Today’s WSJ has an article on the web video advertising dilemma. Sites like YouTube are burning $1 million per month in bandwidth, which requires a robust business model. However, the viral component of YouTube means that the videos get imbedded in blogs, etc.- which prevents YouTube from benefiting from banner advertising revenue on those sites, even though they are footing the bandwidth bill.
It’s clear that in-video advertising is the ideal way to capture the greatest number of viewers consistently. However, what is the best way to accomplish that? 15 second intro commercials are aggravating and do not translate well to other platforms, i.e. mobile devices.
One of our portfolio companies, Imagineer Systems, is addressing this issue head on with their AdBroker software and service. Imagineer is well known for their software use in Spiderman, Harry Potter, X-men III, etc. Now they are taking their world-class high-end software and targeting online content, effectively using a “product placement” model, similar to that of in-game advertising:
Using proprietary [tracking] technology Imagineer can manipulate existing content, for example, regionalising the branding within popular TV programmes such as Friends or upcoming high definition re-releases of films. The in-video advertising approach is attractive for several reasons. It is skip proof, non-intrusive, allows regional and/or demographic multiplicity leading to higher volumes, lower advertising prices and better targeted advertising through precise addressing. It delivers a whole new business model, is accessible to smaller advertisers and delivers an incremental revenue opportunity to rights holders, broadcasters, agencies and aggregators on its own or even alongside traditional advertising models.
One of the areas where product placement could work well is in user generated content- which is a good potential fit with a YouTube model. Providing free video downloads for your mobile phone, subsidized by in-video advertising, could be an attractive option as well.