When it comes to online entertainment, online video in particular has become recognised as a powerful format for both communicating online and providing an enhanced online experience, with advertising becoming the key source of revenue for online entertainment providers.

Around 15% of overall worldwide advertising spending will be directed towards digital media channels in 2011, according to BuddeComm.

Even though the economic downturn initially impacted upon the growth of overall advertising spending; in 2011 there are signs of recovery with online advertising continuing to grow and the ever popular TV advertising rebounding.

The rise of digital media channels has placed much pressure upon the traditional media and entertainment outlets in recent years, the firm said. This, combined with an economic downturn, has led to much unrest in the media sector. The digital media companies are the clear leaders however, but to a certain extent there will be parallel developments: one driven by digital TV, using the traditional broadcasting networks; and one driven by broadband using new fixed and mobile telecoms infrastructure.

The success of digital media companies can be partly attributed to their willingness to compete in many different markets and implement new innovations. Companies like Google, Microsoft, Amazon, Facebook, Apple, Twitter, and so on are continually looking for other opportunities from developments in mobility, e-commerce, home media centres, social media, online VoD and infrastructure. As online entertainment is based on a virtual environment, it is expected that cloud computing technology will become a useful infrastructure tool for the future.

The new research found that online video media is a growth area, and in 2011, Hulu has over 300 advertisers using its service. In the Middle East, a rapidly growing broadband user base offers a digital media market ripe for development. Recent events in the region highlight the role and impact potential of social digital media in the region. There is a growing movement to combat music piracy and illegal online downloading services. Facebook, which is expanding into online VOD, continues to expand upon its service offerings and has become a true competitor to Google. Ranked 22nd worldwide, Egypt has Africa's largest Facebook community, growing at over 100% per year.

BuddeComm also noted significant evolutions in the market: The success of Google’s YouTube service, based on user-generated videos, has been well documented, and in 2011 YouTube continues to dominate in terms of viewers and streaming. YouTube is also seeking to expand its services beyond only user-generated videos by forming partnerships with online movie content providers.

Other business models have emerged and are proving successful, particularly for online movies and TV shows, BuddeComm noted. Hulu is a prime example of this and Netflix, operating in North America, is also gaining prominence. In 2011, social networks began to offer online VOD services via a partnership between Facebook and Warner Bros. Whole new distribution channels for on-demand videos are opening up and the success of these partnerships will be closely watched by the industry