As broadband adoption approaches 70% of online homes, the average number of video streams delivered per month has more than doubled over the past year. In addition to the well-documented rise of YouTube and the proliferation of video clips across MySpace’s network, other major websites from portals such as Yahoo!, MSN, and AOL, to network sites such as ABC.com, NBC.com, and CBS.com, now offer more online video content than ever before. Consumer demand for video has been fueled by increased penetration of broadband and its always-on, high-speed connection, social networking sites which enable users to easily post and share content, greater availability of professional content, and increased user comfort and savvy online. Additionally, advertisers have demonstrated strong interest in online video advertising, with demand often outstripping supply. US domestic online video advertising reached nearly $400 million in 2006 and could approach $700 million in 2007, 70% growth Y/Y, but still only 3.3% of total US online ad spending. By 2010, online video advertising will total $2.4 billion, or 7.4% of total US online ad spending. However, despite the steadily increasing popularity of online video and pent-up advertiser demand, monetizing video remains a challenge. Both Yahoo! and Google have recently indicated that they are experimenting with various advertising models, but neither company has yet determined the best way to monetize online video audiences. Google’s YouTube, the leading online video aggregator site, is currently only monetizing a fraction of its viewership, with advertisements appearing sparingly throughout the site. While online video holds compelling promise for content providers and aggregators, as well as advertisers, the path to monetization remains unclear.
There are two primary models through which online video content is currently being monetized: 1) a user supported model, with the user paying directly for access to video content via subscription or download fees; and 2) an advertising supported model which allows a user to view content for free, but with accompanying advertising. While the subscription or fee-based model will likely continue to be well suited for certain forms of premium, specialized content, the ad-supported model has much greater sustainability and will ultimately be the most common form of monetization.
There are two primary models through which online video content is currently being monetized: 1) a user supported model, with the user paying directly for access to video content via subscription or download fees; and 2) an advertising supported model which allows a user to view content for free, but with accompanying advertising. While the subscription or fee-based model will likely continue to be well suited for certain forms of premium, specialized content, the ad-supported model has much greater sustainability and will ultimately be the most common form of monetization.
Given video’s more interactive nature and a relatively limited supply of high-quality video inventory, CPMs for online video advertising typically carry a premium to standard display advertising or even rich media. Video ads in a targeted environment can command CPMs north of $40 while ads on more general, run-of-site portal inventory, may carry CPMs closer to $20-$25.
Despite generally negative sentiment around pre-roll ads, they remain the most common form of video advertising, at least for now. A pre-roll is typically a 15 or 30-second video advertisement which a user must play prior to viewing the selected video clip. Content sites including CNN.com and NYTimes.com, as well as larger portals MSN, AOL, and Yahoo!, currently use the pre-roll format extensively in monetizing online video. Despite its prevalence, pre-rolls remain controversial given the impact on the user experience. Google has noted in the past that it does not believe in pre-rolls and that they have traditionally not worked, but it has said it is looking at variations on the pre-roll in testing other formats. Furthermore, a recent poll conducted by Harris Interactive revealed that 42% of frequent YouTube watchers surveyed would view YouTube videos “a little less” if each clip had a pre-roll ad, and 31% would visit YouTube “a lot less” if pre-rolls accompanied each clip. Separate surveys from both Forrester and Advertising.com suggest that users find many pre-roll ads too long, with a 15- second spot preferred to a 30-second spot. From an advertiser and ad agency perspective, pre-rolls have proven to be a convenient transitional ad format as advertisers are often able to simply repurpose already-produced television advertisements for use on the web. However, marketers and their agencies will need to become more innovative going forward to differentiate online video ads from TV and be better able to fit them into shorter time slots. Marketers’ digital experts are increasingly challenging agencies to be more creative. Despite the noise around prerolls, their efficacy may depend in large part on the content behind them. For example, advertisers had good success with CBS.com’s March Madness last year because the exclusive content was highly compelling. There is a place for short pre-rolls (10-15 seconds) going forward on some professional content and a very limited amount of user-generated content. A recent Advertising.com study suggests that 15-second spots are preferred by customers over 30-second spots and have 20% higher play rates. The appropriateness of placement within specific content, however, may need to be determined on an individual basis.
