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updated 1/16/2007 4:56:38 PM ET 2007-01-16T21:56:38

Blendtec Chief Executive Tom Dickson had an unorthodox method for testing his company's blenders: He used them to pulverize two-by-fours. His marketing director, George Wright, decided to videotape the exploits, adding other objects, from marbles to rake handles. Then they posted the clips to the Web.

The rest, as they say, is marketing history. Starting with an initial investment of about $50 for supplies, the pair since November has created and posted more than 25 low-budget videos, fielding hundreds of requests to grind up everything from an Apple iPod to a grandmother's false teeth. Dickson even appeared on the Today Show, where he pureed an entire rotisserie chicken, bones and all, with a can of Coke.

"Really our whole intent is brand awareness and market awareness," says Blendtec's Wright. "People will remember that there's a blender that will blend marbles if their blender isn't blending ice very well." He says Blendtec videos have been viewed more than 17 million times.

Cheaper by the million
Dickson and Wright owe their newfound fame to the power of online video, which is exploding along with the proliferation of high-speed Internet connections and the growing popularity of video-sharing Web sites like Google's YouTube. The number of U.S. video viewers is expected to surge to 157 million in 2010, from 107.7 million in 2006, according to eMarketer. The consulting firm estimates that more than one-third of the U.S. population, aged 3 and older, viewed videos on the Internet at least once a month in 2006.

Numbers like that aren't lost on Madison Avenue. Major brands such as Coca-Cola, Diageo's Smirnoff, and Unilever's Dove are creating online video campaigns that rely on word of mouth, often generating millions of views — for far less than it costs to place ads on TV.

Corporations are using Web-based video in other ways, too. Tech companies such as IBM and Microsoft use customer testimonial videos in pitches to prospective clients.

Enterprise Rent-A-Car, Google, and Nordstrom post videos on their Web sites to help recruit new workers. Corporate bloggers are experimenting with video to give audiences behind-the-scenes glimpses of the inner workings of companies like Microsoft, while companies such as Deloitte and American Express use video to enhance training.

Calculated risks
One of the most common uses for online video is as a low-priced marketing tool. PepsiCo's Frito-Lay unit is harnessing the homemade video craze to promote its Doritos brand at this year's Super Bowl. Frito-Lay will award $10,000 and a trip to Miami for a Super Bowl viewing party to each of the five finalists in a competition to produce the best homemade commercial.

It's a risky move, considering that other companies can spend as much as $2 million producing a Super Bowl ad and millions more for air time. "We talked about the risks but we also understood that if you want big rewards you have to take big risks," says Ann Mukherjee, vice-president for marketing at Frito-Lay.

But the risks are calculated. According to a recent survey conducted by Burst Media, an online media and technology company, 56.3% of online video viewers recall seeing advertisements in content they have watched. An ad that gets circulated widely can give companies huge visibility at minimal expense—a big reason why, even as Internet advertising plays a growing role, spending on Web clips is growing slowly. "Online video ad spending will remain a mere pittance when measured against the big bucks that go to TV commercials, at least through the end of the decade," according to a November study by eMarketer. U.S. online video ad spending was only 0.6% of total TV ad spending in 2006 and is expected to rise to 3.3% in 2010, eMarketer says.

Little wonder online video advertising appeals to companies on a shoestring ad budget. In April, British soft drink maker Britvic eliminated its TV ad budget for Tango fruit drinks. So it turned to online video. The result: a widely viewed commercial featuring fruit bouncing down a street—a spoof of an earlier ad by Sony featuring bouncing, brightly colored balls.

Everybody's talking about it
A tight budget and a splash of humor also worked well for LiveVault, a maker of disk-based backup storage, which in early 2005 wanted to create a message to drive home the need for its product. Marketing consultant Jeff Weiner came up with the idea of using actor John Cleese, while marketing firm Captains of Industry helped shape the campaign that humorously depicted the trauma that network managers face when they fail to back up data. LiveVault spent about $250,000 for the campaign.

Within a few months of the February, 2005, launch, a million people had seen the video. "We had a huge uptick in terms of inbound leads, about 500%," says Bob Cramer, former CEO of LiveVault, who sold the company to Iron Mountain about a year ago. Sales at the company doubled in the year following the debut of that ad. "Less measurable, but more important, when I went to speak to other CEOs for strategic partnering, all of them had seen the video."

Yet not everyone who sees online marketing videos likes them. About 77.5% of respondents to the Burst Media survey said ads in online videos are intrusive.

Many said they stop watching video content once they encounter an ad. Of that group, 27.9% also said they immediately leave the Web site. "The last thing you want to do is to anger your viewers and cause them to abandon the site," says Chuck Moran, manager of marketing research at Burst Media.

Nor do companies want to be caught doing anything that smacks of deception. In December the blogosphere discovered that Sony had created a fake blog and YouTube video about an amateur hip-hop artist whose cousin desperately wanted a PlayStation Portable for Christmas.

