There is an interesting interview in the WSJ today with Dave Rosenblatt, CEO of Doubleclick. While talking about industry trends, Dave clearly lays out the fact that it is still early days in terms of broadband video advertising.
In general, video advertising as a trend is pretty firmly in motion. In spite of that, though, it is still very small. There are somewhere between half a million and a million search advertisers in the market, there are probably only a couple to five thousand graphical advertisers and probably less than a hundred video advertisers. There is no reason for that imbalance to exist. So one of our goals is to increase efficiencies with which people buy and sell video advertising and democratize access to the process in the same way that Google has democratized access to the search market...It is going to be easier to buy video advertising, and therefore many more people are going to do it.
I agree with the fact that buying and selling video advertising needs to get easier, but how do you monetize all of that user generated content? On the making it easier part, I am sure Microsoft has been thinking long and hard about this market as it recently launched Silverlight, a cross-browser and cross-platform plug-in for rich media apps. In addition it is offering 4gb of free hosting and streaming for its development community. Think about how easy it will be for Microsoft's developers to plug in Microsoft Ad center and some broadband video ads into their streaming content especially via an integrated offering tied into the development platform. I am sure this fact is not lost on Microsoft as it looks to take on Adobe and also vie for leadership in the broadband video advertising market. Sure Google has locked up search thus far but all of that potential broadband advertising revenue is still up for grabs.
BTW, these stats on the number of advertisers is not all that surprising as it usually is the big advertisers with the huge budgets that will jump in first and explore new opportunities. These numbers are also not all that surprising to me since my fund is an investor in Visible World. As mentioned in previous posts, Visible World is bringing the power of Internet targeting to television:
While I have always been bullish about broadband video advertising, I have never believed that the $60b television advertising industry would disappear overnight. In fact, before the Internet dominates all advertising why couldn't one bring the tools of the web to the television world making TV advertising more effective, targetable, and measurable - in effect changing it from a mass media to a more targeted dynamic one.
What this means is that our advertisers who use Visible World can deliver dynamically changing television commercials based on any number of variables including the content, zip code, demographic, weather, etc. Sure, lots of technology partners have continually stressed the broadband and mobile opportunities which are clearly building, but as Willie Sutton did, we are going where the money is today - helping that $60b spent on television advertising become more effective. Sure broadband is in our sights and we can deliver that same video commercial or asset over any pipe whether it be broadcast, cable, satellite or broadband but the reality is that broadband can't pay the bills right now. In addition, I am of the viewpoint that the broadband video ad itself will have to be much different and shorter than your typical spot today.
So I agree 100% with Dave from Doubleclick (see Valleywag for more commentary). For other evidence of the early nature of broadband advertising, I suggest doing some analysis and looking at where the bulk of revenue from other ad networks are generated. Yes, you guessed it - banner display ads and search engine marketing. Sure broadband has really high CPMs and trust me if these ad networks could build a huge business off of that today they already would have made some acquisitions but there just isn't enough demand from their advertising customers. As you guessed it, what that means is the market is still early and there are plenty of opportunities for innovative companies to help move some of that $60b spent on television ads online.