FreeWheel, a video technology company, has reported that during Q4 2011, video ad volume growth overtook video viewing volume growth. There are now nearly 7 ads per video 20 minutes or longer- more than twice of that in early 2011. It seems viewers too, are more accepting of ads in online videos.
Here are some implications of this trend and some ways it’ll impact the industry:
1) Lower advertiser reliance on subscription-based models: advertisers can shift their focus from finding prospective subscribers to casual, one-time video viewers.
2) Lower consumer loyalty: without having to pay subscription fees, users would feel less compelled consuming content from just a handful of sites. Instead, they will be drawn to and spend their time on wherever they can find the best and most relevant content.
3) Netflix and its subscription model will continue to thrive: the value of Netflix is and will be in its algorithm. People would stay subscribed in part because Netflix knows so much about their tastes and is able to recommend movies they will like.
4) Continued growth of the freemium model: of course, these will continue to exist to cater to users who would rather pay a subscription fee for an ad-free video experience than otherwise.
5) Content focused over-brand-focused messaging: to cater to the “liberated” video viewer, advertisers will have to prioritize promoting their content over their brand. The actual site where a video lives will take a backseat and give way to the “content is king” maxim. Instead of generic “Watch best quality videos on XYZ”, ads will look more like “Watch the Matrix trilogy for free. Click here”. Think long tail, dynamic ads over head term ads.
6) Retargeting over email advertising: retention efforts will take the form of retargeting tactics over email marketing. Without a database of subscribers who have opted in to email alerts, it’ll become pertinent for video website owners to bring users back to their site in other creative ways.
According to the comScore report below, YouTube owns nearly half of US Online Video market. The metric used to determine this is the number of videos viewed in December 2011. However, I believe this is not the most accurate way to measure marketshare, as it doesn’t take into account user engagement, i.e. length of time spent watching a video.
Whether a video watched is 2 minutes or 2 hours long, this report counts it as one view. This is probably the main reason why Netflix’s share is shown only as 1%, since each video watched on the channel is way longer than a video watched on other sites like YouTube. This grossly skews the ratio, making it seem that Netflix is behind the game when its users spend hours and hours on the site.
That said, I don’t think “time spent watching videos” should completely replace “number of videos watched”. Both should be taken into consideration for more accurate and balanced analysis.