Online-video market will be worth $15.6B by 2012: study

Internet video will become an increasingly important piece of the entertainment pie for consumers, and content owners and distributors will find online distribution a significant incremental and competitive method of monetizing content, according to a new study by ABI Research.

The Long Island-based research firm suggests that the value of the total online-video market – both pay and ad supported – will be worth $15.6 billion by 2012.

“The implication for marketers is that they will need to increasingly diversify their ad spends to online, especially if they are heavily reliant on traditional broadcast advertising,” said Michael Wolf, director of digital home research at ABI Research.

“The good thing for marketers,” he added, “is they will have much more information about their audiences, as video advertising online brings all the advantages of Internet advertising [in that] they can ultimately get strong click-through response data to track response rates much more closely than through broadcast TV advertising.”

The expanding reach of new syndication networks and video “super-portals” such as Joost, alongside established sites like MySpace, will rapidly grow the total user base for ad-supported video.

Wolf believes that, in the near term, the challenge is getting access to good video advertising inventory because demand currently exceeds supply. In the long term, the challenge will lie in creating cohesive marketing plans among the explosion of options across the different premium and user-generated video opportunities.

Pay-video adoption will grow through sites such as iTunes, the study found. The growth of Internet-connected hardware platforms will make direct download of Internet video to the TV a viable model in coming years.

ABI Research’s study also suggests significant growth for enabling backend services such as content management, publishing and CDN services. Emerging broadband video ASPs are offering comprehensive hosted software solutions and tie-ins to their own ad and syndication networks.

As to how this predicted trend will affect video search, Wolf said, “Video search is only in its infancy. The search players are right now investing significantly in trying to best find ways to create well-optimized search capabilities for video as it is more challenging than for text. Video search is the new focus for all the large search players.”

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