BUSINESS BLOGS
BUSINESS BLOGS
category: business
23 Jun 2009

Social networking is more popular than ever, but it continues to trail online video as the most popular activity online:

Over 70% of US web users watch video clips on the internet, making online video the leading social media platform, ahead of blogging and social networking, according to the Global Web Index.

This is consistent with the fact that consuming content has long been the dominant activity online, at 47%.

The problem, of course, is that in both online video and social media, the business model is trailing the consumer behavior, something that is in fact applicable to all of digital media (people spend 10-25% of their time online, but advertising budgets don’t reflect this yet, with less than 10% of total advertising expenditures going to digital).

The problem with social media and online video is quite different, though:

- in social media, marketers have rejected the notion that they will embrace social networking sites, UGC and the like.  eMarketer has consistently scaled back projections for social media advertising, and services like Facebook and Twitter have began to look for non-ad based revenue sources.

- in online video, when it comes to professional (be it super premium or premium) content, marketers are desperate to spend more money, but the problem lies with the fact that the world’s “market maker” for online video, YouTube, has hitherto rejected calls to run pre-rolls.

This might be changing.

Last month, Media Week UK reported that YouTube is testing pre-rolls with some select partners:

Content partners include Channel 4, BBC Worldwide, National Geographic, ITN and Discovery Networks.

In the UK, Warner Brothers, Match.com, Activision, Renault and Nissan will be the first advertisers to show pre-roll ads over the next few weeks.

Channel 4 is the first partner to show these pre-roll ads against content, starting today (21 May). The campaign, brokered by PHD, will promote the new Warner Brothers comedy, The Hangover.

Suveer Kothari, head of YouTube in the UK, said: “Since we launched YouTube, we have been trying to balance the demands of users looking for free, entertaining, professional content on the web, premium content owners looking for ways to monetise their content, and advertisers looking for more premium content for them to showcase their tv creative against. We believe this test will help us balance these demands.”

The recommended length of each pre-roll ad will be 15 seconds, although there will be an upper limit of 30 seconds. The test partners will be able to sell pre-rolls through YouTube. They will be sold on a CPM basis.

I think this is a step in the right direction, despite what the purists will say. Don’t get me wrong, I don’t want to be a hypocrit, as a user, I tune out of pre-rolls. But that being said, if YouTube - who commands 50%-75% market share - keeps snubbing pre-rolls (the main format advertisers want), then they keep stalling the growth of online video.

I am not even saying that one should be selling pre-rolls on YouTube, but that when you tell a marketer that you cannot sell any pre-roll ads, they tend to lose interest.

After all, despite what a lot of philosophers want to believe, pre-rolls is the main format of online video because it is the one users want least.   Do you really think when TV was founded, viewers begged for the 30-second TV spot?  Of course not.

If and when YouTube embraces pre-rolls (it can be with a very high frequency capping, such as 1 per 24 hours per user on selected content) then you will see revenue soar for both the site, its parent Google and the online video segment in general.

Disclaimer: WatchMojo.com is a content provider to YouTube, we generate 40% of our total streams on YouTube.