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Online Video Creates SME Advertising Option

In the latest wave of The Kelsey Group's User View study, 59 percent of those surveyed claimed to watch online video, and more than half said they engage in some sort of response activity, such as visiting a Web site, going to a physical location, or making a purchase.

The study's findings are highlighted in a new Kelsey Group report entitled "Online Video: A New Local Advertising Paradigm," which credits the popularity of YouTube with bringing online video watching to mainstream audiences.

"YouTube has largely popularized the concept of watching short videos on a computer screen and has likewise familiarized consumers with the idea of watching short video ads," said the report's author, Michael Boland, Kelsey Group senior analyst. "A wide range of business models are coming to market in the hopes of tapping into the growing demand for video. We are in a wild-west phase of experimentation on all fronts -- content generation, licensing, search and monetization."

According to the report, production companies such as Spot Runner and TurnHere offer to produce and distribute video ads for small businesses at price points that are significantly lower than those of traditional advertising agencies, bringing video advertising within the grasp of many small to medium size enterprises (SMEs) for the very first time.

The report reasons that the value of video may be easier to comprehend for many small businesses compared with some forms of online performance-based marketing. Pay-per-click, for example, may be abstract and less attractive to certain small businesses that are more interested in leads, foot traffic or incoming phone calls.

As a result, video has the potential to be an easier integration to a cross-platform product bundle. The vanity factor that has driven significant revenues for Yellow Pages publishers is also clearly present in video.

Small business video advertising can combine the traditional strengths of pull-based directional marketing, the Internet's targeting capabilities, and the emotional and dramatic power of television. Given the demographics of broadband users, the online audience reached by these ads would also be well-educated, affluent and more likely to engage in pull-based content retrieval.

The opportunity is greatest for Internet Yellow Pages publishers, given sales assets, existing SME relationships and the growing demand for video advertising in the small-business marketplace. Add to this the presence of high-margin, low ad elasticity vertical categories, such as professional services, and the potential becomes clear.

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