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Interactive Local Media White Paper

Online Video: A New Local Advertising Paradigm
Michael Boland , 5/22/2007

Executive Summary

A new video revolution is brewing. Thanks in part to the awareness and popularity YouTube has brought to the medium, watching online video has reached mainstream levels.

Business models meanwhile continue to be developed and heavily funded to meet this demand in new ways. Content generation, licensing, search and monetization all represent big question marks in the embryonic market sector, and we are in a “wild west” phase of experimentation on all fronts.

The medium has more recently reached a local level with an ecosystem beginning to form around the affordable production of video advertising for small businesses. Video production companies such as TurnHere and Spot Runner are offering services at price points that are targeted toward SMEs and within their budgets as well.

Another concern for small businesses is finding affordable ad distribution channels. Driven by growing demand, many online publishers and networks are considering or developing models to integrate video ad units into their existing sales efforts.

Cable television is one possible distribution venue that is being pushed by Spot Runner, whose self-service cable spot buying process could enable economies similar to those that allowed Google and others to tap into the “long tail” of small-business paid search advertising.

Another option is embedding a video player in certain Internet Yellow Pages listings. This would essentially enhance the level of media and information of a traditional IYP lookup. From a sales channel perspective, it could be bundled with existing print and online display ad sales.

Citysearch earlier this month became the first local search destination to do this in a major way, with 300 small-business video ads integrated throughout the site and roughly 400 more to come. The videos are spotlighted on city-specific pages and embedded within individual business listings.

This opportunity is particularly salient in vertical categories conducive to video that offer minimal elasticity of advertising. In autos and real estate, for example, the level of competition, considered purchases and high-margin sales have made early adoption a matter of necessity.

The opportunity is greatest for IYPs, given sales assets, existing SME relationships and the growing demand for video advertising in the small-business marketplace where directory publishers hang their hats. Add to this the presence of high-margin, low ad elasticity vertical categories (similar to autos and real estate) such as professional services, and the potential becomes clear.

Video also has the potential for easier integration into a cross-platform product bundle because it is less abstract to advertisers and sales reps than an option such as pay-per-click. In addition, the vanity factor that has driven significant revenues for Yellow Pages publishers is clearly present in video.

Overall, small-business video advertising can combine the traditional strengths of pull-based directional marketing, the Internet’s targeting capabilities, and the emotional and dramatic power of television.

Many of the benefits have yet to be seen and multiple challenges remain, such as the investments required in site design, video delivery and video search engine optimization, and growing pains in sales integration. But online video shows the potential to be a considerably powerful medium and the next must-have format in local directional advertising.

Copyright 2007 BIA/Kelsey. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. BIA/Kelsey disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.


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Copyright© 2006 The Kelsey Group. All Rights Reserved.