Going Commercial: Firms Tout Video Ads

by Pete Barlas in Investor's Business Daily, posted 2/11/2009

When Jim Kaskade wanted to help promote his wife's new online store last year, the couple didn't settle for Web-display or text-search ads.

Instead, they turned to San Mateo, Calif.-based Jivox. Using Jivox's video-making and ad-placement technology, Kaskade created a 23-second video spot for the startup, GreenEdge Kids, which sells eco-friendly children's products.

Jivox is one of several little-known companies, including Boulevards New Media and SpotMixer, trying to cash in as they help small businesses get a piece of the growing online video ad market.
Many of these companies are following Google, (GOOG) the Web's search leader, which launched a similar video ad program for businesses in February 2008.

A Big Future?

GreenEdge launched its video ad campaign during the Christmas shopping season, so it's too early to quantify its effect. But Kaskade believes video ads have a place alongside — if not higher than — banner or search ads.

"If you have somebody looking at a 30-second spot, they are learning about your business for 30 seconds," he said. "So it's much more significant than looking at text ads or banner ads that have very little information." Small businesses should adapt their marketing to changing times, says Phil Leigh, an analyst for research firm Inside Digital Media.

"The Internet has basically destroyed the Yellow Pages, and local businesses are having a hard time distinguishing themselves and even getting found," he said. "Video is crucial to the future of the Internet for all businesses including small businesses."

Jivox debuted in September. The company wants to make getting into online videos easy and cheap. Companies can create a 30-second video ad on the site for free using their own video or by using stock photos, videos and music Jivox provides. Jivox then places the completed ad on its network of more than 600 local TV, radio, newspaper and weather Web sites. The list includes a network of newspaper sites operating under the Examiner.com name and Kron4.com, a TV station in San Francisco.

Jivox places the ads to reach a targeted audience, says Jim Gustike, the company's head of marketing. "The ads appear only where it is locally applicable for that business," he said. "That is the special sauce behind the Web site."

Jivox customers include small retailers, restaurants, cosmetic surgeons, dentists, handymen and bed-and-breakfast inns. Jivox won't say how many small businesses have signed up. But the recession hasn't dampened growth, Gustike says. "We had our concerns as we saw our economy declining," he said. "But companies are trying to keep their businesses going, and they are searching for new ways to market themselves and set themselves apart from everybody else."

For just $250, a small business can show its video 17,000 times across Jivox's network of sites, a measurement known as an ad impression. Kaskade says he created an ad in a little more than two hours.

He paid $500 and got 70,000 impressions for the ad. For Kaskade, the price was too good to pass up. "I couldn't get that for bricks and mortar; 500 bucks to get 70,000 people to come through my door? You have got to try it," he said.

Hitting The Target

Kaskade also took advantage of the ability of the service to target the ad to specific locations. He started out placing the ad on local Web sites in San Francisco and Seattle, areas known for their environmental friendliness. Jivox also allows advertisers to offer discount coupons while the ad is running. While many large companies use video more as a branding device, small businesses have more immediate needs, Gustike says.

"Small businesses are looking to sell products, so there has got to be results from your marketing activities," he said. Video ads are just a small fraction of the online ad market. But they could play a more vital role as Internet connections get faster and users grow accustomed to online video. By 2013 sales of online video ads in the U.S. are expected to grow to $4.6 billion vs. $587 million last year, says research firm eMarketer.

In November, Internet users in the U.S. watched 12.7 billion videos online, up 34% vs. the year-ago period, says research firm comScore. Advertisers' ability to track whether somebody watched an ad is helping to boost online video ad sales. But a more fundamental issue might be at play, says Thomas Harpointer, chief executive of AIS Media, an Internet marketing and Web services company. "People are lazy," he said. "We all prefer to watch a video rather than read a full page of text — it's just easier."

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