Online Video Ads Get Ready to Grab You
By Matthew Maier

(Business 2.0) – Will Batman Begins or War of the Worlds be the summer's biggest blockbuster? Who cares. The thing to watch will be the Web commercials touting the pictures--banners and trailers that promise to showcase the most advanced Web video advertising ever. Some of the technology will be familiar: You'll be able to stop, rewind, or fast-forward the trailers and e-mail them to friends. But the real bleeding-edge technology set to take off this summer is called "hotspotting." The ads--designed by upstart interactive agencies such as Deep Focus, eLine Technologies, Klipmart, and MovieBanners--will embed hyperlinks and pop-up windows in the frames of the movie trailers, turning each character or object into a virtual library of information. Clicking on Batman, for example, could lead you to a bio of actor Christian Bale. Rolling the mouse over a specific War of the Worlds frame might give you a link to a site selling the novel.

Using a thin layer of Flash code that can be integrated anywhere in the image, hotspotting lets advertisers assign numerous actions to every character, so consumers can interact with the image no matter how it might be moving across the screen. "The online video market is about to explode as a result of this technology," says Chris Young, CEO of Klipmart, which has produced Web video spots for Adidas and Disney.

Full-motion online ads are quickly emerging as one of the Web's next big moneymakers. Big-name brands will spend $198 million on the medium this year--a 70 percent jump over 2004, according to Jupiter Research. And that's expected to surge to $657 million by 2009 as broadband stretches everywhere and compression technologies evolve. Already, CNN is said to be ditching much of its paid Web content in favor of free news clips, just so it can tap into video ad revenue. And Net video ads are being used by top players ranging from General Motors, which showcased its new Cadillac STS online, to Coke, which has hired up-and-coming San Francisco agency AKQA to create a series of Web video ads for the June launch of its new no-calorie soda, Coca-Cola Zero.

One of the earliest successful online video spots actually grew out of the TV advertising bonanza of the Super Bowl, when Mitsubishi launched its Galant sedan in 2004. The cliffhanger TV spot had an ending that was revealed only on Mitsubishi's website. Not only did 70 percent of the site's 1 million visitors play the video repeatedly, but the automaker also knew precisely how long they stayed (4.9 minutes, on average, according to ComScore Media Metrix). Best of all, dealers reported a 58 percent spike in Galant sales after the spot ran.

That helps explain Madison Avenue's fixation with the new medium. By combining the pull of TV with the data-tracking capabilities of the Net, advertisers can gather unprecedented information about who's seeing their ads, and much more. "We know exactly how much of the ad our audience is watching and what they're clicking on, so we can eventually determine the effect that has on sales," says Joani Komlos, a media manager at Nike, which used the technology to promote its Shox line.

Plus, clever campaigns like Mitsubishi's are helping advertisers reach the coveted 18- to 34-year-old demographic that's increasingly trading the remote for the mouse. A handful of Web destinations like MSN and Yahoo now claim audiences that rival those of cable channels HBO and Showtime. A whopping 23 million people watched videos on Yahoo last month, prompting Mark Burnett Productions, maker of The Apprentice and The Contender, to offer exclusive outtakes from its shows to Yahoo viewers.

More online video programming will drive demand for video ads, of course, and the biggest players are ready to reap the rewards. AOL, Google, Yahoo, and others are working on algorithms that will let consumers find video clips of, say, old Seinfeld episodes or highlights from the 2004 World Series. Imagine what will happen when targeted video commercials are aimed at the viewers. "Needless to say, content owners and advertisers are quite excited about this feature," says Jennifer Feikin, director of Google's video search efforts. The 30-second TV spot might not be dead, but it sure is looking terminal. --MATTHEW MAIER