Search may have been Web advertising's belle of the ball, but online video is now the new darling. But despite media companies, including the big four networks, moving content online and YouTube feeding a healthy appetite for user-generated clips, advertisers are facing a shortage of usable inventory. The result: Prices for net video ads are being pushed above those seen for TV spots.
Agency execs said 30-second pre-roll spots, which play before video content, now cost from $25 to as much as $40 per 1,000 plays. That's a 25 percent increase in the past year, making it rival the cost to run the same spot on many network programs, media execs say. And inventory on some high-traffic video destinations is sometimes unavailable, according to buyers.
The high prices have led some agencies to question if they're getting their money's worth, while others are searching for alternatives and anticipating new ad-worthy models that give consumers high-quality content.
"The default [thinking] is there's a lot of video being watched online, [so] there must be a lot of supply," said Jeff Lanctot, vp of media at aQuantive's Avenue A/Razorfish. "But most of that video being watched isn't being monetized."
That's because top video site YouTube, which accounts for one of every two videos online, does not run pre-roll ads. This leaves the likes of also-rans such as Yahoo!, MSN, AOL, ESPN.com and CNN.com to provide the entire video inventory.
While Web video sellers believe prices should be higher because they offer an engaged, actual audience rather than a passive, estimated one on TV, others are not so sure. Publicis Groupe's Starcom, for one, is conducting an evaluation to determine if it's overpaying. "Is my :30 that runs as a pre-roll on ABC.com worth the same as on ABC?" asks Tracey Scheppach, video innovation director at Starcom. "Is the view worth more?"
The price hikes and inventory shortages have caused some brands to turn to the much-maligned Web standby: the banner ad. Brands are placing assets in ad units, some that play when a user clicks and others that play automatically when a visitor lands on the page. Such ads cost about a third to half the price of pre-roll ads, according to media executives.
Not only are lower prices an obvious draw, but in-page video ad creative has improved as more brands up their budgets for it. In a campaign launching this month, Levi's is embedding interactive options in video banners that let users roll over the video for more information about the Redwire DLX jeans.
"Rather than just repurpose a TV spot, which we've done with pre-roll [ads], this allowed us to showcase the product in a new way," said Patrice Varni, Levi's director of Internet and consumer marketing.
Cracking the code for incorporating video ads with user-generated content would offer the biggest near-term inventory bump, agency execs said. YouTube's executives have said they are opposed to allowing such ads, which they claim would be overly intrusive. Yet some said it is only a matter of time. "If they ever really want to become wildly profitable, they're going to need in-stream advertising," said Nate Elliott, a JupiterResearch analyst.
The biggest opportunity for advertisers online, though, might lie with their old partners, traditional media companies. Agency execs point to Viacom hooking up with Google to distribute content and NBC's plan to move to a distributed model as good steps. Companies like Broadband Enterprises and Brightcove are building similar syndication models with professionally produced content, said James Kiernan, associate director of digital media innovation at MediaVest.
"All of a sudden, they'd figure out a way to monetize the long tail of the Web," he said.