What Works in Online Video Advertising?

Advertisers and Web publishers have embarked on an ambitious quest to learn which types of Web video ads best deliver eyeballs and clicks

By Douglas MacMillan

When it comes to advertisements in online videos, Web surfers don't know what to expect. Watch an episode of The Office on Hulu, and you'll get a couple of 15-second ads from sponsors like Target (TGT). View a National Geographic Channel clip about emperor penguins on YouTube, and you might see clickable ads for an Arctic cruise company across the lower portion of the video. Other sites opt for a lowly display ad off to one side of the screen.

Whatever form they take, online video ads are confusing for consumers. Can an ad be skipped, and what happens when you click on a banner or link—those are just some of the questions that leave Internet users scratching their heads.

And if all that variety is a stumbling block for viewers, it poses an even bigger challenge to the companies trying to reach customers. For instance, advertisers need to worry about tailoring their various ads to a host of different standards, and then come up with a way to measure the effectiveness of a broad range of approaches. "With so many different formats for video online, we incur incremental production costs every time we enter a new format," says Nancy Ryan, media director for insurance company Allstate (ALL). As a result, some companies are avoiding online video advertising altogether.

Jumping into the Pool

In the interest of lowering the hurdles, Allstate and other advertisers signed on to the Pool, an effort among marketers and Web publishers to agree on a standard format for online video ads. The hope is that by working together, the group will more efficiently find out what kinds of ads work best, thereby giving marketers more reason to shift ad dollars toward the Web. "It would have been extremely difficult for a single publisher to have undertaken this breadth of research on its own," says Beth Uyenco, global research director in the advertiser and publisher solutions group at Microsoft (MSFT), a participating company.

Proponents of a common standard liken their quest to the search four decades ago that made the 30-second spot the gold standard for television advertising. "In terms of advertising spending, television didn't take off until it got a 30-second unit," says Tracey Scheppach, senior vice-president of video innovations at Starcom MediaVest. Starcom, a unit of global ad giant Publicis Groupe (PUBP.PA), spearheaded the Pool late last year by asking Microsoft, Yahoo! (YHOO), Hulu, CBS Interactive (CBS), Discovery Communications (DISCK), AOL (TWX), and online video ad network Broadband Enterprises to propose a total of 30 different types of ads. The group then invited advertisers, including Allstate, Applebee's, and Capital One (COF), to the table, and took a group vote on which ads they believed would be most effective.

On Jan. 21, the ad agency began testing the top five candidates with panels of viewers in various U.S. cities, and plans to announce a winner in February 2010. While companies and Web publishers won't be bound to use the "winning" format, participants hope their efforts will single out an ad format that has the strongest likelihood of attracting eyeballs and interest.