The big news on Wall Street today is the Federal Reserve’s decision to keep the Fed Funds rate at 2% - a move designed to keep rising inflation at bay. When the Fed cuts rates, the idea is that nation’s money supply will be loosened up, and money becomes easier to get from banks, lenders, and other creditors. But easier access to money can also increase the cost of goods and services, thus creating the opportunity for inflation to cut into the nation’s economic gains and cut into key benchmarks like personal income and corporate profits. We’ll see how well that strategy works.
The other eye-opener is the rumor flying around the trading pits that Yahoo and Microsoft will resume merger talks. If so, any credit and/or blame should go to the Yahoo board of directors, which has been chomping at the bit to get back to the bargaining table with Microsoft.
But what I’d really like to talk about today is a long-term trend that should mean big bucks to video software manufacturers and the people who invest in them. According to a new study from the New York-based Kelsey Group, the online video advertising market in the United States will reach $1.5 billion by 2012. That’s a big jump from the $10.9 million earned by online video companies in 2007.
Everyone seemingly wants to get in on the act. Kelsey says that consumer adoption and conversion rates will drive small to medium-sized businesses to spend 11.6% of their online budgets on video ads by 2012.
Kelsey also said that 62% of consumers surveyed in its User's View Study in March reported watching online video ads, compared with 59% in 2007. More than 47% of consumers who watched an online video ad visited a Web site, and 19.1% sought information about a product or service. More than 18% visited a store to see a product, and nearly 17% of those who watched an online video ad bought something.
Online video ads are definitely becoming more pervasive. As that happens, companies that produce online video software like Zango and NetGravity can expect to see profits rise as the market for online video ads grows.