An Explosion of Online Video

To Falco, the most interesting and late-breaking development in online video is that it is coming full circle and "moving back into the living room…. That's where the real transformation of entertainment will begin." In January, at CES, Falco saw the face of this transformation in the new Sony Bravia flatscreen television.

But the abundance of video content poses another challenge that much resembles the early days of the internet: "How do you find all this stuff? And how do you monetize it?" Describing existing video search as unhelpful, Falco alluded to AOL's acquisition of video-search company Truveo and how the company has started to license Truveo's video search tool as well as open the API to those who'd like to mash it up.

Scale matters: the growing importance of networks
Acknowledging that in an era of user-generated media it might seem counter-intuitive to stress the value of online content networks like AOL, Falco nonetheless argued that the value of networks is only increasing, as is each network's share of marketing dollars.

"Today, Google, Yahoo, AOL and MSN have a combined market share of 58 percent. That's up from 48 percent just two years ago. What's more, there's a big fall-off from these big four to the next tier of companies. While these four all have a billion dollars plus in annual ad revenues, the number five company, CNET, has less than four hundred million dollars," Falco said. What the networks bring to the table is a combo-platter of scale, innovative solutions, research data and targeting expertise. All of which, Falco predicts, will lead to increased network growth in the future.

Moving brand dollars online
But what is the nature of this growth? Falco showed a slide comparing the top 10 overall advertisers in terms of spend with the top 10 interactive advertisers. While Procter & Gamble, General Motors and Time Warner topped the traditional chart, the top three interactive advertisers were Vonage, AT&T and Dell.

"Many big brand marketers are still under-investing in the online media," Falco said. "The top 100 advertisers account for more than half of television advertising, but just 32 percent of online ad spending" (according to eMarketer data). However, Falco predicts that, "if I were to show this chart again in a few years, the top 10 overall advertisers would be the same as the top 10 online advertisers."

Falco's rules for consumer engagement
Winding up his keynote address, Falco turned to ways to engage -- and how not to engage -- consumers online. "On the internet, you can talk to your consumers, but more importantly, you can listen to them," Falco said, going on to offer the guidelines he has put together in his short time at AOL:

"First, respect the consumer-- don't interrupt his or her experience," Falco said. "In an on-demand world, ads that are unrelated or interruptive are deadly.

"Second, open a dialogue with your customer. Learn to listen as well as talk," Falco said. "They want to be heard.

"Third, be willing to give up some control. I know this involves some risks, but I believe that consumers will reward those brands that come across as genuinely more open and willing to listen.

"And finally, it is important to know what your brand stands for and who you are trying to reach," Falco said, going on to describe Dove's success with its Real Beauty campaign.

"The highest and best use of the internet for marketers is to understand that it provides a two-way dialogue with consumers. It provides us with unprecedented access to their wants and needs, and even their hopes and dreams. Each of us has the chance to seize this opportunity," Falco concluded. "Open that conversation, and succeed in ways that are hard to imagine today."

Editor's note: Don't miss our one-on-one interview with Randy Falco.

Brad Berens is the editor in chief and chief content officer for iMedia Communications. Read full bio.