Video
So the European head of New York-based Tremor Media Inc., an advertising network, knows which Web sites to market to the German carmakers ad agency.
“We go to them and say here are 150 sites with video content that is attractive to that target group,” said Baudis, who works with Volkswagens ad agency, Mediacom, a unit of WPP Plc, the worlds biggest advertising company. “Targeted advertising is more efficient. It costs less money to reach the target. Thats the beauty of it.”
Online video ads are the fastest-growing piece of the advertising industry, aided by their ability to show off products in a feature-rich medium and, increasingly, to zero in on a target audience. Volkswagen and HSBC Holdings Plc are among European companies using online video ads to reach potential customers as television audiences shrink.
In Europe, spending on online video ads could triple between 2009 and 2013 to about 1 billion euros ($1.4 billion), said Nate Elliott, an analyst in London for Cambridge, Massachusetts-based Forrester Research Inc. In the U.S., the online video ad market could grow to $3.01 billion in 2014 from $879 million in 2009, according to Forrester. Such ads currently account for just 1.6 percent of whats spent on TV commercials, says New York-based research firm eMarketer Inc.
Still Young
HSBCs two video ads on Web sites including those of the British Broadcasting Corp. and National Geographic, were among the banks “best-performing campaigns we ran last year,” said Ceren Dogany, digital account director at Mindshare Worldwide, a WPP unit. “We received a massive number of clicks and a really high click-through rate.”
Targeted advertising is in its infancy, Baudis said. Information on consumer preferences is drawn through “cookies,” or a small piece of text stored on a users computer by a Web browser. Ad agencies can then post ads based on consumers browsing habits. The system relies on consumers accepting the cookies and may be capped by privacy concerns.
“Consumers do appreciate targeted advertising, although it will take some time to develop, to convince them because of privacy issues,” he said. “Normally, targeted advertising will mean that you get better ads.”
The ads are inserted in a video program on a Web site or occupy space on an Internet page. Program developers in Europe are scrambling to capture this new revenue.
Huge Opportunity
“Welt der Wunder,” a German producer of science, technology and educational shows that gets no ad revenue for programs aired on TV, sought the aid of Tremor, which pools several Web sites to make it worthwhile for advertisers.
Tremor, which aggregates Web sites for advertisers and provides them technology to place their ads, is among new players spawned by the online video ad trend. It is banking on Europe following a trajectory similar to the U.S.
At about 25 million euros, online video ad spending in Germany is miniscule compared with the 3.9 billion euros spent on TV ads, said Baudis. Online video advertising in Germany alone could grow six-fold by the end of 2012, he said.
SAP Ventures, an investment arm of SAP AG, the worlds largest maker of software for businesses, last year invested an undisclosed amount in Tremor.
Ubiquitous
“We felt that growth in online video advertising would be one of the strongest online advertising sub-segments,” said David Hartwig, a SAP Ventures partner in Palo Alto, California. “Online video is going to start encroaching on some traditional TV viewing and its going to start to pull from TV advertising, making it a really huge opportunity.”
Other companies capitalizing on the trend include Cambridge, Massachusetts-based Brightcove Inc., with a platform that publishers use to manage video content. Its investors include General Electric Co. and Hearst Corp., and it manages video content on the Web sites of The New York Times, Conde Nast Publications and Universal Music Group.
“Video will become as ubiquitous and pervasive as text on the Web, and if youre an organization, a corporation, a media company, youre going to make video a much more central part of how you market, communicate, educate and entertain,” said Jeremy Allaire, its founder and chief executive officer.