Yahoo! and Microsoft's MSN are betting that streaming-video clips preceded by TV-like ads will wring more money from traditional TV advertisers. Yahoo! signaled its commitment by hiring former ABC Entertainment chairman Lloyd Braun in November to head its media group and signing a lease to house the unit in a sprawling office complex in Santa Monica, Calif., a stone's throw from Hollywood.
Both Web companies are adding two- to five-minute video clips of news and sports highlights, preceded by 15- and 30-second commercials. The number of clips watched per month on MSN jumped from 6 million in January 2004 to 60 million last month. With its Yahoo! Launch property alone, Yahoo! streamed 2.9 billion music videos in 2004, more than double the year before.
Other Web publishers have followed suit. This month, iVillage redesigned its site to sprinkle online video throughout, and NYTimes.com began running its first online video ads. ESPN.com, which broadcasts about 24 million clips a month, has increased its video content by 25 percent from a year ago, according to company executives.
"It's giving advertisers who still haven't come forward online an easy way to break into the medium," said Nate Elliott, an analyst with Jupiter Research, which has forecast Internet video ad revenue this year will rise 64 percent to $198 million.
With broadband in 51 percent of wired American homes, according to Nielsen/NetRatings, watching online video is possible for a wide audience. In a poll of more than 27,000 Internet users released last week by the Online Publishers Association, 51 percent of respondents said they watch online video at least once a month, and 27 percent said they do so weekly. Online video users were also found to be younger and more affluent than non-viewers. "These people who are leaving TV are exactly the people spending time watching streaming [video] online," said Steve Moss, general manager of ad sales for MSN.
Early research indicates that online video ads work. The OPA survey found that 34 percent of those viewing online video ads said they have visited an advertiser's Web site, and 9 percent said they have made a purchase. A study completed in November by Pfizer and MSN found online streaming video is as effective as TV at increasing brand interest and consumer influence, the companies said.
Big advertisers have dipped their toes in the water. Advertisers running 15- or 30-second spots on Yahoo!-produced video include MasterCard, Bacardi and Circuit City. MSN Video boasts 23 of the top 50 U.S. advertisers as clients. Kraft, Pepsi and Microsoft are running campaigns on iVillage. Fox Searchlight Pictures has signed up as the exclusive sponsor of videos in NYTimes.com's movie section. ESPN.com, a pioneer with its 2-year-old ESPN Motion product, has run video ads for more than 50 advertisers, including Citibank, American Express and Procter & Gamble. "We're seeing some of our clients move some of their TV dollars into this space," said Toby Gabriner, president of Aegis Group's Carat Interactive.
Pricing varies by publisher, but CPMs typically run from $20 to $30, according to media buyers. However, ad spending is constrained by the relatively small amount of video available. The OPA poll found that 53 percent of respondents who did not watch Web video said they would if they could find it more easily.
The development of video search engines by Google and Yahoo! could help, said Jeff Lanctot, director of media for aQuantive-owned Avenue A/Razorfish. More important right now, he said, are MSN and Yahoo!'s moves to introduce video to more of their combined 185 million monthly U.S. visitors, as measured by Nielsen/NetRatings.
MSN Video, launched in January 2004, has led the way. It offers dozens of video clips of sports, news and entertainment on the MSN portal and at MSNBC.com. Thanks to its partnership with NBC, it has clips from the Today show and NBC Nightly News. In June 2004, it signed a three-year deal with Fox Sports to distribute sports highlights. "We continue to look for good content partners," Moss said.
Yahoo! is working to build on the success of Yahoo! Launch, which it last week renamed Yahoo! Music, either through original content or distribution deals. "They're going to be looking at ways to leverage [Yahoo!'s] base of 345 million users worldwide," said Beth-Ann Eason, vp of category development at Yahoo!
Vertical sites are also producing more of their own videos. ESPN.com has created a "Sports Guy" cartoon series and video supplements to Web stories. iVillage plunked down $17.2 million in last month to buy Healthology, a medical information provider with a library of 1,200 streaming videos. NYTimes.com makes videos that feature the company's reporters and columnists.
"If the content is good and it's compelling enough, people are going to watch it," said Robert Davidman, CEO of Earthquake Media, a New York-based media planning agency that has placed Web video ads for HBO.
Starcom Worldwide this year plans to place in-stream video ads on 35 sites, up from seven a year ago. "More and more of these sites are more broadband friendly, and they're offering more video content," said Chris Boothe, evp at the media buyer, who has bought video ads for Kellogg's, Allstate, Miller and Nintendo (news - web sites).
Still, Internet video ad standards remain unsettled. Many publishers run repurposed 30-second TV spots; Jupiter's Elliott said he would like to see more advertisers embrace 15-second spots. One media planner complained that he still must ship and receive bulky tapes, even though the ads will be digital.
Some publishers, like Yahoo! and MSN, include interactivity with ads. Others, like ESPN.com and iVillage, do not. And tracking and measuring online video ads remains difficult. Said Avenue A/Razorfish's Lanctot: "It's still a bit of a Wild West."
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