I recently worked on developing a business plan for a consumer internet video business. Much of the research done was compelling as it relates to the future of internet video. The market is exploding and once again mobile plays a big role in the growth. I thought I would share the information.
Consumers are watching more video than ever. But the way they watch is changing. Increasingly, the demand is being met via the Internet. From smart and connected TVs to laptops, tablets and smartphones, consumers now have more devices than ever to connect to the Internet to stream content.
More and more of consumers are taking advantage of the increased ability to determine what, how, when and where to watch.
Even so, video consumption and interaction by screen and device varies greatly by life-stage and lifestyle, by age, gender, and by ethnicity. No longer does one size fit all, and new trends continue to emerge.
Yet, the US consumer’s attention continues to lie in the quest to seek TV and TV-like professionally produced content. Consider Netflix which earlier this year expanded its offering not just by increasing its partnerships to re-air programming but also jumped into the game of producing and delivering original content.
The key to success will be to identify the biggest and most immediate opportunities for growth in the growing market of Internet Video. The following section will analyze the market opportunities.
Traditional TV is still king. But more and more consumers are discovering new video content via the Internet. The lion’s share of Internet video can be assumed to come from desktops/laptops.162.5M users now watching video on the Internet while 36M watch on a mobile phone.
Internet video is still in its infancy as evidenced by the chart below. However, there’s a trend emerging: Time spent watching traditional TV is in decline and Internet video is increasing. We can expect the change to start happening more rapidly over the next couple of years, as more people get high-speed Internet connections and get Internet enabled devices.
Looking at a month in the life of Americans, traditional TV by far garners the most attention, with the 65+ age demographic spending 220:22 hours per month. Younger demographics increasingly watch timeshifted TV and are gradually turning to Internet video. The age groups 18-24 and 25-34 take the lead, spending 9:38 and 7:09 respectively watching online. In addition, they spend 7:35 and 4:53 watching video on a mobile phone.
Of the 162.5M watching video on the Internet, the composition skews a little older with 44% coming from the 25-49 age group, and 23% coming from the 50-64 age group. For the 36M watching video on mobile, the composition is younger, with 53%% in the 18-34 age group, and 24% in the 35-49 age group.
The bottom line:
- Of the 162.5M users now watching video on the Internet, it is a safe bet that most access from desktop/laptop, while 36M watch on a mobile phones
- Although traditional TV is king, it is in decline, while we can expect the acceleration of online video watching to increase
- The age groups 18-24 and 25-34 spend the most time watching both online in general and on mobile
- The composition for Internet video viewers is slightly older (25-49) and the composition for mobile video viewers is slightly younger (18-34).
Mobile (smartphones and tablets)
In the past, mobile video has been held back by a single factor: bandwidth. The wireless infrastructure wasn’t fast enough to allow for clean video viewing.
4G LTE is changing that, and mobile video is fast becoming popular on the faster wireless networks. In the US, 4G subscribers are 33% more likely to watch video on their smartphones than the average mobile user, according to Comscore “Mobile Future 2012” report.
Device design also helps, with smartphones now integrating larger screens and speedier processors (and LTE connectivity).
In short, mobile video is becoming a mass consumer phenomenon, much as digital photos were earlier in the smartphone adoption cycle. As a consequence, consumer behavior is changing in favor of higher mobile video usage, video app uptake and advertising.
Mobile video is growing across the board, but tilts young, reaching audiences not easily penetrated by traditional TV.
Video length is increasing across device types, offering more ad opportunities.
Triple digit growth rates in mobile video ad bookings signal the promise of multi-screen campaigns.
Mobile video is not displacing other mediums. Instead it appears to be an additive activity: it offers new opportunities for video viewing.
The shift to mobile video is best understood as part of a larger trend away from traditional TV and toward on-demand video, which gives viewers more control over their content and allows for “time shifted” viewing.
Smartphones and tablets now offer options in terms of both when and where content can be viewed. Tablets can be watched in bed or in your neighborhood café. Smartphones and mini-tablets can stream a TV sitcom or music video at a bus stop.
According to BI Intelligence analysis of Nielsen data, the US mobile video audience increased 77% to 36 million viewers over last two years. The second fastest growing category, the audience for time-shifted TV, grew 54% to 146 million. The chart below shows how mobile video’s share of total video viewing worldwide has also surged.
A misperception about mobile video is that a small screen automatically translates to a consumer preference for shorter videos. However, as the chart below shows, almost half of videos watched on smartphone screens are 10 minutes or longer, according to Ooyala’s data. Tablet viewers spend even more of their time – 67% – watching videos longer than 10 minutes.
