Despite fourth-quarter advertising cutbacks, online video ad prices in the slumping economy appear to be holding steady so far.  Online video will take its lumps, but the medium counts several points in its favor that may lessen the blow.

Experts say more advertisers will enter the online video market in the coming months, including smaller advertisers who now can afford the rates. Plus, marketers likely will shift away from less accountable mediums and into more targeted ones, like Web video. Finally, the online video ad business has operated under an inventory shortage to date, which may protect it against deeper price erosion.

Prices likely will drop anywhere from 10% to 15% in the next few quarters for online video, said James Kiernan, VP and group client director at MediaVest. He said agencies are starting to get “inbound sales calls” with last-minute deals from Web publishers for unsold inventory.

Plus, the cost-per-thousand prices for online video have traditionally been high in comparison to TV because there are fewer ads in an online TV show. Online video viewers also tend to be more engaged with the content, making the ads more desirable.

The pricing pressure, though, will lead to a CPM correction over the next six to 12 months.

“We’ll see the herd of online video publishers and networks thin, which will bring supply more in line with demand,” said Jason Tsai, senior VP/group communications director at Universal McCann. “As we saw with the dot-com bust, we’ll see some of the companies without deep pockets either go out of business or get acquired, reducing the number of players in the space and stabilizing the marketplace.”

Online video ad network Tremor Media has seen CPM increases in the last few months, said Randy Kilgore, the company’s chief revenue officer. Advertisers want to sponsor premium Web programming and the supply of that is limited, he said. He added that spending in the entertainment and automotive categories has grown recently, perhaps as troubled automakers turn to the more efficient Web to try to move cars off their lots.

Hulu also reports continued demand. CPMs still exceed those of broadcast prime time on the site and revenue is outpacing early expectations, with more than 100 major brand advertisers on the site, said spokeswoman Christina Lee.

So advertisers remain bullish on the future of online video.

“I still believe that in the long term, online video advertising has a very bright future,” Mr. Tsai said. “It remains one of the few online media types that has the potential for storytelling and making emotional connections with consumers, but things are likely to get worse for most online video publishers before they get better.”

Web-Video Ad Prices: Cringe-and-Wait Mode - TVWeek - News

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