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Research: Ad Budgets Need to Shift to Online Video

With nearly half of all weekly online video viewers saying they plan to increase their consumption of online video in the next year, executives at the advertising technology provider YuMe have been travelling around the country, telling ad agencies and major brands that they need to increase the amount of money they are allocating to online video in their overall campaign budgets.

During meetings in Dallas, Los Angeles, San Francisco, Chicago and New York over the last 10 days, YuMe executives used a new research study to document that argument.

The study was conducted by Frank N. Magid Associates and based on viewers on the YuMe video ad network. It not only found that online video users are spending more time with the medium, with 66% of that population reporting they had increased online video viewing over the last year. The results also show that online video is assuming a larger role in many people's overall video consumption.

About half (49%) reported that they watched online video every day, with respondents spending a mean time of about seven hours a week.

Many also reported that the quality of online video had improved versus television and a significant minority reported that they were reducing their regular TV viewing. Even though other studies have found that overall TV viewing continues to rise, about 35% of heavy online video users who watched online video each day reported that they had reduced their regular TV consumption and about 23% of moderate users reported declines TV viewing.

These changes in behavior make it harder to reach many of these viewers with straight traditional TV buys and mean advertisers should allocate a larger part of their budget to online video, argues Scot McLernon, chief revenue officer at YuMe.

The study grew out of conversations with agencies and marketers over the question of whether they could reach their targeted audiences with only TV buys, McLernon notes. "The study indicates that this is becoming increasingly difficult," he said.

"It is not a zero sum game," where marketers should abandon TV, McLernon stresses. Rather the two media should be viewed as complementary. "What we are finding is that the massive reach of TV is simply better and more complete by adding in online video," he argues.

Because of the growing importance of online video consumption and the fact that some people who can be reached via online video are difficult to reach with TV, McLernon also notes that they've seen their clients significantly improve the reach of their campaigns by shifting some TV ad dollars to online video.

For example, one client that shifted about 10% of their overall budgets from TV to online video increased the reach of their buys by about 1.7 million people with no additional expense, he explains.

"It's a significant improvement and we are seeing our clients react to that," he says.

The study also found significant ad engagement online, with online viewers being less likely to be doing other things while the ad was airing. About 58% reported they were doing other things around the house while the TV set was on, versus about 26% for online viewers.