la-nyc.juThe heart of online video advertising was once in LA. No more, says Giant Media CEO David Segura. He would know: After three years of bootstrapping it in LA, Giant Media, which offers a form of native online video ads, is moving its operations eastward. The company is keeping a presence on the West Coast, but can’t deny that the center of the online video buying market is increasingly on Madison Avenue.

Segura says LA clients in the entertainment and auto industries were quick to jump into online video, but others have only begun experimentation with meaningful parts of their budget. Beyond that, brands are increasingly directing dollars online to supplement their TV campaigns. “We see new opportunities because New York culture is more aggressive and willing to try more tactics and make decisions faster,” Segura says. Where 75 percent of the company’s business is now based in LA, he says he sees that shifting to half and half this year.

Giant Media has remained bootstrapped and profitable as it’s grown in LA. With 300 percent growth last year, they company expects to do $20 million in revenue this year.

Online video ad spend was expected to hit $3.1 billion in 2012, jumping 40 percent, according to Emarketer. The market is currently dominated by pre-roll ads on platforms like YouTube and Vevo as well as publishers like CollegeHumor, AOL and Hulu. Mobile video advertising continues to grow, while spending on banner video ads is actually expected to shrink.

That sudden aversion to video banner ads is where Giant Media and its “native” video ad peers like Sharethrough and Visible Measure operate. The companies sell ad space for videos that live in a publisher’s regular stream of content, meaning any plays are initiated by the viewer, rather than having the ads force-play at the beginning of a video the viewer actually wants to watch. Last month Sharethrough found that native video ads delivered “higher brand lift” than pre-roll ads. It should seem obvious — if you choose to watch an ad, you’re less likely to hate it than if you’re forced to endure it.

Beyond mushy metrics like “brand lift,” the value proposition of native video ads is that the ads will stimulate more sharing and earned media than a pre-roll ad. This is the concept behind native ad golden child Buzzfeed’s sponsored stories, too. Still, pre-roll has the one thing that makes it way easier to buy than native: it has scale. As native grows, that will be its biggest challenge.

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