Apple’s IOS-powered devices have a huge lead in terms of driving the most mobile video views. The chart below shows which percentage of videos not viewed on a desktop. IOS devices drive 57% of the views, versus 15% for Android. Xbox drives more views than Android.
On the advertising front, video is part of a larger shift in mobile advertising toward rich media ads that provide more engagement and interactivity and a more tailored experience particular to the device the user is immersed in.
In the chart below, data from Opera’s mobile ad network illustrate the tectonic shift to rich media and video ads, with mobile video ads doubling from 6% to 13% of ad executions in just six months.
Mobile video is a promising medium for advertisers, because it offers a polished TV-style ad, while also presenting an opportunity to ask users to perform other actions, such as signing up for an e-mail about a product or an app.
Video will be key to monetizing mobile advertising. The relatively low value of mobile ads has in large part been driven by small screens and consumers’ distaste for intrusive ads. The hope is that mobile video will be the engaging ad format that finally unlocks mobile’s potential.
YuMe, a multi-screen ad solutions provider saw mobile video ad impressions grow 75% from Q1 to Q2, reaching 7% of all impressions. Mobile ad network Greystripe reported a 300% increase in mobile video ad bookings between Q3 and Q4 last year. They also boasted 1% to 3% click-through rates on its mobile video ads, and completion rates of 50%.
Bear in mind that mobile ad numbers are still tiny and are growing from a small base of limited inventory. But even if the value of mobile video ads trend down, spending will still flow to them. Advertisers will need to capture those eyeballs becoming glued to the small screen.
Current eCPMs for mobile video ads run in the $5 range while in-app video can garner a $10 eCPM.
The bottom line:
- Users are watching longer videos across all devices, and watching a greater proportion of their video on mobile.
- Mobile video ad bookings are growing at triple digit rates.
- Over the long term, robust video-ad CPMs could be threatened by consumers’ tendency to tire of digital ad formats but new formats will need to evolve.
Connected TVs are TVs connected to the Internet, whether it’s via Web-TV devices such as Roku and Apple TV, game consoles, or smart TVs.
It is estimated that by 2018, 80% of all TVs shipped will be smart TVs. In the meantime, existing TVs are being connected from the 8.6M Web-TV devices sold globally last year.
The chart below shows the number of households with the different sources of service provided. These same sources are critical in supplying high speed internet access.
When you consider the amount of bandwidth needed to support streaming video, it is important the number of households with broadband reaches critical mass. As the chart below indicates broadband penetration of U.S. households now stands at almost 84 million.
In addition, gaming console manufacturers are also seeking to claim a stake in this evolving ecosystem. Not only have they strategically aligned themselves to provide video content and gaming interactivity through their consoles, they are capitalizing on an established footprint. These evolving entertainment hubs are enabling a new set of opportunities for entertainment consumption through media applications.
Owners of game consoles spend considerable time with their devices. PS3 users are spending 36 minutes daily, Wii users 17 minutes, and Xbox 360 users 32 minutes. And it’s not just for gaming. These consoles act as both gaming vehicles and video content purveyors. They enable social gaming as well as DVD play and streaming through apps.
The chart below identifies how many U.S. households have devices that could have capability to access the Internet in the home.
The bottom Line:
- Connected TVs represents the future, however it is still in its infancy
- Web-TV devices a transition while smart TV’s will be the norm by 2015
- We cannot forget the impact of multi purpose game consoles, unlike Web-TV devices, this segment will continue to grow
Having grown up with the Internet, Generation Y is more connected than any other generation. As such, their needs and wants are different.
They don’t think of TV as a box in the living room. To them, it doesn’t matter if their videos come from a TV, an iPad or a smartphone. As long as it’s what they want, when they want it.
Gen Y are socially connected consumers. They share everything and they are “on” all the time. They expect the services and products they interact with to enable their connected lifestyles.
Increasingly, consumers are “social explorers”, meaning they use social media channels as their primary source for news and entertainment.
Consider these facts:
- 17% of all users are Social Explorers
- People share to talk about themselves, to “brand” themselves
- 47% of Gen Y’s will write about positive experiences online
- 39% of Gen Y’s will share negative encounters online
- 50% of Gen Y’s have over 300 Facebook friends
- 43% of Gen Y’s have Liked more than 23 brands
- 40% of Gen Y’s visit Facebook more than 10 times a day
The bottom line:
- Gen Y is ahead of other generations and are currently more socially connected
- In order to be successful with this audience it is important to embed social features in all aspects of the product
 Source for data tables: Nielsen cross platform report
 Source for this section: BI Intelligence Report on mobile video
 Source for data tables: Nielsen cross platform report