Not Ready For Prime Time? Streaming Video Ads Face Hurdles (Dec. 5, 2000)

“It’s the future of the Internet,” a top executive of DoubleClick evangelized at a Silicon Valley conference on Web publishing last autumn. “Forget banners. This will change everything.”

She was talking about the Internet’s version of a television commercial: rich media ads that contain video or animation. A year later, Web “commercials” are still in their infancy.

“It’s not a leap of faith to think streaming audio works. The streaming video part, unfortunately, is way behind where we would expect it to be,” says Jon Mandel, managing director of MediaCom, a unit of Grey Advertising.

Mandel is no Internet Luddite. He serves on the board of the new Streaming Media Advertising Advisory Council (SMAAC), which is helping to shape standards online, and heads a company that handles interactive duties for such advertising powerhouses as P&G and Sprint.

“Everyone wants to be first,” he observes. “But if you’re too early, does anybody know you’re in the room?”

To be sure, streaming video advertisements are out there. Just click on streaming sites like or and you’ll probably encounter them. But even those doyens of rich media see streaming video advertising as the future — while audio owns the present.

“On the video side, the experience is horrible if you don’t have some sort of broadband,” says David Bialek, vice president for sales at, and another SMAAC board member. “It’s got to be a faster connection than 56k.”

It’s the Wires, Stupid

Speed. Every conversation about streaming video advertising eventually comes back to that issue.

“Streaming video is not going to hit critical mass until penetration of broadband in consumer markets gets to a higher level,” observes David Halprin, senior analyst at eMarketer, a research firm. “Once it does, then it will be a watershed event in Internet advertising — the kind of creativity that is brought to TV commercials will start to show up.”

Paul Kagan & Associates projects that broadband penetration will reach about 30 million households by 2005. But Halprin believes those and similar estimates may already be outdated.

The Baby Bells, he argues, have finally realized that broadband is the “Holy Grail of sticky operations” that will help them keep customers. They are now rolling out DSL at a much more rapid pace than analysts had expected.

“That is why the outlook for broadband is a lot more positive than it was several years ago,” Halprin says.

“The Internet hit 30 percent penetration around 1997-98 and ad revenues started really hitting big in the 40 to 50 percent penetration area,” he notes. “Maybe that’s the turning point for streaming video.”

When that happens, the appetite will certainly be there.

“People are looking for new ways to engage their audience and captivate it, and rich media is certainly a dynamic platform,” says Scott Gordon, vice president of marketing at SeeItFirst, a company that adds interactivity to streaming media.

But cost remains a big hurdle — streaming video ads, like TV commercials themselves, are expensive to produce. And then there’s the relatively low level of understanding of streaming media in general among both advertisers and ad agencies.

“It’s just much easier to get an advertiser to give creative for audio because most advertisers already have audio creative” that can be adapted to the Web, says Bialek.

Islands In the Stream

Only a few hundred of the top-tier sites are currently equipped to handle streaming video. And even if they were, Bialek and others ask, why would you want to put a streaming video advertisement on a site that contains static content?

“It’s like throwing a TV commercial on a playground, it just doesn’t belong there,” he argues.

That may sound self-serving, but on streaming sites like and video ads are generally embedded in programs that have already required the visitor to open a video viewer.

“So in a situation like that,” says Bialek, “it makes all the sense in the world, because they are already engaged.”

And even on those sites, where visitors are more frequently logging on for the music, video ads don’t always make sense.

“On streaming media sites people are more likely to minimize the browser, so we’re going to lose some of the audience who won’t see the video,” he adds.

There are relatively few sites offering streaming video advertisements in part because of the high cost to the streamers. For each visitor who logs onto a streaming feed, there is an additional cost to the site — not that many are logging on. A recent Arbitron report found that of more than 2,000 people with broadband access, only 41 had ever streamed video. And of a similar number of users with only dial up access, the number was 24 who had ever streamed video and just four people had streamed video in the previous week.

“Selling advertising against a 100k stream is a pretty expensive proposition,” maintains Grant Wynn, president and CEO of Coollink Broadcast Network, an audio and video streamer. “Make no mistake, we have the ability to stream at 300k but the ability to make money off selling advertising at that bandwidth is extremely limited.”

“It’s one of those sad chicken and egg things,” says MediaCom’s Mandel. “They can’t produce the programs without advertising and you need the programming to get the advertising.”

Avoiding the Internet’s Betamax

SMAAC is working to overcome another critical issue when it comes to streaming video and audio — a lack of standards. The concern is that without careful planning, the industry could easily find itself in a VHS vs. Betamax situation.

Still, most industry insiders are convinced the widespread acceptance of streaming video ads is inevitable.

“You already see the increasing number of TV channels directing people to websites for simultaneous interaction,” says Halprin of eMarketer. “With streaming video, Web advertising will have a close interaction with interactive TV and Web-TV hybrid media forms that will be emerging with increasing frequency at the same time as broadband is developing.”

“Given what’s happened with advertising in general on the Web, it’s the next wave,” agrees Mike Cole, executive vice president of marketing at ITV, which builds streaming media platforms. “It drives traffic, it engages viewers and most clients we talk to have video in their plans.”

But just when those plans can be implemented remains the big question. As MediaCom’s Mandel puts it: “At the end of the day, it comes down to a bunch of guys stringing wires.”

Next Week: Serving up stitials: Is Flash an antidote to the narrowband blues?

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