Online Video becomes a key Marketing Platform.

Clever, consumer-made video touting the virtues of consumer products is generating considerable buzz and Internet ad revenue. But traditional broadcast media is fighting back.

As broadband online access has become common, consumer product companies have shifted more of their ad budgets to the Internet. By March 2006, 42 percent of Americans had high-speed Internet access at home, compared to 30 percent in March 2005, according to the Pew Internet & American Life Project.

Meanwhile, the number of people viewing video online is exploding. YouTube, the Internet site that hosts videos, says that its videos are accessed more than 100 million times a day.

The ubiquity of high-speed Internet access, giving the consumers the ability to watch videos and other high-density media, has led to a proliferation of consumer-generated videos, says Jason Alves, business development manager at Internap Network Services Corp.

Alves says that video — especially streaming video — offers demographic advantages over traditional media.

“With streaming video, a marketer can capture the [viewer’s] IP address and know how many times it’s being viewed,” he says. “With downloads, it’s easier to pass it around over the Internet, but you can’t track it.”

Nick Loria, general manager of North American sales and operations for video technology provider Joost, said that Internet advertising can be targeted better than traditional marketing, and the response can be measured.

“One hundred right people are more valuable than [millions] of TV viewers you don’t know,” Loria said at the recent Media Summit conference in New York.

The popularity of online video comes as the Internet ad market is taking off. Total Internet advertising sales totaled $13 billion in 2005, according to the Interactive Advertising Bureau’s latest stats. Ads supporting streaming video generated $121 million in ad spending in 2005, and by 2010, 10 percent of all Internet advertising will involve video placements.

In addition, podcasts, which are non-music audio and video files downloaded to portable music players such as Apple’s iPod, are expected to generate large amounts of advertising support. Last year, advertisers spent only $80 million on podcast advertising, but that is expected to reach $400 million in five years, according to research firm eMarketer.

Whether streamed or downloaded, videos are inexpensive compared to a typical 30-second commercial, and hold the promise of consumer interaction. For instance, a car featured in a video clip could contain a hyperlink that transports the viewer to the manufacturer’s Web site or to another video with purchase information.

Consumers have been developing their own videos, many of which end up on social networking sites such as MySpace. Some videos have turned ordinary folks into media sensations. “This is an opportunity for companies to add value,” said Elizabeth Coppinger, vice president of video services for Real Networks. “Videos can be used to create community on the Internet.”

Consumer product companies, including Colgate-Palmolive Co., Procter & Gamble Co. and Unilever, have developed campaigns revolving around online video. Unilever’s “Dove Evolution” video, a 75-second film created by Ogilvy & Mather, attracted millions of YouTube viewers.

Brokerage Piper Jaffray reports that social network sites like MySpace and YouTube attract young audiences, a key market segment. About 60 percent of YouTube viewers are between 25 and 34 years old.

Videos need to be interesting and entertaining, says Stephen Condon, vice president of Entriq, which provides video technology to media companies. “Web videos are the new media platform and it can help build an interactive relationship with consumers,” he says.

Last April, General Motors ran an online contest, inviting viewers to create ads for its new Chevy Tahoe SUV. It provided the video clips and music, allowing users to create the video. The contest ran for four weeks and drew more than 30,000 entries.

Still, marketers are only reaching a small percentage of consumers on the Internet, especially compared to television, says Jeffery Miller, vice president of Telescope, a telecommunications company. Consumer product companies can develop a deep relationship with consumers through video advertising, but they won’t reach the masses that broadcast TV can, he says.

Losing ad dollars to the Internet, broadcast television is incorporating interactive features into programming. Thanks to the success of reality shows that encourage viewers to vote on contestants such as on “American Idol,” many other television shows have been built around this model, giving viewers a vested interest in the outcome.

TV shows are also making it easier for viewers to cast votes by providing them with codes allowing them to vote via mobile phones. Marketers can capture voters’ area codes, which provides valuable demographic information. “It also provides immediate interaction, rather than [making viewers] go to the show’s Web site and vote,” says Telescope’s Miller.

By Kathleen Kiley, Managing Editor, Consumer Markets Insider
Courtesy of http://www.kpmg.com