The Online Video Picture Comes Into Focus

There is clearly a lot of activity in the online video space, but there are still many question marks about how to effectively monetize the experience, and how local advertising could eventually come into the picture.

Both of these are related to adoption issues for online video and consumer preferences, which are being tested throughout the marketplace. This adoption will grow, the San Jose Mercury News points out today, as higher broadband speed, better compression technologies and more defined distribution networks will bring higher quality video to sites like YouTube. As we pointed out last week, a distinction should also be made between the value of destination sites that currently offer online video, and the medium’s value itself in eventually becoming a standard feature across many Web sites.

Tools that allow users to connect their PCs to their television sets will also push online video adoption, as this will allow for viewing in "lean back" mode in the living room. This continues to be an early adopter technology, but Apple’s recently introduced iTV device has the potential to drive mainstream adoption.

Similarly, something that has threatened to squash the proliferation and popularity of online video has been efforts to end a system of net neutrality. As cable and telecom companies stand to lose viewers to the Internet video content that is traveling over their pipes (especially telecoms that are spending tens of billions to roll out the necessary infrastructure to deliver video service packages (IPTV), they are obviously against net neutrality and have been fighting for their rights to set up toll roads on their networks. But as Business 2.0’s "Future Boy" Chris Taylor points out today, a Democratic controlled Congress is a boon for net neutrality and its advocates. This means more innovation in online video, which will grow as broadband increases, and could lead to the capability for more long form and professionally produced content, and the galvanization of distribution partnerships to bring it to viewers.

Advertising distribution will be worked out in parallel and small-business advertisers will be increasingly empowered with affordable ways to create professional video content (see Spot Runner). Online video channels that are created will open up affordable media on which small businesses can display this content — especially as the inventory’s increasing supply drives down prices to within their reach. Ways to effectively target viewers and place contextually relevant video advertising also need to develop among online video networks.

This could all take a while to happen and for SMEs to gain a comfort level with it. There are many moving parts to this scenario, in other words, but the wheels are in motion and it will be interesting to see how it unfolds over the next three to five years. We’ll keep watching closely.

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