For the past several months, the online advertising industry has been buzzing about consolidation in the video business. Many of the year-end prediction pieces for 2011 reflected an interest in this topic as well. However, as I learned early in my career as an investment banker, there are two very different types of deals. Any banker can do deals that make money; but it is the great bankers that do deals that really matter.

Although I have massive respect for anyone who builds a business and can sell it for millions of dollars, most transactions do not provide long-term value to their respective industries. As we enter the next phase in the evolution of the online video ecosystem, it is important to further the conversation about consolidation and focus on the deals that matter.

Deals that matter are those that significantly change market-share dynamics and competitive positioning, and lead to billion dollar businesses. To put this in perspective, let’s discuss past deals that fit these criteria.

Search Deals

In the search industry, there are only two deals that matter. The first was Yahoo‘s acquisition of Overture, which created a long-term viable competitor to the Google AdWords business and ultimately led to the Yahoo/Microsoft search alliance. The second was Google’s acquisition of Applied Semantics, which enabled Google to build the AdSense network. This was Google’s second billion-dollar venture and ultimately led to the majority of the inventory on the DoubleClick Ad Exchange (now Google Ad Exchange).

No other deals have fundamentally changed the space the way these two have. Others worth noting because they made money for the stakeholders in the acquired companies include Excite/@Home and Yahoo/Inktomi.

Display Deals

In display, there have only been four deals that really matter. The first was AOL’s acquisition of Advertising.com, which created what was, at the time, the largest display ad network in the world by a big margin. Second and third were Yahoo!’s acquisition of BlueLithium and subsequently RightMedia, which led to the creation of the Yahoo Advertising Network and the Yahoo-powered RightMedia Ad Exchange. The fourth was Google’s acquisition of Doubleclick, which enabled the launch of the Google Ad Exchange, which is now the largest display advertising business in the world.

Deals that didn’t matter in display but made a lot of money for the stakeholders involved include AOl/Tacoda, Microsoft/AdECN, Microsoft/Aquantive and WPP/24/7.

Mobile Deals

In mobile, there have only been two deals that matter. Google bought AdMob, which instantly gave Google more than 50 percent market share in mobile advertising, and laid the foundation for its category domination. Apple bought Quattro Wireless, and although the jury is still out on the value Apple got out of the deal, it served as the catalyst for the company to launch iAd – an  important addition to its near-monopoly status in devices and operating systems.

As of now, there actually haven’t been many inconsequential deals in mobile, but we will have to see the long-term impact of Mobclix/Venti and others before we make a definitive assessment.

Video Deals

Using our historical perspective on deals that really matter, let’s now focus on the video category. Clearly, there has only been one transaction in the video space that is material to the business: the Google/YouTube transaction. This deal will likely go down as one of the single best media acquisitions in history because it provided Google with the foundation to become a global leader in digital video content and advertising for the next decade.

It is likely that all other video deals signed thus far will prove to be financially lucrative for the stakeholders involved, but insignificant in the long-term, competitive chess game of major media companies. Until Yahoo!, Microsoft, Viacom, Comcast and the major broadcasters begin to focus real capital in the video category, the consolidation that occurs will be peripheral at best.

This post was originally featured on MediaPost’s Online Video Insider column. Tod’s a regular contributor to Video Insider, offering insights about online video and key issues that shape the industry. To see the original post, visit MediaPost.

Welcome to the second installment of our semi-regular check-in on everything that’s worth knowing about on Twitter. And for this, the dreaded first week back in the office after the holidays, the Twittersphere has been ablaze with talk of CES, which kicked off Wednesday in Las Vegas. One of the hottest topics this year has been the convergence of online video and TV, as device makers roll out new gadgets that allow viewers to stream web content over their TVs and cable operators, networks and programmers grapple with the implications of “cord-cutting”: the phenomenon of consumers canceling their cable subscriptions in favor of free or inexpensive online content. Obviously, those of us in the online video space are watching eagerly to find out how this plays out, so read on to find out our take on the biggest and most relevant stories coming out of Vegas this week:

Cisco Unveils Videoscape

Judging by the buzz, not just on Twitter, but also across the blogoshere, Cisco’s announcement about its new Videoscape product was one of the most hotly anticipated at CES. Essentially the new system aims to tie together television from broadcast, cable and Internet companies, and allows them to be delivered to any kind of device. The announcement is evidence that Cisco is especially bullish on Internet video, which it expects to constitute 90 percent of consumer Internet traffic by 2014.

Time Warner + Sony + Samsung = The demise of the cable box?

Time Warner Cable’s partnerships with Sony and Saumsung were one of the most interesting announcements at the show, and frankly, given the far-ranging implications, we’re surprised they’re not getting more buzz! In an effort to compete more effectively with online services like Netflix or Hulu, Time Warner has announced that its live and on-demand programming will be available over IP, which essentially means that consumers with broadband-connected TVs would no longer need a set-top box. We’ll be curious to see how long it takes for cable boxes to go the way of VHS players and dial-up modems.

