Web Video: Bigger and Less Profitable

People in the media business say that the future is online video. Just how many companies will be able to profit is the big question.

Online video-advertising rates continue to fall. Prices for ads on top-tier sites last year were down by 10% to 15% from 2011, estimates BrightRoll, a video-ad company. That reflects two developments: the number of companies offering online video continues to rise. All kinds of traditional media companies, including those with roots in newspapers, magazines or broadcast television, want a piece of the fast-growing online video advertising market. Consequently, the amount of online space available for ads—the inventory—is exploding. Of the 39 billion content videos viewed on the Web in December, about 23% carried video ads, up from just 14% a year earlier, according to comScore.