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Recently I had the chance to catch up with Mark Sigal, CEO of online video distribution platform provider vSocial. The company provides a platform for advertisers and video publishers to publish and brand videos on existing Web sites, social networks or customized video channels. The key is that it bakes in the functionality to monetize video content with in-video advertising. In this way, it has similarities to Brightcove.

So far it has signed deals with local CBS TV affiliates to bring their content online and is targeting other entities conducive to this form of marketing, such as bands and real estate agents. It also has an online destination with a library of 50,000 videos and about 4.5 million monthly unique visitors, placing it within the top 10 online video sites.

VSocial and other start-ups are beginning to fill in the blanks of the overall online video content and advertising distribution picture. Other companies worth looking at are Kiptronic, a video and audio podcast advertising platform that raised US$4 million in Series A funding last week, and Nexidia, a speech recognition software provider that can contextualize ads to online video content, forming the basis of an AdSense-like publisher network for video ads. These were both recently profiled by GigaOm spin-off NewTeeVee blog here and here.

As we pointed out in the White Paper “From Reach to Targeting: The Transformation of TV in the Internet Age” and in past blog coverage, online video and IPTV have a lot of interesting implications for local in the way that their volume of content and IP targeting abilities will open up advertising opportunities  similar to the search-based text advertising we’ve seen flourish on the Web. Rather than the reach characteristic of cable and broadcast advertising, IPTV and online video channels reach smaller and more contextually and geographically targeted audiences. This could have a long-tail effect that brings ad inventory within the price range of some SME and local advertisers.

Combine this with the fact that video production technologies are coming down in price and companies such as Spot Runner offer custom-made video ads at a traditionally elusive price point for SMEs (about $500). This has proven traction in the real estate vertical where Spot Runner has partnered with Coldwell Banker to offer all its agents this capability. It will take a long time for a critical mass of small businesses to make this leap since many are still averse to search advertising or even a Web site. But it is clear that the first steps are being taken toward offering affordable online advertising (inventory and production capability) to SMEs.

“Spot Runner is an important part of this equation,” says Sigal. “My other mantra on this subject is PowerPoint. Someone is going to get it right by creating a tool that build ads using a PowerPoint-type interface. You have a whole marketplace of people that know how to use those types of tools. If Microsoft was smart, it would come up with a Microsoft Live version of PowerPoint for creating ads.”

An interesting thought but, of course, easier said than done. Many question marks still remain. Hollywood’s aversion to a competitive new medium and its resulting hesitance to license its content for online distribution will slow down online video adoption. But increased consumer demand and adoption of popular long-form video distribution outlets such as iTunes will eventually break down these barriers. This is already starting to happen. Until then, user-generated content will continue to rule online video, a la short YouTube-type clips. This affects the quality and quantity of ad inventory available

“If you look at what made Google AdWords so successful [it] was that any business of any size could plug in and create an ad without human intervention,” says Sigal, “but it’s a step order function more complex and expensive when you talk about video advertising; and logic suggests that that’s not just about tools but a function of the stock inventory.”

Questions also surround the ad delivery formats that consumers will prefer in online video, such as pre-roll or post-roll ads.

“I think the short answer is that there isn’t one answer,” says Sigal. “More important is that the line between ad and content is becoming blurred and the closer an ad is to content the more likely a user is going to click.” Sigal believes that initially we are more likely to see text and display advertising accompanying online video, but video ads will slowly but surely be tested and deployed.

A big theme at TKG’s ILM:06 conference in November was that we are in an experimental stage in many forms of online media and advertising. Online video is a big example; mobile local search is another. Some are finding in this experimental stage that social networking, user-generated content and online video have many synergies. YouTube is an obvious example, and vSocial has built its model on the intersection of the three.

Many local businesses have leveraged social networks such as MySpace to market themselves. This, however, must be carefully done to embrace the viral aspects of such a campaign without spoiling it with a forced marketing message. This was done to much criticism by a few national brands such as Sony and Wal-Mart, which both underestimated their audience’s ability to sniff out an egregious marketing intent.

Still many local businesses have done this successfully with the creation of MySpace profiles. Integrating video ads into these and other channels is the next evolutionary step.

Google’s US$1.65 billion purchase of YouTube in October was a defining moment in the growth of online video. Increasing competition and investment levels among telecommunications giants to bring us movies and television programming over high-speed fiber networks is another emblematic sign of the times. And most recently, Apple’s launch of AppleTV at the Macworld Expo earlier this month will signal a turning point in online video, given its ability to bring online video to television sets. This will be a fast moving and interesting area to watch over the next few years.

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