Online video essential: report

David Hasselhoff pictured with Air New Zealand mascot Rico. Photo / Supplied

Online video is seen as a must-have for newspaper, magazine and television companies as they battle for advertising revenue in the digital world, a report says.

A PricewaterhouseCoopers' report released today examines how New Zealand's entertainment and media companies are responding to the migration of audiences to the internet.

The value of online advertising rose from $73 million in 2006 to $293 million last year, the PwC report said.

While this amounts to an increase of about 300 per cent, online advertising is still dwarfed by its counterparts in radio, television and print.

The report showed online advertising represented 15 per cent of the market last year.

Although online advertising has overtaken television and newspaper advertising in Britain, the report said there was scepticism the same would happen in New Zealand.

Despite this, PwC forecasts online advertising will become increasingly lucrative with the market likely to double in size by 2015 to $587 million (about 23 per cent of the sector).

To take advantage of advertising dollars, media companies face the tough task of attracting spoilt-for-choice internet users to their websites.

Video is becoming a big factor in this fight to capture the attention of those online, the report said.

Brett Chenoweth, chief executive of Herald publisher APN News & Media, said video was a valuable "driver of audience" and it was important for news organisations to be producing their own video content.

As well as bringing in readers, the report claimed video was an important part of the "online advertising mix" and cited Air New Zealand's web campaigns - which include clips with stars such as David Hasselhoff and Lindsay Lohan - as an example.

The report claimed that infrastructure projects such as the ultra-fast broadband scheme and upgrades on the mobile network would help grow the online video advertising sector.

Social media was seen as another important tool to draw in online readers.

But while it is often easy to reach a wide audience on sites like Twitter and Facebook, Chenoweth said driving them back to a company website - and accompanying online advertising - was tough.