A Plea for TV Everywhere

Okay, so this isn’t technically an announcement, but it’s an interesting piece of content nonetheless. Eighteen months ago, Time Warner CEO Jeff Bewkes first revealed the concept of “TV Everywhere,” the process by which cable subscribers would be able to access programming online and on their mobile devices. Given the rapid adoption of watching content online, the movement seemed like a no-brainer, but consumers have been slow to adopt and the industry hasn’t been able to find a uniform way of authenticating subscribers. During the CES keynote on Thursday, Bewkes and Verizon CEO Ivan Seidenberg made a plea to the crowd to help them build a solution. No word yet on whether anyone’s taken him up on the offer.

We’re excited to see how all of the announcements at this year’s show come to fruition over the course of 2011. Anyone else have favorites that we missed?

As 2010 winds down and we look to 2011 with prediction fever, I can’t help but think of the old adage “hindsight is always 20/20.” So this year, in addition to my own annual prediction piece in which I make some educated guesses about the coming year and critique the ones I made last December, I’m taking a look back and acknowledging others who hit the nail on the head. And of course, true to form, I’m calling out predictions that didn’t hold true, and some that stood no chance of being correct.

The ones that got it right

“2010 will be the year that video breaks through and becomes part of the mainstream advertising media buy.”

While I like this one for obvious reasons, the data backs it up: Spending on online video reached $627M in the first six months of 2010, up by 31% from the first half of 2009. What’s more, it is the fastest-growing category of online advertising and will remain so until at least 2014, according to recent eMarketer data.

“In 2010, the industry will crack the code for higher-value video advertising. In order to be more valuable, it needs to be a win-win-win situation (e.g. viewers enjoy more relevant ads, publishers generate more revenue, and advertisers get more targeted ads with more engaged viewers who drive direct action).”

The richness and interactivity of online video continues to help advertisers connect with their target audiences in new and more engaging ways. Moreover, premium online video ads outperform TV ads across the board: general recall (65% vs 46%); brand recall (50% vs. 28%); message recall (39% vs. 21%); and likeability (26% vs. 14%). And when it comes to driving direct action, online video has a demonstrable ROI for ad dollars, as evidenced by a Nielsen and BrightRoll study that linked video ads to a 6% increase in in-store sales for a leading CPG brand.

The ones that missed the mark

“’Click through will die as measure for the effectiveness of brand-building campaigns. The movement against the “last click” gains momentum.”

The click through metric has been the subject of serious controversy for awhile now, but whether we like it or not, it’s one that advertisers and vendors alike are familiar with, which is why it won’t be going away anytime soon.

“The rollout of VAST will be championed by the IAB and member companies in early 2010, but fizzle out completely due to lack of publisher adoption. Little to no progress will be made.”

Not only is this one wrong, it’s beyond wrong. We saw increasing adoption of both VAST and VPAID standards across the board in 2010. BrightRoll’s own ad exchange – BRX — announced support for both standards earlier this month, and our annual survey of leading online publishers found that 77% were VAST-compliant and 61% were VPAID-compliant.

“Viral video will move from art to science: Viral video analytics will become sophisticated, and we will end up with a more scientific approach to viral campaign planning.”

While I know plenty of agency executives who wish this were true, the fact is that unless your brand involves babies or cats, making a video viral is neither cheap nor easy, and marketers who spend significant time and money trying to turn out these videos are wasting their resources. Even if they are able to capture that winning combination of luck, creativity and timing, there is still no guarantee that it will be sticky enough to go viral.

“TubeMogul will be purchased by Adobe.”If the recent Groupon debacle is any indication, acquisitions are anything but predictable, and while 2010 witnessed plenty of consolidation in this space, this is one acquisition that never got off the ground.

So there you have it. What are your predictions for 2011?

As the end of the year approaches, I am once again prepared to put on record my predictions about what the next twelve months hold for the online video business. However, before I share the results of my crystal ball analysis, I wanted to evaluate how my 2010 predictions fared:

1. The largest video properties won’t produce any video. Grade: A

Not only did the majority of the top 10 video properties, as measured by ad volume, not produce any video, but it is hard to find many content producers in the top 20. For example, NBC is #21, ESPN is #27 and Disney is #29. The aggregators, syndicators and networks were the dominant growth stories of 2010, and it is hard to see that train slowing down as we enter 2011.

2. Stream fraud becomes online video’s click fraud equivalent. Grade: B-

Although there were a handful of cases of video fraudsters getting caught with their hands in the cookie jar, most stream fraud went unnoticed in 2010. It’s unclear whether agencies are simply content to look the other way or whether the overreliance on ineffective verification services clouds the problem, but regardless, stream fraud continues to be a profit machine for the bad actors. Without a consistent performance metric across video inventory sources, this problem is not going away any time soon.

