KEY POINTS

  • We forecast that online video ad revenue will reach nearly $5 billion in 2016, up from $2.8 billion in 2013. That represents a compound annual growth rate of 19.5%. For comparison, TV ad revenue will decline by nearly 3% per year during the same time period.
  • Online video ad views exploded in 2013, topping over 35 billion views in December, about three times the number of views in the same month a year earlier. Video ad views averaged over 100% year-over-year monthly growth during 2013, compared to 77% in 2012.
  • Online video ads are significantly more expensive than other digital ad formats due to a lack of inventory, but prices are steadily declining as more publishers rush into video, and placements open up. 
  • Video ads are high-performance — they have the highest click-through rates of all digital ad formats, at an average CTR of 1.84%.
  • We forecast that tablets and smartphones will account for a majority share of video ad views by 2016.
  • Viewability, the question of whether video ads are actually seen by multitasking online viewers, has emerged as an issue. However, we believe metrics will standardize to account for this problem, and that overall demand for online video is too high for viewability to put too much of a crimp in the video ad market. 
  • Streaming devices and connected TV accounted for just 2% of online video ad views in the fourth quarter of 2013, but companies like BrightLine are experimenting with formats to grow this new niche market. 

Summary

MonthyOnlineVideoAdViewsBIIOnline video advertising is one of the fastest-growing ad mediums. 

In part growth is being driven by an increase in ad spending overall over the last few years, and the shift of ad budgets to digital in general. 

But digital video has its own unique selling point. It provides a level of visual and narrative richness that nearly equals television, while offering all the advantages of digital, including advanced targeting, tracking, and increasingly — automated buying of video ad units. 

One measure of video ad growth, the amount [...]