Although the pre-roll remains the most common form of online video advertising, companies are testing other ways to monetize online video viewership. For example, ABC.com and NBC.com feature mini commercial breaks, or mid-rolls, which run during full episodes of shows available for online streaming. Each break typically lasts 30 seconds and the episodes may feature a single sponsor across all commercial breaks, or individual advertisers for each break. Similarly, Google has tested a mid-roll format during streaming episodes of Charlie Rose and other free content on Google Video. Mid-rolls can be effective and acceptable to users, but their use will likely be limited to long-form professional content, perhaps videos that are at least 20 minutes long. Post-rolls, or advertisements which appear following a program or clip, are also being tested by Google, MSN, and other providers. Google has suggested that it could do more with post-rolls going forward, but this format is less appealing to advertisers, even though it is often priced on a performance basis.
Many sites, including CNN, are also offering graphical ads alongside, or below, video clips which play within a media player. Overall, video providers and advertisers are still working to achieve the right balance between creating a satisfying user experience while offering a compelling and effective ad format.
Online video advertising can potentially provide advertisers with more effective results than existing rich media or, in some cases, traditional television commercials. Online video advertising, if well executed, can create a “lean-forward” experience, where the user is actively engaged with the message as opposed to typical television advertising where the viewer is more passive.
Online video ads have the potential to introduce interactivity into the relationship with the viewer, an element which has been a part of the fabric of online behavior, but uncommon to traditional television advertising. For example, an interactive video ad may compel a user to click on an ad, vote on or rate an ad or product, or submit a comment, all actions which raise the level of engagement with the advertisement. An October 2006 study published by PointRoll, a provider of online rich media, compared “average brand interaction time with and without interactivity using PointRoll technology,” and found that by adding interactivity to an online video ad, time spent with the ad increased 42% for retail advertisers, 52% for telecommunications advertisers, and 79% for finance advertisers. Time spent with entertainment advertisements increased only 1%, but this category had the highest time spent to begin with, at almost 15 seconds.
Online video advertising offers greater creative possibilities than traditional online formats such as banners, pop-ups, text ads, or even rich media. Furthermore, advertising agencies have a rich history of creating 15 and 30-second advertisements for television and many of these creative skills can be readily transferred to the online medium. In the near term, this familiarity has resulted in many advertisers porting their television creative over to the online channel as the ad unit is basically the same, though most realize that content created specifically for the Web will garner better results. However, as clients are becoming more attuned to the unique aspects of digital media, they are increasingly pushing their agencies to create compelling, web-specific advertising campaigns, rather than repurposing content from other media. The combination of the ROI-driven nature of online advertising and the creative possibilities of video advertising will ultimately yield more entertaining and effective advertisements.
Online video advertising can potentially address an issue which has been a long-time complaint around traditional television advertising, the lack of measurability. Well designed, interactive online video advertisements will allow an advertiser to know exactly how many viewers played the advertisement and how many were compelled to click on a link or complete some other type of action. Sites which require a user to login should also be able to capture additional information and user history that can potentially help improve targeting for advertisers. The ability to measure the return on investment for an online video advertisement makes this form of video advertising a unique and attractive value proposition.
