A VC View of Video Ads

VC blogger and (recovering) entrepreneur David Stern on his blog The Commute offers insights on the emergence of video advertising and small to medium business, (SMB). David is also keen on small business as they see online advertising.

"...Even though we consistently hear how wonderful Google is for the SMB market, the lion’s share of the SMB advertising spend isn’t online. For them, Google is still a mysterious black box. For them, online marketing still isn't tangible enough to adopt right now as a compliment for or replacement for their current more traditional spend. This is an emotional objection, not a rational one, clearly. But it is real nonetheless. This class of advertiser does already advertise in the Yellow Pages and many of them have done a local television ad or two. But for them, it is more important to be able to SEE their ad run, or certainly see their ad run on something that is accessible and known to them or something like it. It is an emotional response, full of vanity, and fear. Having something tangible is important and it is the gating factor for many in determining whether to advertise online. .....

I believe video advertising has the promise of being able to lure not only the early adopters of online advertising, but also and more importantly, the largest portions of local SMB advertising dollars, the portion that has resisted text-based online advertising, online. I believe that this is the next big trend in advertising that has the potential to produce venture scale returns for investors...."

He's right about Google being a black box for the small business advertiser, they can't find Google on their own and even when they do get to the platform they see the directions but can't read them, it's braille or Russian.
Those who have maneuvered through the obstacles in rare air enjoying little competition. My job is translating the braille on Google, Yahoo!, MSN and Superpages for small business and opening their eyes to "this other one half" of the advertising pie.

VC's like David point their firm's money to businesses focused on delivering the product that will bring his firm the best return. The term "follow the money" comes into play here. As David and the venture capital people point to the direction of the future those of us providing service to small business must take note. MediaPost's article on the growth of video advertising supports David's view with exciting figures.

"ONLINE VIDEO AD SPENDING WILL register its greatest year-over-year growth in 2007--rising 89% to $775 million, forecasts eMarketer. Even more significant, the researcher says, the growth rate will remain near or above 40% through 2011, when video ad spending will reach $4.3 billion.

Next year (2008) will be a watershed for online video as more than 50% of the U.S. population--155.2 million people--will be watching it, eMarketer forecasts."

The only directions the SMB operator needs for video is show them where it will be seen and tell them how much it will cost. again, early adopters will be richly rewarded. Where does the small business go to get started? Turn Here is a good place to start.

The Venture Capital people are not in the business of placing the SMB online. They seek out the companies providing the platforms and distribution channels. On that front I have one company in my portfolio in that arena, Roo. (RGRP.OB)