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AUGUST 13, 2007 Online Video: Seeing the Whole Picture Video images are flooding across the Internet.

No longer an unknown quantity or merely a sidekick to television, the online video medium is fast becoming a formidable viewing factor. eMarketer projects that the number of online video viewers in the US alone will rise from 114 million in 2006 to 183 million in 2011.

"Some of the major players in the industry are fearful that the widespread availability of video content on the Internet will threaten traditional TV and film distribution models," says Paul Verna, eMarketer Senior Analyst and author of the new report, Online Video: Making Content Pay. "Conversely, others see the potential to increase revenues through a variety of new business models, including ad-supported streaming, pay-to-own downloads, subscription services and online rentals." Currently, eMarketer estimates that news is the leading type of video content viewed online, with a nearly 14% share of the total. Movie and TV trailers are a close second, at 12%, followed by music videos, at about 11%.

The lowest-ranked categories on this list are either niche genres, such as cartoons and business/financial reports, or content of longer duration, where picture quality is a consideration, such as full-length movies and TV shows. "Many online video revenue models are emerging, but the growth of an ad-revenue model for online video will be critical to the health of the industry," Mr. Verna says. By 2011, 165 million US Internet users will have seen online video advertisements, according to eMarketer projections. That number will total 90% of the online video viewership in the US. Comparatively, in 2006, 88 million people — or 77% of US online video viewers — experienced Internet video ads.

"There is currently a debate among advertisers, Web publishers and consumers over the length of online video ads," Mr. Verna says. "But so far no consensus has emerged on an online equivalent to the 30-second standard that has prevailed on TV for decades." If the relationship between online video content and online video advertising is key to the growth of the Internet video industry, the interconnectedness between TV and the Internet will also play a leading role in how the market for online video evolves. "Rather than a wholesale shift in viewership from TV to the new media channels, both mediums will actually grow in the next several years," Mr. Verna says. "Internet video will entrench itself in the content mainstream, right alongside TV, although not in such pervasive numbers." According to eMarketer projections, by 2011 there will be 200 million broadband Internet users. Of them, 91% — or 183 million — will watch online videos.

"Eventually, a number of devices will converge in some form of the long-promised 'digital home,'" Mr. Verna says. "But even in the foreseeable future, consumers will use currently available technologies to enjoy all manner of video content, from Hollywood blockbusters to homespun videos." To get the whole picture, please read the new eMarketer report, Online Video: Making Content Pay, today. Get more articles like this one delivered for free. Click here for the eMarketer Daily newsletter.

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