February 18, 2005

Advertising and online videos

According to our November 2004 survey, 56% of internet users have watched a video clip or listened to an audio clip online. On any given day, 10% of internet users will play a video or audio clip online. And, as the amount of users who have broadband increases, those percentages are also likely to increase as more users find it easier to download and stream large files.

As a result, many television networks and other outlets are trying to make this online capability a profitable endeavor. By placing some of the same content online that had previously aired on television, networks view their online video clips as ways to attract more viewers to their sites and perhaps raise additional income. Sites are currently using a variety of methods to achieve their financial online goals. Like newspapers, radio, and television before, the method of raising revenue online that becomes most dominant will be the one that proves most effective for the networks and is most palatable for internet users.

Some television shows have web sites that allow you to play a clip for free once you view an advertisement that runs before the clip you’re interested in. Fans of the Late Show with David Letterman can view some of their favorite comedy clips once they sit through one ad and put up with another ad below the on-screen video window. Similarly, the Daily Show with Jon Stewart offers a range of possible video highlights from previous shows that are prefaced by a video ad and also include a “hot link” ad to the right of the playing clip. This model of advertising is the closest to the one people have become accustomed to while watching broadcast television.

Another model is to have viewers pay for the ability to view content. CNN.com allows visitors to purchase a “CNN Newspass” that gives them the ability to view a multitude of videos relating to the day’s current news. This model is more closely related to cable television or magazines where subscribers pay upfront for the ability to view the content (although they are sometimes subjected to additional advertising anyway).

These revenue questions involving streaming video are the same that many online newspapers and magazines have been struggling with for some time, and the decisions consumers make about their willingness to pay for content or view advertising will have a strong influence on the nature of online audio and video content in the coming years.