Starting next month, websites that include MSNBC.com, Yahoo.com, and Hulu.com will begin letting consumers decide which ads show up in video clips they view online.
A research study of the new Hulu-designed format led by Vivaki, the digital arm of French advertising company Publicis Group, showed that users are twice as likely to click an ad when given a choice, as opposed to when one is selected for them. "When you give people a choice, they tend to love you because you're showing them respect," says Beth Uyenco Shatto, global research director at Microsoft's ads unit. "If it wasn't for advertising, they wouldn't be getting the content for free."
The new ad-selecting tool is called ASq and may step up development of the $3.1 billion global video ads market, already online advertising's fastest-growing segment. While it may not end unwelcome commercials for car insurance or weight-loss pills, it may help websites command higher rates while letting marketers attract more eyeballs and improve consumer targeting.
a boom in global online video ads
CBS.com (CBS), AOL.com (AOL), and Discovery.com (DISCA) plan to start using ASq in September. Google's (GOOG) YouTube is studying it. The new offering would let viewers of an online video choose from three or more ads instead of imposing a pre-roll clip. Yahoo and Hulu plan to use it, as does Microsoft's MSNBC.com, which features segments from the Today show, NBC Nightly News and Meet the Press. "We're getting smarter about what makes more impactful advertising," says Uyenco Shatto. "The big 'aha' here is understanding what makes a viewer choose a particular ad."
Online advertising is expected to rise 12 percent this year, to $61.8 billion worldwide, from $55.2 billion in 2009, according to New York-based researcher eMarketer. Although text ads on search pages such as Google or Microsoft's Bing remain the dominant form of online advertising, video ads are growing fast, eMarketer says. According to IDC, global online video ad spending, which was $2.2 billion in 2009, will expand to $11.3 billion in 2014. YouTube, which has more than 1 billion views a day, says the company is "doubling" its efforts to get more viewers for its video ads. "We are always looking to develop new formats and features that make them more interactive," the company says.
While online ads may be resented as disruptive, they foot the bill for much of the Internet's content. They are expected to get better at targeting individual consumers. "Online is much more individualist than television so targeting is extremely important and effective," says Dean Donaldson, director of media experience at MediaMind Technologies, maker of software for digital ad campaigns. "People do like advertising if it's fun and engaging and that's done by speaking to each user," he said.
rare: high-quality online video ads
Not everyone is convinced that allowing users to choose ads will benefit the industry. "If you only watch what you like, then how will it broaden your appeal?" says Richard Wheaton, managing director at Ogilvy & Mather's Neo digital media agency, which works with such clients as Cisco Systems (CSCO), Eastman Kodak (EK), IBM (IBM), and American Express (AXP) "Everybody isn't happy to be advertised at, but the more iPads (AAPL) I see, the more I want an iPad." Wheaton says there's a "real shortage" of quality video ads online because they are very expensive to shoot.
For now, most online video ads are nothing more than TV commercials posted on the Internet, says David Hallerman, an advertising analyst at eMarketer. "The whole online video space is still experimental for most advertisers and websites," he says. "It definitely will be growing, though search still remains No.1 in terms of dollars spent and will remain dominant." An estimated 9 percent of ads online are "touched" by a user's mouse for an average 43 seconds, Donaldson says. The touch time grows by 2 percent to 3 percent if the ad is a video.
Blinkx (BLNX:LN), an online video-search operator spun off by Autonomy (AU/:LN), is among the companies that stand to benefit from the expected surge in video ads, says Chief Executive Officer Suranga Chandratillake. The site, which gets 99 percent of its revenue from advertising and was rated by ComScore (SCOR) as the fastest-growing video site after Facebook, targets consumers with ads using software that analyzes words and visual signs. Users can even select the endings of certain video ads.
300 million Chinese view online video
Samsung Electronics (005930:KS) is using interactive ads in one of its campaigns for 3D TV. The company took a projection of the late-19th-century Beurs van Berlage building in Amsterdam and pasted it into a YouTube page. The building cracks, butterflies emerge from it, and users are instructed to click on as many butterflies as they can to win a free TV. "Video is emotive," Chandratillake says. "Search is a terrible place to do branded advertising. When you think of your favorite ads, they are never Google search ads."
There are 150 million online video watchers in the U.S. and double that in China, says Sean Finnegan, chief digital officer at Starcom MediaVest Group, a media buying and communications agency owned by Publicis. "The majority of brands we represent plan to increase their allocation to online video this year and next," he says.
Starcom MediaVest was part of a research group put together to study the ASq model by Publicis's Vivaki, along with Hulu, Microsoft, and others that included marketers such as Allstate (ALL), Applebee's International (DIN), and Capital One Financial (COF). Eventually, video ads will become richer as audiences migrate from TV to online. Ads will have social and commercial elements and target the right person at the right time, says Jonathan Nelson, Omnicom Group (OMC)'s digital chief. "Video ads and interactive ads have lineage in TV; extending that online is natural," he says.