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Web Sites Go Fishing in TV’s Advertising Revenue Stream

Web sites have been “draining the life out of newspapers and radio for years,” according to one of the founders of an Internet video site, and now they are going after the advertising revenue stream of television as well.

Simon Assaad, a co-founder of Heavy.com called television “the last part of the market that we haven’t punctured.”

And, although other Web sites may not have laid out the battleground quite as explicitly, their content is starting to look a lot more like traditional TV, including the commercials.

Video is proliferating on the Internet, and it is no longer limited to short clips of cats flushing toilets, breath mints reacting explosively with carbonated sodas and other user-generated content of the kind that captured the anarchic spirit of the early Web 2.0 days.

Hulu.com, a joint venture controlled by NBC Universal and the Fox TV business of the News Corporation, started showing television series like “The Office,” “Prison Break” and “24” this fall to online viewers in the United States.

Other Internet video services, including Joost, Blinkx and Babelgum, have started or are planning televisionlike offerings from a variety of sources. YouTube, the Google-owned company that popularized home movie clips, has been adding video material from established television providers, even as it tries to fend off allegations of copyright infringement from Viacom.

Social networking sites, which have some of the largest and fastest-growing audiences on the Internet, are also trying to get in the picture and make a grab for ad revenue. Bebo, a social network popular in Britain among teenagers and young adults, introduced a service last week that lets content partners show their videos, and ads, to Bebo users.

“The Internet is at an interesting stage — it’s getting both more and less interactive,” said John Barrett, research director at Parks Associates, a company in Dallas that studies the use of digital technology.

“At one end of the spectrum, you’ve got things like social networking. At the other end, there’s more video that people just click, download and watch,” Mr. Barrett said. “The passive end of the spectrum gets more like radio and TV every day, and that’s an environment that advertisers are comfortable with.”

But as with many media offerings on the Web, turning audiences into earnings is difficult. Internet users have come to expect online media to be free, so trying to charge for Web videos is probably futile, with the exception of live sports or high-profile movies. Instead, the predominant revenue producer for Web video will probably be advertising, experts say.

Many advertisers, particularly the makers of consumer goods that dominate television advertising, remain wary about the Internet, partly out of fear of undermining their brand image by associating with provocative Web fare.

While Procter & Gamble spends more than any other company on advertising offline, only about 1 percent of its ad budget was allocated to the Internet last year, according to eMarketer, a research firm.

And while many marketers have spent heavily on ads linked to searches on Google and other search engines, some mainstream brands have shied away from online display ads like banners. In the first half of 2007, the leading spenders on online display ads in the United States were Experian, the consumer credit reporting service, and NexTag, a comparison shopping site, according to Nielsen Online.

Could television-style video persuade more mainstream brands to embrace Internet advertising?

EMarketer estimates that by 2011 online video ads will generate $4.3 billion, or about 10 percent, of overall Internet ad revenue in the United States, up from $410 million, or 2.4 percent, last year.

Online video content and advertising will not necessarily grow at the same rates. On the Internet, unlike many traditional media, advertising formats can be mixed and matched.

While some advertisers are using television-style 15- or 30-second ads before, during or after a video program, such ads can also appear in the middle of a block of text. Joost, YouTube and other online video providers are using fixed advertising “overlays” that appear on part of a video screen from time to time, allowing users to click through to a marketer’s Web site or advertising video.

Web video services say some of their advertising formats are more effective than other kinds of Internet ads, like banners. Suranga Chandratillake, chief executive of Blinkx, said that about 5 percent of viewers typically clicked on a video overlay ad; with banners, advertisers are lucky to get 1 percent of viewers to click through.

Joanna Lyall, who helps marketers plan digital ad strategies at Mindshare, a media buying agency owned by WPP Group, said that paid televisionlike spots might not be as effective as other, less conventional forms of Internet marketing. Some of the most memorable online ads have been videos that were posted on social sharing sites like YouTube, at no cost, but spread virally because of their entertainment quality.

“The reason advertising works online at the moment is because it’s not like TV,” she said.

At the same time, with more and more people making their own clips and posting them on the Web, it is becoming harder for would-be virals to be noticed, said Caroline Slootweg, the head of new media at Unilever.

“The days of just putting something up there and hoping it goes are pretty much over,” she said.

 

Eric Pfanner, The New York Times. November 19, 2007

Copyright © 2007 The New York Times Company. All rights reserved.