Magna: Web Video Growth Fueled by Traditional TV

Over the next few years, online video is expected to be one of the few bright spots in the otherwise depressed ad economy. But not necessarily for pure Web players, as-old school broadcasters are predicted to be the beneficiaries of the anticipated surge in online video ad spending.

That’s according to a new report issued by Magna Global, which forecasts that advertising revenue for online video will jump by 32 percent in 2009, going from $531 million in 2008 to $699 million. By 2011, Magna expects that figure to exceed $1 billion.

Magna’s prediction is slightly less rosy than that of eMarketer, which predicted in December that Web video spending will swell by 45 percent in 2009 to $850 million, surpassing a billion by next year. And Magna’s estimate is down versus a previously issued forecast. Still, most industry experts are in agreement that video and search will be among the strongest sectors for ad growth this year in the online advertising space.

What’s perhaps most interesting about Magna’s report is that it foresees most of this ad growth being fueled by traditional TV players—who’ve been foresees at times of being flat-footed online—landing multiplatform ad deals, rather that pure Web video giants like YouTube. “Over the next few years, we expect traditional TV content, and traditional TV suppliers, will continue to account for the bulk of online video budgets,” reads the report, which was authored by Magna’s CFA global forecasting Brian Wieser.

Wieser argues that traditional advertisers are still averse to user-generated video, despite its huge popularity. Plus, as more professionally produced content has come online in recent year, there was 24 percent increase in time spent watching this professional content in 2008 alone (source Accustream).

That gives traditional brands more options. However, according to Magna, buying inventory on broadcast and cable networks’ Web sites is rarely worth it to brands on its own. “This represents a limited volume of top-tier inventory,” reads the report. “Few large advertisers can achieve broad reaching objectives solely by using an online video-only campaign if there are any content preferences involved.”

That’s why most online video as part of multiplatform packages offered by TV networks  as a way to gain incremental reach, according to Wieser, likely making it tough for smaller Web video players.

“Now is a tough time for all startups,” said Mark Mackenzie, head of technology, media and telecom venture capital, AllianceBernstein, who was interviewed by Magna for the report.

Magna expects user-generated content sites to continue to add more professionally produced content over the next few years to increase their appeal to advertisers —something that is already underway with YouTube.

Meanwhile traditional print publishers are expected to struggle to make a business of their own video ventures, give their limited volume. That may result in an opening for ad networks, according to the report.