Sony's $65 million deal to acquire Grouper.com opens the door for other acquisitions in the space. Many observers believe that YouTube, the dominant player in the user-generated online video content space, might be one of them.
At this point, though, a YouTube acquisition would be an expensive proposition. The site's popularity has exploded in recent months, both among Internet users and advertisers, and its market value has been rumored to be as high as $1 billion.
There is no doubt that the category is growing quickly. As of May 2006, Grouper.com was the eighth most visited online video site, according to data from Hitwise.
A posting about the acquisition on the GigaOm blog reaffirmed Grouper.com's recent strong growth. The posting reported that "Hitwise data shows that Grouper.com has increased its market share of web visits by 1,678% from January 2006 to July 2006. Comparing the week ending August 19, 2006 versus the week ending January 7, 2006 Grouper.com has increased its market share of visits by 1,144%."
As of February 2006, 93% of Internet users surveyed by the Online Publishers Association were aware of online video and 46% said they watch online video at least once a month.
Between October 2005 and March 2006, the average time spent watching online video in the US grew from 85 minutes to 100 minutes, according to comScore Networks data released in May 2006.
Although these developments reflect US Internet users' consumption of online video content in general, they have strong implications for the future of online video advertising. Though this is still in its infancy and is likely to account for only 2.3% of total US online ad spending this year, eMarketer projects that the dollar value of online video advertising is projected to grow to $2.4 billion in 2010, up from $385 million in 2006.