Posts featured over-the-top hip-hop lingo, and Sony was forced to come clean. But bloggers were outraged at the deception, and the company endured a litany of negative comments and at least one angry video response.

"Marketers will game the system, but I think that will be short-lived as we see more people putting out elements for people to play with," says Cynthia Francis, CEO of Reality Digital, a software company that helps businesses enhance their online presence through the use of user-generated content.

The medium carries plenty of other potential pitfalls. Companies that dabble in online video need to give up some control over the message and be prepared for an audience that talks back. "Marketers have to get used to people telling it like it is," says Suzie Reider, YouTube's chief marketing officer. "If they want to engage in user-generated environments, they will hear from the user community."

Uncontrollable medium
General Motors learned that lesson the hard way when it ran a video-creation contest for its Chevy Tahoe truck. "They ended up with not just positive feedback, but some people with more of an environmental bent were creating negative commercials," says Reality Digital's Cynthia Francis.

And while a company can suppress unauthorized video on its own sites, it can do little to contain the viral spread of clips on sites like YouTube. "We did anticipate that people might use that promotion for a platform for their own agendas," says Chevy spokesman Travis Parman. "We weighed the risks against the benefits."

He says Chevy "screened ads that could be offensive or defamatory" but posted all the rest, including some negative ones. Consumers submitted more than 30,000 ads, resulting in 5.8 million page views, he says.

Companies retain much more control when their online videos are used internally. Cisco Systems Chief Executive John Chambers hosts regular breakfast conversations for employees. Those who can't attend can view the breakfast via streaming video. Later, that video is posted on the Intranet.

Each month, Cisco releases about 300 videos internally to its employees and about 50 videos externally. With each new product launch, for example, Cisco includes video that discusses the product's vision and capabilities and includes a demonstration of how to use it. Salespeople can then make the same demonstrations to their customers.

Watch the pro
Similarly, companies such as Deloitte and American Express use video in their e-learning programs for employees. At Deloitte, nearly all the 35,000 employees participate in e-learning courses. The company works with SmartPros and about 20 other external vendors to add video to courses to demonstrate role-modeling behavior as well as coaching and sales behavior.

Deloitte also uses video of internal experts to explain difficult or dense passages in required reading. "Having a subject matter expert appear changes the pacing of the program and gives learners a chance to see the experts in the organization," says Kathryn Hallenstein, national director of e-learning at Deloitte. Typically video adds about 10% to 20% to the cost of a course, says Hallenstein.

Video can also be used to give outsiders a glimpse into how a company works, either for marketing or recruiting purposes. When blogger Robert Scoble worked at Microsoft, his job involved creating videos of the people and products at Channel 9, Microsoft's video blog. Scoble did it all without a camera crew, makeup, lights, an editor, or any of the other tools companies might think they need.

Fast phenomenon
"I just went in and had a conversation with somebody about what they were building," says Scoble, who now is vice-president for media development at video podcast startup PodTech.net. "I found people really respected that." Although Scoble left Microsoft in June, the Microsoft video blogs continue to draw in more than 5 million software developers and other viewers each month.

"If you don't have video and audio and lots of pictures on your blog, it's very 2005," says Debbie Weil, corporate blogging consultant and the author of The Corporate Blogging Book. Yet, when Weil finished writing her book about a year ago, people in the business world were barely talking about video blogging.

Increasingly, companies are also letting employees talk about their working experiences in videos on recruiting Web sites. For example, to get across the idea that Enterprise Rent-A-Car promotes employees from within, the company shows a clip of Chairman and CEO Andy Taylor talking about how he began behind a rental car counter in high school and college and worked his way up.

Virtual RecruitingPerhaps the video that gives new recruits the best idea of what it might be like to work at Enterprise is a short clip that describes the environment as "chaotic" and "slightly insane," with one employee saying that he didn't want to "work at a job where he had to sit at a desk and be quiet." "We look for people that thrive in a fast-paced environment and are highly social," says Marie Artim, assistant vice-president for recruiting at Enterprise, which hired 7,000 college grads last year.

"The next phase will be for companies to include recruitment videos with job postings," says Peter Altieri, founder and CEO of Wetjello, a video recruitment company. Once more companies begin to use video to attract candidates, Altieri expects that jobseekers will start creating videos to submit to companies along with their résumés or e-profiles.

That trend is still nascent, though, and Altieri estimates that there are fewer than 200 video résumés on sites like YouTube and RecruiTV, the online video recruitment portal that Wetjello created.

Video résumés may be a thing of the future, but one thing is certain now: Plenty of consumers are eager to view and even create videos related to brands such as Coca-Cola, Chevrolet, and Doritos. For the Super Bowl ad contest, Frito-Lay received more than 1,000 Doritos commercials from consumers. "The quality of what we saw was impressive," says Frito-Lay's Mukherjee. "It was worth it to put this money behind consumer expression."

Blendtec's Wright concurs. In December, the month after the "Will It Blend" campaign began, the blender maker's online sales surged four times over the previous monthly record.

Copyright © 2012 Bloomberg L.P.All rights reserved.

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