Making Money from Online Video

Turning those video clips into money

The recent “Online TV and the Future of Digital Video Advertising” study from The Diffusion Group estimates current CPMs for user-generated video at $15, with CPMs twice that for short-clip video and $40 CPMs for long-form video. All three CPMs will rise gradually through 2013, according to projections from the research firm.

Making Money from Online Video

While the CPM pricing model is the method marketers use the most to buy video advertising, it is necessary to discuss it with a few caveats:

  • Advertisers rarely reveal exactly what they pay for ads, and publishers hardly ever let on exactly what they charge.
  • The cost of ads is based on at least two factors: the rate card cost and the discounted cost, which changes based on inventory, timing and customer. Typically, the data here does not indicate which cost-rate card or discounted-is being counted.
  • Even when the ad prices are essentially accurate, they are averages.

That said, available data reveal trends and tendencies.

Bain and Company recently polled seven Web publishers for the Interactive Advertising Bureau (IAB) and found that all of them listed higher prices for online video advertising than for display (banner) ads. On average, the video CPM was approximately $43, or about three times higher than the $15 average CPM for display ads.

That basic pricing dynamic is a prime mover for publishers to offer more video content that can support more video ad inventory. The higher CPMs commanded by online video ads are not uniform.