To read more, visit MediaPost

For those of you who know me or are familiar with some of things I’ve written over the last few years, you’ll know that there is one specific issue in the online video ad space that has been a particular cause of mine: the use of “potential reach” as a way to measure the number of people a given video property has access to. I’ve spoken at length about why I believe this is a misleading and outdated metric that does a disservice to advertisers, agencies and video companies because it vastly over-estimates the network’s ability to reach people online.

A few months ago, however, comScore announced that it was launching a new measurement system that ranked video ad networks by actual reach of ads delivered, as opposed to just their potential. While this new measurement system is a step in the right direction, the reality is that I still see potential reach being referenced by smaller players and some media outlets, indicating that further education is still needed.

Ultimately, I’d like to see potential reach eradicated completely, as it serves no purpose other than to inflate some vendors’ numbers in order to attract advertisers. As the WSJ recently reported, advertisers spent $627 million on video ads in the first half of 2010, up 31% compared to the same period last year. Now, eMarketer is predicting that the category will continue its reign as the fastest growing in online advertising through 2014. These statistics are irrefutable evidence that solid metrics are needed to further cement the category’s credibility. The bottom line is that in order for online video to continue seriously and effectively compete for ad dollars that would otherwise be allocated to TV, marketers need to have trust that the companies they are working with actually reach the audiences they claim to reach. Ultimately, specious metrics like potential reach hurt us all by shrouding the space in confusion.

In “Why Pre-Roll Video Ads Don’t Scale,” Ad Age reporter Michael Learmonth writes about the perceived lack of scale in online video advertising, which he attributes at least in part to consumers doing “just about anything to avoid… video pre-roll.” In the piece, he also makes note of how many news-centric sites allow 30-second pre-roll prior to short clips, which may contribute to the tune-out factor.

On that point, we agree. For years, we’ve encouraged buyers to break the habit of repurposing TV :30 for pre-roll, instead offering something creative and compelling and more importantly, appropriate for the online audience. New interactive pre-roll units are allowing more creativity than ever with online video, and we need to treat the online viewing audience as the distinct entity it is, separate and different from TV viewers.

But to say there’s no scale? No way. According to our own annual publisher survey, 94% of respondents who use pre-roll said it either met or exceeded their expectations. Even if we allow for the understandable bullishness among publisher-side sellers, that’s a tremendous amount of success that advertisers, in turn, see from the unit. Worth noting, however, are some of the other factors publishers listed among their chief concerns: standardization (45%), interruption of user experience (33%) and lack of advertisers (29%.) Let’s examine each of those concerns as they relate to the issue of scale in turn:

Standardization. Four years ago, there was close to zero standardization in video advertising. The developing space was hampered by multiple file formats, different player types, no image quality guidelines, and perhaps most troubling to display veterans, no real ability to third-party serve creatives. In the past 36 months there has been a significant amount of progress in this area, due in large part to the VAST and VPAID standards. While not a panacea, these standards finally gave the industry a common denominator. And although they are not yet universally adopted, our survey showed that nearly 78% of publisher respondents report VAST compliance and 69% self-identified as being VPAID compliant. Publishers will be well served (forgive the pun) to quickly and fully adopt VAST and VPAID, in order to become eligible for the broadest set of available campaigns.

Interruption of user experience. Smart publishers will indeed be conscious and considerate of the experience their end users have when viewing content. After all, who hasn’t had the frustrating experience of clicking on a news piece, only to be subjected to seconds of player load time, followed by a :30 video, followed by more seconds of load time, followed at long last by the content? Publishers who work with their infrastructure and ad-serving partners to minimize player latency are already ahead of the game. And to Mr. Learmonth’s point, advertisers should increase the proliferation of shorter, more user-friendly :15 spots, particularly when targeting news and information sites.

Lack of advertisers. There’s certainly no lack of demand for video inventory, particularly in recent quarters, so we may interpret this concern as a lack of appropriate advertisers for a particular publisher. Not surprisingly, brand marketers (who make up the overwhelming majority – in fact, almost the entirety of pre-roll advertisers), are careful to run only across brand-safe inventory. The definition of “brand-safe” is subject to some degree of interpretation, once you remove the obvious sin bin categories such as adult, gambling, illegal sites, etc. But beyond that, the lack of a universally accepted definition of “brand-safe” leaves perfectly legitimate content sites, often containing curated user-submitted videos, continually needing to justify their brand safety. Unlike display, video does not yet have a meaningful amount of direct response advertisers. We suspect that once CPMs achieve a price point that can allow DR campaigns to scale, the “lack of advertisers” concern will quickly evaporate.

