The thirst for knowledge, entertainment and communication online continues to. Internet technology has evolved from being primarily a text based medium to a rich multimedia channel for its audience. So why is video growing so rapidly on the web? I believe that online video is replacing TV as the primary form of entertainment. This trend will continue to grow as more content producers use the Internet as a primary means of distribution.

To understand the potential of video I hypothesized that the online media consumption habits would, in the long term, mirror offline media consumption habits. One basic metric to measure consumption habits is to examine at advertising expenditures. According to TNS Market research, year is the US advertising expenditures for all media in 2005 were:

Full Year 2005
NEWSPAPERS (LOCAL)

$24,814.40
NETWORK TV

$22,523.40
CONSUMER MAGAZINES

$20,167.40
CABLE TV

$14,248.80
SPOT TV

$17,158.70
INTERNET

$7,343.00
LOCAL RADIO

$7,273.40
B-TO-B MAGAZINES

$4,364.60
SYNDICATION – NATIONAL

$3,930.90
SPANISH LANGUAGE MEDIA5

$3,976.10
OUTDOOR

$3,213.00
NATIONAL NEWSPAPERS

$3,303.50
NATIONAL SPOT RADIO

$2,616.50
SUNDAY MAGAZINES

$1,497.40
FSI’s

$1,391.90
NETWORK RADIO

$1,027.80
LOCAL MAGAZINES

$317.70
TOTAL

$139,168.60

So that we compare apples with apples I have grouped offline media into text (newspapers, magazines), audio (radio) and video (TV) based offline media. Thus we then get the following breakdown:
video vs audio vs text

So if we assume that the online viewing habits will mirror online viewing habits expect to see advertising expenditures to be split is roughly the same way. Total US Internet advertising expenditure for 2008 is projected to be $25.9 Billion and currently online video accounts for a tiny $1.3 Billion (Source:eMarketer). This represents just 5% of the total US Internet advertising. In comparison, offline video accounts for 44% of total offline ad spend. If we extrapolate these findings we see that video has the potential to be worth approximately $11.4 Billion in the US in 2008. In other words, there is over $10 Billion in unrealised potential in online video right this minute.

This is why online video is so hot right now.

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