Video advertising and monetizing online.

It’s early in 2008, and yet it’s clear that video adverting and monetization will be the problem that either one of the big four (Google, Microsoft, Yahoo, AOL), or one of the media powerhouses (NBC, Viacom, CBS, Disney, News Corp.) or some upstart (too many to list) will crack. They have to this year, right? There was even a strike here in Hollywood over how the revenue is going to be split up. There has been a steady increase in media consumed online. Some of the brightest minds in the industry are fully invested in solving this problem. Except 2008 sounds suspiciously like 2006 and 2007, other than the strike. And to date there has yet to be THE breakthrough that fundamentally changes the conversation around online video advertising and monetization.

Last week there was a bit of commotion around online video advertising when Google announced something in this area. I say “something,” because while I have read/watched the relevant pieces, including Google’s own releases, I can’t figure out what Google released. I know the program is in beta, but here’s what I have gathered:

Video AdWords (for advertisers): A very little testing of place videos alongside search and AdSense content partners, based on the same pay-for-placement model as text advertising. I like the spirit of this idea, assuming Google can achieve relevancy without compromising my experience searching on Google. The New York Times’ Saul Hansell has the best write-up here: “Google Tests Video Ads on Search Results Pages”.

Video AdSense (for Web site publishers): This is more about adding value to its AdSense network partners, which drive a significant portion of Google’s revenue. Instead of serving a customizable ad unit with text ads targeted towards their sites’ content, Google’s AdSense partners can choose to serve a customizable video player, which serves text ads (and presumably video ads) that are targeted to their Web sites’ content.

Video Monetization (for video publishers): Make a video. Google will not only put text ads around it and overlays on it, but will also get your video distributed through its AdSense partner network (see above).

All nice. Nothing earth-shattering. Certainly no silver bullet. Liz Gannes from NewTeeVee shares my confusion on what is really all that new in “More on Google AdSense for Video,” and Michael Arrington was betting against a similar announcement … IN 2006!!!!!!!

What’s the problem? Let’s start with the lesser of the two major problems. Think about the writers’ strike. By my count, Google’s system has three hands in the cookie jar before the word go. That is, Google gets its share of revenue generated, Web site owners get their share for syndicating the video and the video’s publishers (if they’re big enough) get their share. Now the video’s creator has to split what’s left amongst writers, talent, producers and (likely) investors.

How is this the lesser problem? Because the other issue is that Google hasn’t actually changed the way relevancy is determined, at least not in any way they are sharing as of yet. And there is just an inherent flaw in contextually targeting advertisements for video content for a majority of video creators and advertisers ( ” Does The Talent Agency Model Hold The Key To Brand Advertising’s Future?”) .

The answer to effectively monetizing video online has much more to do with greater collaboration and integration between content producers and advertisers, something that might not have as much of a clean sexy technology solution as Google would like. The benefit is that more integration between content producers and advertisers is the easiest way to free content and attract brand dollars. No one has seemed to find a way around this.

For my analyst/VC friends: On the upside, the above releases mean Google might be able to increase revenue by gaining a larger share of the direct-response budget, capturing some of the direct-response TV dollars. But the $80-billion-dollar apple that is television advertising still rest firmly in the hands of those creating the highest quality content and the agencies, until Google proves it can attract and monetize video with brand dollars. Meanwhile, note that Google is messing with its search results page, among other things, to try to crack this nut.
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By Joe Marchese
Joe Marchese is President of socialvibe.
Courtesy of http://www.mediapost.com