Can online video advertising outpace TV ads? Skeptics sound off

A financial analyst is pouring water on recent studies that say online video advertising will overtake TV ads within the next few years. Television still has much greater reach than online video, with 115.6 million TV homes in the United States, and isn't likely to end its reign anytime soon.

"(I)t's all about reach," David Bank, RBC Capital Markets analyst, said in a note to investors last week, according to The Wall Street Journal. In his view, online video consumers are still very concentrated and limited to a few subsections of the viewing market. "Advertisers will tend to reach the same small group of consumers time and time again, with the identical message," he said.

Analysts at research firms and ratings institutions, from comScore to Neilsen, disagree with Bank's assessment.

Those subsections include viewers aged 18 to 34, a demographic with the biggest buying power and one that advertisers want to reach, comScore's VP of marketing and insights Andrew Lipsman told the WSJ.

The difference is not as clear cut between online video ads and television ads as it was between print and Web advertising. In that battle, the difference between hoping one's print ad would be seen by a publication's readers, versus getting almost-immediate feedback on who was viewing, interacting with or acting upon a Web banner, made a compelling case and sent print ads into freefall starting around 2007.

In television's case, online video often extends the reach of TV programming and advertising efforts, Neilsen's Randall Beard, global head of advertiser solutions, told the WSJ.

And advertisers and programmers alike are seeing value in the online video proposition. AOL Chairman-CEO Tim Armstrong told investors in March that digital advertising was a huge and largely untapped opportunity. "Most businesses, if you are in front of an $80 billion market and only $5 billion of it is digital, I think that is a very significant opportunity," he said.

AOL began pitching linear TV ads to media buyers in early March through its recently acquired platform, which enables ad campaigns to run in both TV and digital spaces.

The cost of digital ads may be inhibiting growth, a study by SQAD, a New York-based media research firm, suggests. Online video ads cost 38 percent more than cable ads, with a CPM of $23.03 on average. That's still somewhat cheaper than television ads, which average a $30 CPM rate, a recent FierceCable article noted.

For more:
- the Wall Street Journal has this story

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