San Jose, CA - Monetizing online video in today's environment is a "good news, bad news" story, said YouTube's Larry Hoffner at Streaming Media West.
Hoffner, director of content partnerships at YouTube, noted that online video viewing is now a mainstreaming practice, with 75 percent of U.S. internet users streaming 11.4 billion videos monthly. Broadband access - the enabling technology for online video - is expected to increase 50 percent over the next five years. And user behavior is converging, with 15 hours per week spent online.
The bad news is spending on online advertising is "incongruent" to the proliferation of online products. Out of a total U.S. advertising spend of $303 billion, only 6 percent is spent online while 22 percent is spent on TV. People spend more time online than they do in front of the tube, but advertisers have not migrated there at the same rate.
In other words, nobody is getting paid.
Advertisers and content people want monetization, but nobody wants to "exchange analog dollars for digital pennies," said Hoffner. There are too many "Show me the money" phone calls taking place across the industry.
Hoffner posits that a combination of standardization and innovation will lead to successful monetization. Advertisers are looking for "what is the same" in measurement standards and those standards need to scale. "There's no agreement on what a click is, when a view is a view," he said. "How do you get to a [gross rating point] online?"
Even though TV spending and ratings are going down, TV still has ratings. "You can't do that necessarily online," Hoffner said. Online video advertising is a pitch, not a measurable equation of metrics for ad agencies to understand. "Once there is a standard, then the budget starts flowing. That's not happening yet, that's what we need to work on."
Online video content distributors have to use and stick with a universal standard. YouTube, Hulu, Joost and other video players have adapted a video display standard, but more mainstream players such as CNN.com, Time Warner and smaller ones such as local TV stations all need to agree on the same standards or, "We're all just leaving money on the table."
Content distributors need to innovate collectively to keep the flow of people coming online. Media companies large and small need to create an environment where they can best distribute, display and monetize content. Finally, advertisers need to provide a "superior service" to deliver messages, along with a clear cut measure of the results that demonstrates to ad buyers how people are engaging with video, where they are watching the video, and other pertinent demographic information about consumers.
"Streaming is a part of our social fabric," said Hoffner. "The economy around streaming is immature. We need to work together to standardize and continue to innovate."
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