There is a good series of 3 pieces on
GigaOm today about Online Advertising. But I disagree in part with the conclusions.
Om Malik notes that:
The media industry is in the middle of a massive change, thanks to the ubiquitous presence of broadband everywhere. Fast pipes are enabling niche networks, venture capitalists are investing in new media properties. The online video market resembles an old fashioned bubble, and companies are sprouting up like mushrooms after a fresh monsoon. All of this is predicated on one business model: advertising. Google bet $1.65 billion in chips on YouTube, betting that it can profit from this shift to online video. Their confidence is understandable: Google now accounts for 25%1 of all online advertising dollars.
One of the things we have repeatedly told our clients (and anyone who would listen) is that Online Advertising is hitting a tipping point and money will shift from Old to New Media. The impact is disruptive for both Old and New media - one because existing cost structures (with low margins) have less revenue flowing through, the other because an embryo industry suddenly has a flood of money coming at it. And it will happen very, very fast compared to the ability of the Old Media to scale down. The New Media will undergo exactly what Om describes.
There were 2 interesting pieces from my point of view:
- Robert Young on Google, YouTube and the Future of Video Advertising.
- Liz Gannes asked Where’s the AdSense of Audio & Video?
Robert Young's piece on Google and YouTube was interesting for us as we have done quite a bit of work in this space. In essence he notes that (I have summarised his text):
- Google could eventually control the flow of dollars generated via online video advertising because they have an “an unfair competitive advantage” when it comes to monetising online video inventory due to their AdWords & AdSense platforms.
- This is based on their existing relationships with hundreds of thousands of small-to-medium-sized businesses (“SMBs”). The backbone of Google’s auction-based, Pay-Per-Click ad platform was primarily built on these SMBs, and the key reasons why Google’s existing relationships with SMBs will prove so critical to the future of video advertising has to do with user-generated content.
- Big corporations are extremely sensitive to any content that could potentially “pollute” their brands, SMBs will be less sensitive and will weigh the risks - as long as Google can perform. Aggregate enough small ad buys and Google will be a position to generate billions in online video ad dollars.
In Liz Gannes piece
here on the emergence of video advertising, she basically felt it would be Adsense Mk II but with more emphaisis on deriving context from non-text media, and sheer volume of ads to keep the inventory going.
I disagree somewhat, here is what I responded with. Firstly, to set the scene my notes to Liz were:
I think the main issues for video based Ads will resolve into:
(i) Getting a much better fix on the user’s profile and real time behaviour as part of building up their “context” - and I suspect this will be partly done by getting user opt-in for some benefit.
(ii) Being able to repurpose existing video inventory to match to these user profiles.
(iii) Building tools to allow easy self production of video media for all the SMB’s that are currently the main users of Portal (as opposed to Madison Ave) advertising services.
Despite all the work on analysing Video, I suspect in the short term the real benefit will come from letting users drive the metadata definition.
I also do not think that Adsense (ie classified Ad equivalent) is the same thing as what will work in Video Ads - I have no hard data, just an instinct. We have done quite a lot of consulting work on Interactive Video ads and they are consumed very differently.
Liz also wrote about the vexed questions of Old Media in online video such as Pre-Roll, popup inserts etc. Well, my take on this is that users hat them and love TiVo, Popup blockers and the like. I think in a multichannel, interactive world the Big Rule will be Don't Piss Off The Customer!
So, back to the Big Question in the piece - will Google Rool?
Perhaps, but the seeds of their possible demise are in this same shift.
Firstly, The move from "dial up" Web 1.0 to "broadband" Web 2.0 has been more than just a bandwidth shift. We know that Interactive Video
is different in the way it is consumed than static websites, it is not at all clear the Adsense PPC model, which is finely honed for the current world, will win. Video is a creature of the broadband/ web 2.0 world, and it is different to Web 1.0 constructs.
Secondly, the tech shift gives a whole lot of big people a chance to "catch up" with Google, and a bunch of new players to blindside it - just look at YouTube for example. They may not - Google are smart people after all - but a disruption often resets positions.
Thirdly, Google wins only so long as it is the prime site to point to all that video content - the number of Niche (sorry, Vertical now) Search plays lining up now is quite large. In addition, the nature of aggregation is changing from web search through to social networking recommendation search to.........
Well, our view is that the endgame of the video web's search is that it will be more like a blend of search, social net and what is built on it to deal with the Video Net - which in our opinion will be a derivation of an EPG like function.
I don't know yet the ins and outs of how it will work, that is something we are still working on - but online Advertising will not work the way it does now - it cannot - the 'Net has changed, it takes a few years for the new models to emerge.
