Friday, August 13, 2010

Online Video Conversations: Erick Hachenburg, Metacafe - Part 2: The Growing Opportunity For Online Video Advertising

In part two of my conversation with Erick Hachenburg, CEO of Metacafe®, he talks specifically about the growing opportunity for online video advertising and how companies are using online video for advertising and branded entertainment. For Metcafe, the key to its business model is advertising and as a result, the company recently expanded it advertising sales team to meet the growing demand for its online video advertising offerings. Metcafe has premium content deals with Hulu, Warner and other Hollywood studios, and it has grown its movies-related advertising revenues over the past year by more than 70% year-over-year.

Hachenburg pointed out that in addition to being content partners, movie studios are also marketing partners. Metcafe works with movies studios very early on, sometimes 6 months before the movies release to build an audience, and on the opening weekend Metcafe can deeply integrate the brand into the site. Hachenburg noted that many of the consumer brands are interested in reaching consumers where they have their "passion points" through movies, television, video games, sports and music. This gives both advertisers and consumers more choices to both create and consume compelling branded advertising messages and entertainment.

Research findings from Metcafe's annual sponsored study on online video consumption conducted by Frank N. Magid Associates in May 2010, that found online video advertising is increasingly accepted by consumers. More than 55 percent of the 2,412 online video viewers surveyed found online video ads just as or more acceptable than TV ads, a 3% increase from 2009 and 18-34 year-olds are more likely than older viewers to find online video ads more acceptable than TV ads.

Hachenburg said:
"Clearly the way, that consumer brands have been marketing their products over the past years has been through video, through television primarily, the commercial break. What's happening with online video is, we're seeing for the first time a real movement of the brands from the television space to the online video space."
The first thing, he said, is to take the simple approach and take what you have that you know what works, which is the commercial break and bring that to the online video space.
"We are running pre-rolls and we are running different ways of trying to present that message. The impact, the sight, sounds and motion of commercials is just so powerful. It is almost the only way you can effectively brand advertise."
Beyond the pre- and post-rolls, Metacafe offers a suite of advertising programs to maximize viewer engagement with brands. From more robust programs where brands can take over the home page or site, mashup tools, branded entertainment channels and a variety of other options for product placement. One of the key advantages that Metcafe delivers to advertisers, Hachenburg said, is an audience that is passionate about the content and entertainment properties, and that offers greater value than a broad based site. Often times broad based sites have a much a greater audience, but according to Hachenburg, they are just passerbys just coming and going, and not spending that much time on the site.

Metcafe's audience is primarily the ‘entertainment drivers’ and social connected influencers that drive entertainment decisions for others. They don't snack on content, but dive deep into all the entertainment categories and are an especially valuable audience for advertisers. Metacafe believes that the real value lies not through scale but through depth and focus. While the company was once a YouTube competitor, it has been able to navigate the changing currents of online video industry and focus its business model on premium content, branded entertainment and the growing opportunity for online video advertising.

The online video portion of the Magid Media Futures TM 2010 study was sponsored by Metacafe. A complete summary of the online video portion is available for download at