While ad spending in general craters, Interpublic Group's Magna forecasts the U.S. market for online video will grow by 32 percent this year, rising from $531 million in 2008 to $699 million in 2009. (Back in the heady days of July, Magna forecast 45 percent gains for the segment.)
Brian Wieser, Magna's SVP, global director of forecasting, says the researcher expects online video to generate slightly more than $1 billion in net advertising revenues for video content by 2011. That represents a compounded annual growth rate of 36 percent for each year between 2006 and 2011. Weisner says the reasons for video's resilience include the fact that marketers are attracted to targeted content, and online can pinpoint viewers better than TV. Plus, he says, the increasing amount of premium web video from the big media companies has pulled advertising along with them. The forecast comes even as major video players like YouTube and Hulu continue to struggle with the prospect of becoming viable businesses.
But the problem for online advertising remains that online video's scale will still be fairly small in the overall scheme of things, as top-tier ad inventory will continue to be limited. Plus, while targeting has its benefits, marketers still want mass, Wieser noted. For a point of reference, during 2008, "490 billion person-hours" of traditional TV were consumed, he said, citing Nielsen numbers. That's about 244 times greater than the consumption of premium online video. So, even if the forecast's growth rates hold up over the next three years, traditional TV would still account for 98 times more consumptionand all the ad dollars that go with it.
By David Kaplan