Check this out for what should be cautionary news for all the bandwagon businesses trying to make video advertising the next great get rich quick scheme.
The key facts in January 2008:
- More than 139 million US Internet users spent an average of 206 minutes per person viewing online video in January.
- Google Sites also attracted the most viewers (80 million), and they spent an average of 110 minutes watching video.
- Fox Interactive attracted the second most viewers (53.9 million), followed by Yahoo Sites (36.3 million) and AOL LLC (21.9 million).
Other Notable Findings from January 2008
- More than three-quarters of the total US internet audience (75.7%) viewed online video.
- 78.5 million viewers watched 3.25 billion videos on YouTube.com (41.4 videos per viewer).
- 49.4 million viewers watched 534 million videos on MySpace.com (10.8 videos per viewer).
- The average online video duration was 2.9 minutes.
- The average online video viewer consumed 70 video
Look at that. Compare it to TV numbers:
The total average time a household watched television during the 2005-2006 television year was 8 hours and 14 minutes per day, a 3-minute increase from the 2004-2005 season and a record high. The average amount of television watched by an individual viewer increased 3 minutes per day to 4 hours and 35 minutes, also a record. (See Table 1.) Meanwhile, during primetime, households tuned to an average of 1 hour and 54 minutes of primetime television per night, up 1 minute, and the average viewer watched 1 hour and 11 minutes, which was the same as last year. (See Table 2.)
Although teenagers typically drive the consumption and development of new media platforms, teens age 12-17 viewed 3% more traditional television during the full day than in the 2004-2005 television year. This increase was driven primarily by teenage girls, who increased their Total Day viewing by 6%. Increases among teenage girls were particularly high during early morning (6:00 a.m. to 9:00 a.m.) and late night (11:30 p.m. to 2:00 a.m.) viewing, which were up 12% and 6%, respectively.
Younger children age 2-11 also watched more television during 2005-2006, increasing their total day viewing levels by 4%. Viewing by children increased 3% during primetime, 5% during early morning and 6% during late night.
Most people consume more TV in one day than all online video in a month. Sure, you can say that online video is moving very quickly. However, eventually you run out of time in the day and the slow down at the beginning of 2008 might be an indication of that.
Online video viewing is cutting into TV viewing behavior (time watching isn’t the only metric to pay attention to!), despite what the publishers want to claim. Skipping commercials, less direct attention, time of day watching, brand recognition, quality of shows, what shows, DVRs….
Unfortunately, the behavior of online video viewing is not in favor of advertisers. With TV we have 60 years of product placement, crazy amounts of ads every 6 or 7 minutes and we all grew accustom to not having any control over the TV experience. With online we have 10 years of finding as many was as we can to ignore ads, delete them, steal content, embed ad free videos, and so forth. Worse, the way TV ads are sold is very different than online ads and the money associated with web ads is not even close to TV.
Let’s consider the online video advertising model as it stands now.
At best users are watching 3.5 hours of online video a month. That means at best they are seeing 60-80 video ads (1 every 5 minutes I estimate) versus the over 1000 TV ads we all see per month. Let’s say the monetizable videos (no adult, no copyright violation, no crap), say 50% of all videos, go for $30 CPM (hahahaha, it’s closer to $20 or less, I’m certain). That means total video advertising revenue on the internet (maximum amount) is about $60,000,000 per month or $.50/user. It costs between $3-10 million just for bandwidth on those video. It costs another $10-20 million in hardware, space and power to service the sites, encoding, and security. Labor is probably $2-5 million. Cost of Sales (commissions and all that), is probably $10-30 million. Doing the math, we end up with a cost between $25-65 million without factoring in general business expenses like office space, benefits and so forth.
Google doesn’t even really put video ads in there, so really 3.25 billion of the 4 billion videos are without high CPM ads. Google does do the companion 300×250 and the overlay, but there’s no way those are going for $30 CPM on even good content like this. (Then again, the video is cool, but the comments and rest of page is pretty terrible.) So really we should haircut the $60,000,000 number by 50%, just to make it easy.
Some media companies have a different view, or they need to promote alternative data. NBC digital put data out recently. The numbers seem so impressive until you think about them. 40 million video streams… that’s not very big. Not at all. TV dollars aren’t going to go anywhere because we have 60 years of behavior to change before the numbers move at all.
Oh, wait, let’s consider the data from Blinkx and Harris Interactive. Pretty funny study.
All told there’s no possible way anyone is making money on an online video experience.
Not even CDNs are going to make money from this video crazed Internet business building.
YouTube has updated their API so that any publisher can flat out repurpose the main guts of YouTube. This effectively nukes the main growth area for CDNs. Combine Amazon s3 with YouTube API and you have no infrastructure play left.
The YouTube API is going to change the video ad world too. Once major publishers moveover, and they will because the cost is nothing, Google will own most of the sales relationships and it will just be easier to take Google ads, like it already is for most other types of online content.
Another huge point is the complete lack of advertisers for online video advertising. Who can possibly afford video ads and their lack of traffic generation? Only big brands who don’t need to worry about whether they get a click to a shopping cart or can arbitrage the traffic. That limits the advertising pool to about 5000 companies and 200 agencies. Whereas every website and commercial operation online can and does buy Google Ads, Yahoo PPC, or some other text or banner ad. That’s probably well over 10 million advertisers in the Pay Per Click pool. That’s a marketplace. Video ads have NO MARKET PLACE. At least television developed a local ad model. Online video doesn’t have anything like that. With no market place driving prices, there’s no way to equate the value to anything and, generally, that means the price will keep going down.
There’s so much more to look at in all this, especially in raw user and advertiser behavior. I wanted to look at the numbers for now just to get a sense of things.