Less cash for Web video ads

Research company EMarketer Inc. has sharply reduced its spending projections for online video advertising, saying the market hasn’t been as strong as the firm had estimated.

Estimates EMarketer expects to release today show U.S. spending for online video advertising at $505 million this year, down from the $1.35-billion figure the firm circulated earlier.

EMarketer still expects the market to grow in coming years, hitting $1.9 billion in 2011. But that is well below the $4.3 billion it had projected last summer for that year.

David Hallerman, a senior analyst with EMarketer, said prospects for online video advertising remain strong, but EMarketer had overestimated past spending.

Previous estimates, he said, were based on anecdotes and interviews with industry executives, but more recent data on actual expenditures tell a different story.

The Interactive Advertising Bureau, which has been issuing quarterly reports on U.S. advertising spending, last year started breaking out expenditures for online video ads. Hallerman said those numbers were much lower than what EMarketer had estimated, prompting the firm to reassess its projections.

Hallerman said the slowing U.S. economy also pushed down the estimates slightly.

Online video ads still represent a sliver of overall Internet advertising as marketers and websites struggle to generate Internet ads that resemble television without turning off viewers the way TV ads often do. Some studies have even shown that many viewers abandon the video completely if an ad appears.

Networks such as Walt Disney Co.’s ABC and General Electric Co.’s NBC have employed technology that prevents viewers from skipping video ads as they watch “Lost” or the Olympics online, but many viewers can simply tune out by checking their e-mail in another window.