By Chris Bunyan, managing director of geo-targeted online video advertising company, Localstars

The use of video on the internet is growing rapidly, driven by faster broadband connections and the success of sites such as YouTube and BBC iPlayer. Two thirds of people in a US study¹ said they plan to watch more online video in 2011 than a year ago — and the picture is similar in the UK. If a picture is worth a thousand words, then moving pictures -i.e.video content - is even more effective at getting a message across and creating an immediate impact. Businesses are consequently discovering that online video is a powerful advertising medium.Research from Ad-Ology found that 45 per cent of US small businesses planto up their spend on online video advertising this year. But there is now a huge range of ways to use online video — often with big price tags attached. How can smaller businesses gain the advantages of video advertising, without bankrupting themselves?

First, let’s look at the effectiveness of video advertising. Like all online advertising, this is typically measured using click-through rates — i.e. how many times people click on your advert and visit your website. Video ads have click-through rates far in excess of traditional online ads — on average three times higher. Research shows that over 50 per cent of consumers then go on and take further action — with 16 per cent making a purchase. While these are compelling figures they don’t tell the full story — video adverts have many other positive effects, such as increased brand awareness and greater brand recall that can’t be measured by simple click through metrics.

The video jungle
There is a bewildering array of different types of video advertising which,when combined with broadcast and ad industry jargon can be very confusing to the businessperson. Essentially they can be split into two main groups — ads that run inside other video content and standalone ads. The first type, called in-stream ads by the industry, split further into pre-, mid- or post-roll depending on whether they are before, during or after the actual video content. Think of it as the same business model as commercial TV, but embedded in a much wider range of content — from catch-up TV services to videos on news sites and, of course, YouTube. In-stream has the same issues as commercial TV — you need to ensure you are reaching the right audience and costs can be steep, both to shoot ads and to pay for inclusion.

The alternative is to look at a standalone video advert. Traditionally this meant you had to commission a bespoke video ad from an agency which was then played out (essentially placed) on specific websites in the same way as a traditional online ad. Payment models vary — some agencies charge a production/creation fee, with a playout fee on top (dependent on which sites it is on and click-through rates), while others bundle it altogether. Whichever commercial model you use, commissioning a bespoke advert can be expensive and you are then paying on top to get onto the (hopefully) right sites. For a full campaign you could be talking TV-style budgets of over £100,000, though smaller local agencies can create an advert for around £2-10,000. Of course you could just get your ad made and then put it on YouTube — but, unless your business is in cute kittens, how are you going to ensure the right audiences watch it?

Not just for multinationals

So is video just for those with deep pockets? Not necessarily as new, more affordable video advertising services are emerging in the online space. How they work is by providing a comprehensive, professional library of content that businesses can choose from. Whether you are a skip hire company, a car dealer or a florist you can select an appropriate short video and then personalise it with your logo and contact details at the beginning and end. And in many cases such services have partnerships with a whole range of regional media and business directory providers so you can choose the right sites to reach your audience. This combined approach dramatically brings down the cost of video advertising - and quite often there is not a dedicated video production fee, but the advertiser simply pays a slightly higher premium on the advertising exposure they purchase. This means that small businesses can benefit from video advertising from as little as £100 per insertion, bringing it within the reach of even the smallest of advertisers. One advert using this model for the British Heart Foundation generated seven times as many click-throughs as a traditional online banner ad.

Video advertising works for companies of all sizes, from Coca Cola to a carpet shop as it combines compelling content with a channel that enables you to show your brand, products and features in a truly captivating way. While video tends to cost two or three times as much as static advertising, results can be anywhere from five to 25 times more effective.

Once convinced that video is the way to go, how do you get started? If you are a larger company, with an ad agency in place then talk to them. For smaller firms, speak to your local newspaper or relevant business directory — most of these now offer video ad services based on the library model. And, like everything on the web, it is easy to dip your toe in the water, measure effectiveness and then decide how much of your overall advertising budget to devote to this exciting new channel.

Online video advertising is growing rapidly — up from just £30m in 2008 to £440m in 2011 according to researchers AOP. Given the power it has to engage audiences and show off your brand to best effect, this rise can only continue. In an increasingly competitive economy, now is the time for businesses of all sizes to look at how it can help them get noticed.

¹Research by Magid Associates