx than through other syndication partners.

AdHoc uses blinkx’s patented speech-to-text transcription and visual analysis technology to understand video content more thoroughly and effectively than any other service today, and can therefore dynamically place the most pertinent advertising against it. The AdHoc platform offers media companies and advertisers a unique value proposition -- video advertising which combines the emotive power of TV promotion, with the relevance and utility of contextual search advertising.

The confluence of ITN’s premium TV content, blinkx’s extensive syndication network, and AdHoc’s uniquely powerful targeting capabilities was a formula for success. By extending its partnership with blinkx, ITN aims to achieve similar returns by leveraging the AdHoc platform to deliver contextually relevant video advertising on its own website and across its distribution partner sites.

“We’re thrilled to be broadening our relationship with ITN,” said Suranga Chandratillake, founder and CEO of blinkx. “News content is one of the most popular categories of online video and there’s clearly a tremendous opportunity for monetization. The success of our partnership with ITN is evidence that the blinkx AdHoc platform is a uniquely powerful solution for online video advertising today.”

“We’ve been delighted with the results of our partnership with blinkx and are looking forward to implementing the AdHoc technology on our site,” said Nicholas Wheeler, managing director, ITN On. “blinkx AdHoc has proven that it can achieve significant monetization of our content, effective marketing for advertisers and, most importantly, a useful, non-disruptive experience for our audience.”

As a pioneer in video search technology, blinkx has built a reputation as the most effective way to search new forms of online content such as video. With more than 350 partners and 26 million hours of indexed video and audio content, including favorite TV moments, news clips, short documentaries, music videos, video blogs and more, blinkx uses advanced speech recognition technology to deliver results that are more accurate and reliable than standard metadata-based keyword searches.

2008 Jul 16 10:14 PM

[Asmodeus:]

I could talk about all the things that blinkx seem to be doing all day, but I dont want to bore you all. It does seem to be the next big thing in Video. Newscorp, Google, and Microsoft have all been rumoured to be viewing it as a possible takeover target recently.

This article talks about the blinkx Content Correlation Engine and how it allows media companies that today attract some of the largest and most profitable online audiences to automatically match textual and video assets on every single page of their websites, seamlessly morphing readers into viewers, in order to drive massively increased revenues

www.reuters.com/articl...

2008 Jul 16 10:28 PM

[tyneham:]

One wonders if big and small companies can work together to outsmart and compete with and break the greedy, mightly titanic cartel that suffer from the growing Internet click fraud and cluttered content. Read how, for example, Yahoo protects online fraudsters and locks out legal ethical experts... link here tyneham.blogspot.com

2008 Jul 17 05:20 PM

[UB:]

Could anybody point me to the actual source of this statement "According to eMarketer, the size of online advertising revenue is $1.35B in 2008"?

2008 Aug 18 03:45 AM

[Ashkan Karb...:]

UB, it was eMarketer's own figures, which they recently scaled back:

www.emarketer.com/Arti...

2008 Aug 19 08:29 PM