(28 May 2007 3:00 pm)

MUMBAI: In the latest wave of The Kelsey Group's User View study in the US 59 per cent of those surveyed claimed to watch online video, and more than half said they engage in some sort of response activity, such as visiting a Web site, going to a physical location or making a purchase.

The study's findings are highlighted in a new report by The Kelsey Group Online Video: A New Local Advertising Paradigm, which credits the popularity of YouTube with bringing online video watching to mainstream audiences.

Kelsey Group senior analyst Michael Boland says, "YouTube has largely popularized the concept of watching short videos on a computer screen and has likewise familiarised consumers with the idea of watching short video ads. A wide range of business models are coming to market in the hopes of tapping into the growing demand for video.

" We are in a 'wild west' phase of experimentation on all fronts -- content generation, licensing, search and monetisation."

According to the report, production companies such as Spot Runner and TurnHere offer to produce and distribute video ads for small businesses at price points that are significantly lower than those of traditional advertising, bringing video advertising within the grasp of many small businesses for the first time.

The report reasons that the value of video may be easier to comprehend for many small businesses compared with some forms of online performance-based marketing. Pay-per-click, for example, may be abstract and less attractive to certain small businesses that are more interested in leads, foot traffic or phone calls.

As a result, video has the potential to be an easier integration to a cross-platform product bundle. The vanity factor that has driven significant revenues for Yellow Pages publishers is also clearly present in video.

Additional conclusions offered in The Kelsey Group's online video report include:

-- Small-business video advertising can combine the traditional strengths of pull-based directional marketing, the Internet's targetting capabilities, and the emotional and dramatic power of television.

Given the demographics of broadband users, the online audience reached by these ads would also be well-educated, affluent and more likely to engage in pull-based content retrieval.

-- The opportunity is greatest for Internet Yellow Pages publishers, given sales assets, existing SME relationships and the growing demand for video advertising in the small-business marketplace. Add to this the presence of high-margin, low ad elasticity vertical categories, such as professional services, and the potential becomes clear.