The Future of Online Video

TechCrunch asks if there is money in Online Video. The answer is yes, but not as much as the totally over-the-top forecasts of last year - and not where the New Media aficionados think it will be either.

The TechCrunch piece points to e-Marketers estimates of a $5.8bn US online video Ad market by 2012 (already pared down from nearly double that a year ago) and notes they will take down the numbers gain due to Crunch effects. Absolutely - the number should never have been so high in the first place - a lot of Web 2.0 / New Media market research in 2006 / 7 would make even mobile researchers blush with its overblown optimism (we have a game at Broadsight - take a 2 year old forecast of 2 years out, divide it by 2, and see how it compares to the actual - you would be amazed ).

But this does not mean that this is not going to be a big market, its just that it won't happen as quickly as the forecasters hoped. For the last 2 months we have been researching the Future of Online Video for a client (report available soon, and see here for the slideware from a recent presentation). What is clear, as Bill Gates once said, is that the impact will be less in 2 years than you imagine, but far greater in 10.

Just look at the big picture:

1. More people will move to Online Video, and will also spend an increasing amount of their time there:

- More and more people are turning away from traditional TV and watching Online Video. It has grown, in volume terms, in leaps and bounds since c 2004 when broadband became a reality for people in the US and Europe. (See the charts in the TechCrunch piece, they are typical).

- As the systems become ever more prevalent, they are rolling out from the PC onto the TV (eg BBC iPlayer) and mobile handsets like the iPhone now make online video a pleasure rather than a chore to watch. Watching early adopter behaviour with BBC iPlayer, its clear that online video will move into the living room

- This is the zeitgeist - as a commntator on TechCrunch notes "I’m a working professional in my late 20s and I haven’t had cable for years. Incoming freshmen are not bringing TVs to college anymore. The number of people who don’t consume any traditional media (TV, cable, radio) gets bigger everyday, and the only this group is with advertising on the web. The ad companies are idiots if they don’t realize that."

2. Where the attention goes, money will follow

- The money will follow the attention, it just takes time to work out how best to do it- there is a lag while old attitudes change, new metrics become available etc. Advertisers aren't dumb, they will advertise where the eyeballs are, it just takes time to move.

- Watching the UGC market (and I include stuff like Revision 3 / Diggnation in that) is missing the where the action really is - the money will be (primarily) in quality long form and (secondarily) in short form content. `Short form will probably rule on Mobile video. (See this post we made earlier)

Why do we say this? Well, just look at Japan and Korea. They are ahead of Europe and the US in broadband bandwidth (but not really penetration), and their experience is that as bandwidth rises (which it will in the US and Europe), more video is consumed online, and as that happens, more services that optimise the online video experience become available.

The future, as they say, is here - it is just unevenly distributed.