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Advertisers Share Consumer Interest in Video

Internet video's effect on television will ultimately be similar to television's effect on radio, according to the findings of a Yankee Group study. Radio survived the ordeal, but has never been the same since the transition.

The emergence of internet video is fundamentally altering the relationship between content owners, service providers and consumers, introducing new innovative companies to the ecosystem and is empowering consumer choice.

Companies have been trying to harness the power of the internet as a distribution channel for video for many years. Early endeavors such as Pop.com, Pseudo.com and the Den failed, but we know now that 2005 emerged as a tipping point for the internet distribution of video:

- In its first 12 months, consumers purchased 45 million videos from iTunes.

- YouTube averaged 13 million unique visitors monthly and delivered an average of 100 million streams per month to users.

- During a 2-month trial in May and June 2006, ABC.com offered streaming episodes of its prime-time programming such as Lost, Desperate Housewives, Commander-in-Chief and Alias. During this trial period ABC served up more than 5.7 million episodes.

Overall, internet users viewed an average of 1.5 billion video streams monthly in 2005 and in 2006. Yankee Group estimates that this will grow to an average of 7.1 billion video streams viewed monthly. As a result, internet-delivered video (streamed and downloaded) is emerging as a new source of revenue for content owners.

Driven by subscriptions, downloads and advertising, internet-delivered video, particularly broadband video, generated $270 million in revenue in 2005. By year-end 2006, Yankee Group forecast that this would grow to $910 million; by 2011, it will reach $4.23 billion.

Yankee concludes that advertisers will continue to push content owners to put more video content online; and content owners will follow the ad revenue. As traditional advertising mediums (i.e. TV, print, radio) have become less effective, advertisers have clamored for a better means of reaching consumers with their message.

Early research indicates that in-stream advertising might still be the answer. As previously noted, research by ABC during its streaming trial during May and June 2006 showed advert recall was around 87 percent, compared with 24 percent for average TV recall.

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