The pending release of AOLVideo.com, a comprehensive video library, raises questions of competition and advertising value in the video sharing space.
Posted Jul 31, 2006
AOL today informed the online community, You've got video. Or at least you will on Friday, when the Web giant goes live with its online video sharing site. According to the company, AOLVideo.com wants to become "the place people come to start when they think 'video.'" The site will leverage partner content to feature more than 45 channels on demand as well as create space for free individual created content. However, up against video powerhouses like Youtube and fresh off a customer service scandal, it is difficult to tell how the AOL brand will fare in this user driven space.
AOL is looking to cash in on this space now to make up for declining interest in dial-up subscription, and with AOL Time Warner's vast video library at its fingertips, this move makes sense. Competition in the online video sharing space is fierce, but AOL asserts that its site will differentiate itself by being a comprehensive video library, which will have the television content of pay sites like Google Video and iTunes Music Store as well as the free, creative clips created by home users. "Right now, Youtube is all conquering," says Dan Calladine, research director at Isobar. However, Calladine notes that if AOLVideo creates unique features, such as allowing longer clips or better monitoring of content for appropriateness, the site could become an important player.
"With the hype that Youtube has been getting, more established media companies are scrambling to offer more video content," says Emily Riley, analyst at Jupiter Research. More importantly for AOL, there is proof behind this hype. According to Nielsens/NetRatings, Youtube's American user base nearly tripled in the first half of 2006 and traffic has increased by 155 percent in the past three months. This has left the site with an estimated price tag of $1 billion, and other companies are vying to get a chunk of this change.
The video sharing revolution is in full swing, and advertisers as well as media companies are perking up their ears and opening their wallets. Josh Freeman, vice president at AOL, said of the new site in a statement, "Over time, we think we will offer predominately advertising-supported content." It seems likely that AOL will be able to run on this content alone. Riley notes that 11 percent of advertisers already have video content at present, and this number is predicted to rise in the coming year.
Although some have speculated that the growth of free online video will spell the death of broadcast television, Riley insists that the two can easily coexist. The ability for advertisers to predict and target a television viewing audience still makes the television space more attractive to advertisers. It also makes viewers more hesitant to head toward sites like Youtube and Google Video, as marketing efforts on those sites are currently almost impossible to measure. However, with Youtube garnering 3.9 percent of global Internet visits and media giants like AOL shouldering into this space, it is clear that video sharing is a trend that's here to stay.
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