As participants in the online video ecosystem, we must continue to ensure advertisers obtain a high degree of value, users have a positive experience, and publishers receive a fair price for their inventory and through these efforts pre-roll video, already demonstrated as the most effective forms of advertising, will continue to scale.

Twitter can be an overwhelming place. Between tweets about what everyone had for breakfast, how long the morning commute took or various Justin Bieber sightings, it can be tough to sift through all of the noise to find the content that really matters. So with that in mind that we’d like to introduce you to an ongoing feature here on the BrightRoll blog where we do the heavy lifting for you! We’ve scoured the Twittersphere to find the stuff that’s actually worth knowing about. And we’re not just giving you a round-up of the week’s stories, we’re actually digging through tweets from influencers, observers and practitioners to find the timeliest, most talked about and most relevant news and content related to online video, online advertising, media and more. Read on for our take on the hot topics this week.

1. A (Brief) History of Online Video
Okay, so technically this is really only the last five years of online video, rather than an exhaustive history, but we still love this awesome visual courtesy of TechSmith and The Blog Herald that digs into the massive innovation and consumer adoption that’s taken place over the last five years.

2. YouTube Lets Viewers Cruise Past Video Ads
Lots of folks were talking about Google’s new ad unit that gives users the ability to choose which ads they want to watch, or skip the ad altogether, in which case the advertiser isn’t charged. Google says the idea is to give advertisers access to “opted-in, engaged audiences at scale.” Our take? We’re somewhat skeptical that this is truly a viable model… in reality, how often are you going to watch an ad if given the choice? That said, it’s a great option for publishers like YouTube that has nearly unlimited volume that virtually no one else can match.

3. It’s Official: Americans Like Online Video
The October comScore numbers were the subject of a ton of buzz. It’s now become obvious that online video is more than just a passing fad with Americans watching an average of 30 minutes of online video per day. So, if you thought you were the only one watching videos of kittens and Glee behind the scenes and drunken Santas on your lunch break, think again. From an advertiser standpoint, it’s compelling evidence that online video is where the eyeballs are. We’ll be curious to see how long it takes for online video viewership numbers to outpace those of TV. Thoughts?

4. I Stream, You Stream
In response to consumer demand, Netflix has announced a streaming-only version of its popular movie rental service for $7.99/month. The plan will give subscribers instant access to approximately 20 percent of Netflix’s catalog, and is further evidence that consumers are becoming more and more comfortable watching long-form content online. And hey, as GigaOM TV’s Chris Albrecht mentioned in a tweet, you can save a whopping dollar by switching to the new plan!

Check back often for more insights from around the Twittersphere, and in the meantime, have a very happy Thanksgiving from all of us at BrightRoll!

Last week, Google announced that its display ad business is now on a $2.5 billion revenue run and its mobile ad business is on a $1 billion run rate. Google now has a billion dollar business in three major online ad categories — search, display and mobile. With Hulu announcing $240 million in revenue in 2010, the race is on for the first billion-dollar video ad business.

To put this in perspective, there are just six companies that sell $1 billion or more of television advertising a year in the U.S. — ABC, NBC, CBS, FOX, CW and Viacom — so doing $1 billion in video ad revenue is a big deal.

So, what does it take to get to $1 billion in online video ad sales?

To read more, visit MediaPost

There’s a lot changing in online video – from consolidation in the space to new and exciting ad units to a clamoring to reach consumers on the third screen – and we’ve decided it was high time we breathed some new life into our BrightRoll blog. To date, you’ve mostly seen press releases and reposted bylines from various company execs. We’re a great company, full of smart, savvy people working in a fascinating, nascent segment of the Web. So… we’re trying something new.

First off, expect to see some video. After all, we’re an online video ad services company, right? We’re surrounded by some of the most compelling and cutting-edge campaigns from some of the world’s best-known brands. It’s what we do. And we’re going to be doing more of it here. And while video’s important, it won’t be the only change. You’ll also get insights into the online video ecosystem from several voices here at BrightRoll and from interesting and influential people in the space— frank discussions about what the industry’s doing right (or wrong) and posts about our favorite videos at the moment, from the relevant to the irreverent.

We’ve got a lot to talk about and we know you do, too. We want to hear it. So leave a message, share your thoughts and stay tuned for more to come.

Have you heard the latest video advertising pitch?

“Buying impressions is dead, buying engagements is dying… the future is in buying video sharing! You only pay when your videos are watched by self-interested consumers and they can share it with their friends!”

Yes, “shared videos” are being positioned as the new “going viral.” And in a never-ending quest to find media that is completely controllable, yet entirely consumed by self-interested consumers (read: the holy grail) buyers are beginning to ante up.

Unfortunately, the only viral in this cleverly packaged snake oil is the virus you wake up with in the morning when you fully understand what you purchased.

To read more, visit MediaPost