Three out of five now watch online video, and more than half said they engage in some sort of
response activity, such as visiting a Web site, going to a physical location or making a purchase, according to a new report by The Kelsey Group.

“YouTube has largely popularized the concept of watching short videos on a computer screen and has likewise familiarized consumers with the idea of watching short video ads,” said the report’s author, Michael Boland, Kelsey Group senior analyst. “A wide range of business models are coming to market in the hopes of tapping into the growing demand for video. We are in a ‘wild west’ phase of experimentation on all fronts — content generation, licensing, search and monetization.”

According to the report, video production companies can produce and distribute video ads for small businesses at price points that are significantly lower than those of traditional advertising, bringing video advertising within the grasp of many small businesses for the first time. The report also reasons that the value of video may be easier to comprehend for many small businesses, compared with some forms of online performance-based marketing.