Online video will heat up as a U.S. advertising format in 2005, fueled by the use of high-speed Internet connections, while attention-grabbing pop-ups will wane, according to a study released Thursday.
In a research report on online ad trends, Internet agency Avenue A/Razorfish predicted that advertisers will embrace Web video in 2005, building on the interest shown by consumers last year. Avenue A/Razorfish is the largest independent U.S. online agency, part of aQuantive.
"I would not be surprised if every one of the Internet portals has video as one of their top two focuses in 2005," said Jeff Lanctot, vice president of media at Avenue A/Razorfish. "I think they all see it long-term as a way to grow their business."
Industry analysts expect total Internet ad spending to surge between 20 percent and 40 percent this year to more than $10 billion, including paid search listings and visual "display" ads.
That growth is already cheering top Internet companies who rely heavily on ad revenue. Yahoo reported this week a 67 percent jump in quarterly marketing services revenue.
Yahoo operates one of the largest Internet portals against rivals MSN, part of Microsoft, and America Online, part of Time Warner. MSN launched a free online video service last year, giving viewers access to short news and entertainment clips accompanied by advertisements.
"There is a huge opportunity for video-based programming on the Web," said Doug Knopper, senior vice president at marketing company DoubleClick. "We haven't figured out as an industry what the model is just yet...but the experimentation will be on the video side."
DoubleClick competes with aQuantive in serving up and tracking online ads.
Advertisers devote only a fraction of marketing budgets online, but they are accelerating that spending as consumers dedicate more time to the Internet, particularly as they research purchases.
Improved technology that creates ads and tracks consumer response has driven more companies to the Web. Internet portals are also drawing millions of viewers, traffic that is beginning to compete with traditional mass media such as television.
"Yahoo, AOL and MSN are like the old television networks and the home page is their hit show," Lanctot said.
Portals are commanding top prices for home page space, as much as $400,000 for a 24-hour ad placement. Niche sites such as those catering to entertainment or travel have been able to raise their prices by as much as 40 percent, he said.
At the same time, consumer backlash against pop-up ads, which appear automatically when a Web site is opened, and increasing use of technology that blocks those ads will diminish that format considerably, according to Avenue A.
"While (pop-ups) have been an effective low-cost, high-volume vehicle, they are rapidly losing steam," the Avenue A report said. "Marketers who have been dependent on pop ads should be testing alternative formats and inventory."
Source: CNET
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