Jeremy Liew shared some data this spring that indicates that online video ad CPMs will probably have to come down.  Right now, online video ads sell for almost four times the CPM of television ads!  (Online video ads cost $25 to $35, while television commercials sell for $6 to $10).

While the data are interesting, the picture is more complicated than the headline numbers indicate.  I doubt that the average online video placement costs 4x the equivalent TV buy.

First, these averages are not apples-to-apples comparisons.  The $25 to $35 headline CPM for online video is based on rate cards from premium properties with limited high-quality inventory.  The reality is that there’s lots of “dark fiber” out there — lower quality video inventory that remains unsold.  As the market grows and as advertisers get more comfortable with ROI-based video advertising (rather than prestige buys), you’ll see the market fill out with cheaper video ad placements.

Second, the online CPM data is highly suspect.  eMarketer’s source data about online advertising rates relies on rate cards and analyst estimates — but I can guarantee you that buyers are getting significant discounts off rack rates.  Moreover even the analysts recognize that they’re grasping at straws:

“It is all over the place,” said Rino Scanzoni of GroupM in a MediaPost article.  “It is very hard to say this is what the average is. The average is made up of some big, big swings, depending on what you are buying.”

Filed under: market size, online advertising, video, video campaign