Future Bright For Online Video

The majority of U.S. online consumers have watched online video for more than an hour a month, indicating an acceptance of the medium that's expected to evolve into a major distribution channel for entertainment and advertising, a research firm said Friday.

More than 94 million people, or 56 percent of the online U.S. population, have watched streaming video online, Web metrics firm ComScore Networks said. Over the last three months ending in June, the average consumer watched 73 minutes of online video a month.

"Video is now being used by the typical Internet user, where before it had much more limited availability and use," Peter Daboll, president and chief executive of ComScore, said. "Video and audio are becoming a central part of the whole Web experience."

The study indicates that a threshold has been crossed, where companies can start spending more on video advertising for the Web. Where much of the online advertising today is in banner ads and text links in search results, companies can now start moving toward 10-, 15- or even 30-second spots, similar to those found on television.

Indeed, the move toward video ads has already started. In the first half of this year, online ad revenues reached a record $5.8 billion, a 26 percent increase over the same period a year ago, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. Rich-media advertising, which includes video, audio and animation, increased 26 percent.

Video advertising is expected to accelerate as more programming, such as TV shows, starts popping up on the Web. For example, Yahoo Inc. in March streamed the debut of Showtime Networks's comedy series "Fat Actress," starring Kirstie Alley; and rival Google Inc. last month video streamed the premiere episode of the UPN TV comedy "Everybody Hates Chris," based on the childhood of comedian Chris Rock.

ComScore expects the Web portals to offer more of this type of programming, now that people have accepted online video. In addition, the findings point to a brighter future of more advanced services that are still in the very early stages, such as video on demand.

"That's going to be the future," Dabooll said of video programming on the Web. "It's not in the garage anymore. It's much more mainstream."

Nevertheless, the speed of video adoption will depend on improvements in quality. Today, most people are watching Web video through the small screen of a player on their computer.

"I'm assuming that as broadband becomes more pervasive, there will be improvements in video quality," Daboll said.

Indeed, consumers continuing the switch from dial-up connections to broadband is pivotal to video's success, and the trend looks good. By 2010, 78 percent of the projected 88 million online U.S. households are expected to have high-speed connections, according to JupiterResearch.

Another key finding in the ComScore study was the use of online video by 18- to 34-year-old males, who studies have shown are watching less TV and are becoming harder to reach by advertisers. The study found that the group watches the most online video, an average of 84 minutes per viewer per month.

Daboll believes males in this age bracket are attracted to the "on-demand" nature of online video, which means they can pretty much watch news, sports, music videos and other content whenever they want.

"This group is certainly one that can be reached (by online advertisers)," Daboll said.