Online Video Advertising Business Plan Data

Online Video Advertising Business Plan Data

The intent of this document is to define the online advertising marketplace size, growth and market dynamics including the differences in approaches to presenting advertising messaging. The growth of online advertising and its implications on the corresponding growth of online video advertising is next discussed, as it the explosive growth of video sharing sites including and many others via blogs. This groundswell of interest in online video sites is illustrated by the acquisition of Google of, MySpace by News Corporation, and Yahoo’s continued efforts to bring video content into the mainstream of their users. This paper ends with an analysis of how animation is becoming more mainstream as a result of online video sharing.

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Online Advertising Marketplace Forecast

Many analysts have contended that when the growth rate for online advertising begins to outpace traditional advertising, the dominance of online advertising will become clear. This milestone first happened during 2005 when full-year U.S. Internet advertising accounted for 7% of spending while the total advertising market grew by only 3%. According to many investment analysts contend that 14% or more of total advertising spending by 2010 will be from online advertising, and within the total set of digital marketing spending, search advertising will be the largest growth area. This is evidenced by the growth of search-related advertising from 4% of ad spending in 2001 to 41% by 2005, largely driven to efficiencies in Google AdWords and Yahoo’s competitive offerings in this area. Forrester Research (2005) has completed a series of forecasts of digital marketing spending, breaking out paid inclusions, agency fees, contextual listings and paid search. Figure 1 shows the Forrester Research forecast for Digital Marketing Spending for 2004-2010.

Figure 1: Digital Marketing Spending for 2004-2010

Also according to Forrester Research the growth of online advertising will grow to $140 per Internet User in 2010, which is comparable to spending per sales lead generated from television today. Figure 2 shows this comparison of U.S. Internet users to U.S. Internet Ad Spending per User.

Figure 2: Projected Growth in U.S. Internet Ad Spending Per User

Factors Driving Online Advertising Growth

The ability of marketers to track the performance of their investments in online advertising, the growth of the ability to segment audiences online, and the more pervasive use of offers within all forms of online advertising are all propelling the growth of online advertising. Forrester Research (2005) shows graphically how pronounced the overall growth has been in online advertising relative to other traditional forms of marketing spending for generating higher levels of awareness. To summarize, the following are key factors in the growth of online advertising over traditional spending:

Improvements in technology / targeting possible with the use of online advertising strategies.

Accelerating migration of video / audio content onto the Web

New product launches increasingly being hosted on the Internet

Continued growth of search engine optimization and search engine marketing including organic search strategies

Emergence of mobile Internet

Enhanced online sophistication of advertisers and consumers

Online Video Advertising

The growth of online video advertising is directly related to the growth and rapid maturation of Video on Demand (VOD) technologies, and a recognition of internet video advertising and downloads being a significant revenue growth opportunity. An example of this is Disney’s decision to make their popular television programs available via download to Apple iPod users. Figure 3 provides a forecast of the spending on Internet Downloads of TV Programs from Veronis Suhler Stevenson (2005), a well respected communications company that focuses on the online video marketplace.

Figure 3: Internet Video Downloads of Television Programs

Additional key points from the firms’ research on online video advertising and downloadable television programs include the following insights:

About one in ten U.S. online consumers watches television broadcasts online.

Respondents mostly were still watching as much TV on the TV as they had been, despite adding some online viewing to the mix.

Three out of four online views said their traditional TV-viewing habits haven’t changed, a small percentage said it had decreased and a smaller number said it had increased.

More than two-thirds of online consumers log on daily for entertainment purposes, and 16% seek entertainment online several times per week. About one-third of households that watch TV online contain multiple viewers.

News broadcasts are the most popular go-to content online, drawing 62% of online news viewers, followed by entertainment viewing (nearly 50%).

Other popular content: missed favorite shows; previews; sports; and seeing entire episodes of shows, each drawing a yes vote from more than 25% of online TV viewers.

Americans ages 18-34 are roughly twice as likely to have downloaded television programs from the Web as the population at large, according to the study.

Based on its survey of 1,143 Web users, Ipsos estimates that 10% of U.S. adults under 35 have downloaded a show, compared to 5% of the overall population. Downloading is even more prevalent among 18-24-year-olds, as 14% of that group has downloaded a show.

Although the overall proportion of TV downloaders is small, it’s growing quickly. Last year, just 2% of the population at large had downloaded TV shows, as did 5% of 18-34-year-olds.

Internet video services will generate over $1.7 billion in revenues by 2010.

The market for Internet video services began its dramatic acceleration in 2005 as content owners started to experiment with digital distribution as a way to complement and enhance their existing business models and to stem illegal P2P file sharing and piracy.

In particular, the television networks’ decision to offer episodes from new shows as well as old sparked significant interest in Internet video.

Growth of Animation as a Result of Online Video Growth

Given the growth in Digital Video Recording and the corresponding growth of video-based advertising, the use of 3D animation tools specifically developed for assisting artists, animators and design professionals create animations tailored for high performance on the Internet all are contributing to significant growth of animated-based animation downloads. The following graphic provides insights into this growth from LWC Research (2006).

The focus on using animation for distance learning, certifications and entertainment are the three largest vertical market segments of online animation growth. In conjunction with this growth is the stabilization of Java as a programming language and the overall growth of animation as an accepted form of development for entertainment and advertising.


Forrester Research (2005) – U.S. Online Marketing Forecast: 2005-2010 May 2, 2005. Charlene Li, Chris Carron, Jennifer Joseph, Sally M. Cohen. Forrester Research. Cambridge, MA.

Veronis Suhler Stevenson (2005) – Veronis Suhler Stevenson Communications Industry Forecast 2006-2010. New York, NY

LWC Research (2006) – Growth of Online Animation Markets. Irvine, CA May 2006

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