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Firm Forecasts Online Ad Boom

Internet video advertising spending is expected to nearly triple over the next two years, spurred on by increased broadband use throughout the United States, and encouraged by recent content deals with big media companies, according to a new survey.

Ad dollars will soar to $640 million in 2007 from this year's $225 million, according to the Online Video Advertising report from eMarketer. By the end of the decade, advertisers are expected to spend at least $1.5 billion on video ads online.

"Online video advertising used to be an oxymoron, but no more," David Hallerman, senior analyst at eMarketer and author of the report, said. "Television and the Internet are developing new ways to complement each other."

One way these mediums are complementing each other is through content deals. Earlier this month, America Online hooked up with TV firm Brightcove to announce the latest video-content distribution partnership.

Brightcove offers Internet TV services for video publishers ranging from small independent producers to major media companies looking to build their businesses by distributing and monetizing their video programming through broadband channels.

A new service from Brightcove, to be launched next year, will offer only advertising-supported video in the beginning, but later will allow publishers to charge fees for users to rent or buy videos.

Online video has the greatest potential to blend several hot marketing elements including paid search, branded entertainment, viral marketing, consumer generated media, behavioral targeting and Web site brand, according to Hallerman.

"Video represents common ground for television and the Internet, not a field of battle," he said in a statement. "Winner-take-all is not the name of the game."

And the continued growth of broadband throughout the county, with 42 million U.S. homes going online with high-speed connections, a 23 percent increase from 2004, is a driving force in the emergence of online video, according to eMarketer.

In 2007, the New York-based research firm forecasts 60.4 million households will have broadband.

"All this is very good news for advertising agencies," Hallerman said. "Now the products they are best at creating - film and video commercials, or 'spots' -- can be transferred to a new medium, new markets."

AOL has been active in developing content deals this year, with plans already in place to stream episodes from Warner Brothers' television programs free on the Internet. As early as January, viewers will be able to watch old TV shows delivered across Time Warner's Internet division America Online on a broadband network called In2TV.

And other companies seem to be chasing the same ad dollars.

Google launched a beta version of Google Video earlier this year and Yahoo has also entered the market.

"In real-world terms, what that means is marketing campaigns can extend TV's reach to the online space, enticing the target audience to spend more time with a particular brand," Hallerman said. "It also means using the Internet's ability to track consumers in ways that match up television commercials with online and offline activity."