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Half of US to Watch Online Video by 2008

High engagement levels, combined with internet tracking and targeting capabilities, make online video a potentially lucrative source of revenue for web publishers and a highly accountable method for brand advertisers to sway target audiences.

But ad spend is disproportionately small to audience size, according to eMarketer’s report, “Video Advertising Online: Spending and Audience.”

2008 is forecast to be a mass-market benchmark, with more than half (53.3%) of the US population - 155.2 million people - watching video online, according to eMarketer. This year, that proportion is expected to reach 47.0%.

By the end of 2011, eMarketer forecasts, 61.2% of the US population will have watched online video.

In 2007, online video ad spending will undergo the greatest year-over-year growth during the forecast period, rising 89% to $775 million.

More significant, however, is that the growth rate will remain near or above 40% through 2011, when video ad spending will reach $4.3 billion, according to the forecast.

But even in 2011, the amount of time spent watching video online will be more significant than the ad dollars chasing those eyeballs, eMarketer said.

“As marketers and web publishers look for ways to expand video’s place in the online advertising universe, two key concerns will keep growth below expectations,” said David Hallerman, senior analyst and author of the report.

“One is the uncertainty about what the audience will accept, with questions about where in the content the ad will run and how long it will run for. The other is the difficulty gathering together enough video ad inventory, with questions about ad placement and how to monetize the billions of user-generated video streams.”