Can Local Video Weather an Economic Storm?

There’s not a lot of doubt we could see advertising slumps across different forms of media, if we haven’t already. How will this affect video advertising — especially video at the local level that we’ve seen pick up over the past two years?

It’s true that economic conditions could force a rethinking (via LostRemote) of ad budgets in lots of local verticals that do television ads, such as auto dealers. But they could also push local advertisers online where they perceive more efficient and targeted video distribution.

This includes IYPs, local content ad networks (see Jivox) and even the growing digital out-of-home segment. The total dollars spent on local video could go down because of these lower margin online spends. But will it be a direct cannibalization of ad dollars, or more of a shift from local television and cable to the channels that are starting to sell online alternatives?

In some cases there could be overlap. Consider Comcast’s recent decision to bring in lower cost online ad production and distribution (via Mixpo). It’s not clear how this will cut into its own local television ad sales in traditional sweet spots like auto dealers, but it could prove to be a smart move.

In other words, Comcast is jumping on cheaper digital production and distribution in order to maintain relationships with these advertisers and meet their shifting budgets (the whole “if you don’t provide it, someone else will” argument). And the hope is that widened appeal and lowered costs will eventually bring in a whole new batch of local advertisers to video — to the degree that scale makes up for smaller online margins in the aggregate.

Moving local video dollars from offline to online is meanwhile supported by data from eMarketer (in addition to our own forecast) that show online video ad costs will continue to drop. These data are positioned more in comparison with online banner CPMs than they are to offline video, but nonetheless show improving metrics.

Compared with local television advertising, which is relatively mature, online video production is digital and therefore tied to the benefits of Moore’s Law. It will continue to gain efficiencies that could make it more attractive for local advertisers affected by economic downturns. The entrance of Google to the space, as is often the case, could really put it on the map.