eMarketer – Video E-Commerce: Beyond the Experimentation Stage

Justin Foster
Founder and President, Video Commerce Consortium
Co-Founder and VP Market Development, Liveclicker

MAY 14, 2010 – Justin Foster founded the Video Commerce Consortium in 2008. The trade association, dedicated to advancing video in e-commerce, has more than 400 members, including the majority of Internet Retailer’s Top 500. Also in 2008, Mr. Foster co-founded Liveclicker, a Silicon Valley startup with experience in the e-commerce industry and a primary focus on advanced video commerce applications for the Web’s leading e-commerce retailers.

Mr. Foster spoke with eMarketer’s Jeffrey Grau about how video e-commerce has matured over the past year from an experiment to a workable application.

eMarketer: What is new with video e-commerce since we spoke a year ago?

“Overall, there is less experimentation with video today in e-commerce and more knowledge about where video works and where it doesn’t.”

Mr. Foster: Overall, there is less experimentation with video today in e-commerce and more knowledge about where video works and where it doesn’t. A lot of the fundamentals that we talked about last year, with regard to video syndication, optimizing video content and using interactive video, remain the same. But retailers now know more about what makes video work and as a result have been able to scale investments in video production more effectively. There have been some technological advancements that make video more accessible across more channels.

eMarketer: What are a few of those technological advancements?

Mr. Foster: The way that interactive video has evolved. Retailers are incorporating data from their Websites, such as product descriptions, product reviews, ratings, into video content to make the presentation of video more interactive and more compelling, and enabling shoppers to purchase products directly from within video content.

In particular, retailers like Bed Bath & Beyond are doing a great job of this. Zappos is doing a great job. Kiddiecare, a large retailer in the UK, is doing a great job. And Drugstore.com is also using interactive video pretty heavily.

The second big advancement is in the area of video optimization. So, for example, retailers like Bed Bath & Beyond are now taking metadata associated with video, and in some cases frames of video content itself, to optimize the presentation on product detail pages of video players in syndicated channels and are measuring very closely how changes in metadata presentations within video players affect conversion rate and sales. So, retailers such as eBags that are taking advantage of video optimization tools are in some cases able to increase conversion rate from a video by upwards of 70% without actually changing video content itself.

eMarketer: Do you have one more innovation to share?

Mr. Foster: The third area that is definitely taking hold is the increased focus on automating video production. The first is what I call semiautomated video production. With this kind of technology, a retailer shoots the product from one angle for 10 seconds. They’ll shoot the product from another angle for five seconds. Maybe they’ll hold the product and then turn it around, or if it’s apparel, the model will wear the outfit. Then later, the retailer will record maybe a 30-second or minute-long voiceover. Then, the actual post-production is automated. So, all of these different elements are stitched together by software and put together in the style of a QVC or an HSN. This is helping retailers create more videos more quickly.

eMarketer: What are some of the different uses of e-commerce videos?

Mr. Foster: There are many different uses of video in e-commerce. However, the primary purpose of video today for e-commerce merchants is to sell products. This has not changed since last year, but we’ve definitely seen more e-commerce sites realize that creating entertainment-focused content is not as effective at moving products as it may be at, say, creating a brand.

eMarketer: Have you noticed any changes in how consumers use videos?

Mr. Foster: It’s been a steady upward progression in demand on the consumer side. Consumers are becoming used to seeing video as part of their everyday online experience, whether it’s watching a television show on Hulu, whether it’s watching VGC on YouTube, whether it’s simply going to CNN.com, or MSNBC.com and watching informational news-oriented videos. Consumers increasingly expect to see video as part of their online experience. This is certainly a big part of the reason why e-commerce sites are gravitating more toward video now than at this time last year because there is a realization that in order to not simply provide a differentiated shopping experience, but just to keep up with what consumers are expecting from their online experiences, the video needs to be incorporated.

eMarketer: How does a retailer ensure it will get a healthy ROI on its videos?

Mr. Foster: 2009 and definitely 2008 saw retailers experimenting a lot with using different types of video content. Retailers were creating branding videos, category videos, product videos, entertaining videos and TV-commercial-style videos. The lesson that many retailers learned is that you can’t just produce a video and expect to generate a good return from the video. The content matters.

eMarketer: What kind of conversion rates retailers can expect after implementing a video program?

“I would say any retailer that is unable to, on a product level, drive conversion rates up at least 25% through the use of video, is not implementing video effectively.”

Mr. Foster: I would say any retailer that is unable to, on a product level, drive conversion rates up at least 25% through the use of video, is not implementing video effectively. Either the video content is not good content�the retailer doesn’t know what it’s doing or it doesn’t know how to create persuasive video content or people aren’t watching it�or two, the retailer is not featuring video in a way that people actually know it’s there.

We actually ran a study earlier this year across 12 million or 13 million product-detail page views across 25 retail sites and found that the worst-performing retailers were featuring video as such a minor visual element on their product-detail page, less than 1% of people were clicking on it.

The best-performing retailers were really blowing out video in a big way, so that there was no mistaking, when you look at that product-detail page, there’s a video there. We saw that the best-performing retailers were having 45% of the people going to that page actually watching the video.

eMarketer: What does the future hold for video e-commerce?

Mr. Foster: I believe now, more than ever before, that video commerce is an optimization play. Video commerce is about squeezing as much value out of every video asset as possible, and minimizing the amount of production expenses possible.

I see a lot of innovation happening on the optimization side. The two other megatrends in 2010 and in 2011 are the emergence of HTML5 as a potentially viable contender to Adobe’s Flash throne. We’ll see a lot of innovations happening with HTML5 in video commerce, especially support for video on the iPhone and iPad.

“We’ll see a lot of experimentation in 2010 around mobile video e-commerce.”

I also believe that the other trend that we need to look out for is really making sure that we’re providing a good experience with video in mobile. We’ll see a lot of experimentation in 2010 around mobile video commerce, but those are a couple of areas that I see as being really emergent, that retailers need to pay attention to.

Last year, video commerce was an experiment. This year retailers know that video commerce works, and they need to figure out very quickly how to scale video, or they run the risk of falling behind.

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