Despite generally negative sentiment around pre-roll ads, they remain the most common form of video advertising, at least for now. A pre-roll is typically a 15 or 30-second video advertisement which a user must play prior to viewing the selected video clip. Content sites including CNN.com and NYTimes.com, as well as larger portals MSN, AOL, and Yahoo!, currently use the pre-roll format extensively in monetizing online video. Despite its prevalence, pre-rolls remain controversial given the impact on the user experience. Google has noted in the past that it does not believe in pre-rolls and that they have traditionally not worked, but it has said it is looking at variations on the pre-roll in testing other formats. Furthermore, a recent poll conducted by Harris Interactive revealed that 42% of frequent YouTube watchers surveyed would view YouTube videos “a little less” if each clip had a pre-roll ad, and 31% would visit YouTube “a lot less” if pre-rolls accompanied each clip. Separate surveys from both Forrester and Advertising.com suggest that users find many pre-roll ads too long, with a 15- second spot preferred to a 30-second spot. From an advertiser and ad agency perspective, pre-rolls have proven to be a convenient transitional ad format as advertisers are often able to simply repurpose already-produced television advertisements for use on the web. However, marketers and their agencies will need to become more innovative going forward to differentiate online video ads from TV and be better able to fit them into shorter time slots. Marketers’ digital experts are increasingly challenging agencies to be more creative. Despite the noise around prerolls, their efficacy may depend in large part on the content behind them. For example, advertisers had good success with CBS.com’s March Madness last year because the exclusive content was highly compelling. There is a place for short pre-rolls (10-15 seconds) going forward on some professional content and a very limited amount of user-generated content. A recent Advertising.com study suggests that 15-second spots are preferred by customers over 30-second spots and have 20% higher play rates. The appropriateness of placement within specific content, however, may need to be determined on an individual basis.
Although the pre-roll remains the most common form of online video advertising, companies are testing other ways to monetize online video viewership. For example, ABC.com and NBC.com feature mini commercial breaks, or mid-rolls, which run during full episodes of shows available for online streaming. Each break typically lasts 30 seconds and the episodes may feature a single sponsor across all commercial breaks, or individual advertisers for each break. Similarly, Google has tested a mid-roll format during streaming episodes of Charlie Rose and other free content on Google Video. Mid-rolls can be effective and acceptable to users, but their use will likely be limited to long-form professional content, perhaps videos that are at least 20 minutes long. Post-rolls, or advertisements which appear following a program or clip, are also being tested by Google, MSN, and other providers. Google has suggested that it could do more with post-rolls going forward, but this format is less appealing to advertisers, even though it is often priced on a performance basis.
Many sites, including CNN, are also offering graphical ads alongside, or below, video clips which play within a media player. Overall, video providers and advertisers are still working to achieve the right balance between creating a satisfying user experience while offering a compelling and effective ad format.
Online video advertising can potentially provide advertisers with more effective results than existing rich media or, in some cases, traditional television commercials. Online video advertising, if well executed, can create a “lean-forward” experience, where the user is actively engaged with the message as opposed to typical television advertising where the viewer is more passive.
Online video ads have the potential to introduce interactivity into the relationship with the viewer, an element which has been a part of the fabric of online behavior, but uncommon to traditional television advertising. For example, an interactive video ad may compel a user to click on an ad, vote on or rate an ad or product, or submit a comment, all actions which raise the level of engagement with the advertisement. An October 2006 study published by PointRoll, a provider of online rich media, compared “average brand interaction time with and without interactivity using PointRoll technology,” and found that by adding interactivity to an online video ad, time spent with the ad increased 42% for retail advertisers, 52% for telecommunications advertisers, and 79% for finance advertisers. Time spent with entertainment advertisements increased only 1%, but this category had the highest time spent to begin with, at almost 15 seconds.
Online video advertising offers greater creative possibilities than traditional online formats such as banners, pop-ups, text ads, or even rich media. Furthermore, advertising agencies have a rich history of creating 15 and 30-second advertisements for television and many of these creative skills can be readily transferred to the online medium. In the near term, this familiarity has resulted in many advertisers porting their television creative over to the online channel as the ad unit is basically the same, though most realize that content created specifically for the Web will garner better results. However, as clients are becoming more attuned to the unique aspects of digital media, they are increasingly pushing their agencies to create compelling, web-specific advertising campaigns, rather than repurposing content from other media. The combination of the ROI-driven nature of online advertising and the creative possibilities of video advertising will ultimately yield more entertaining and effective advertisements.
Online video advertising can potentially address an issue which has been a long-time complaint around traditional television advertising, the lack of measurability. Well designed, interactive online video advertisements will allow an advertiser to know exactly how many viewers played the advertisement and how many were compelled to click on a link or complete some other type of action. Sites which require a user to login should also be able to capture additional information and user history that can potentially help improve targeting for advertisers. The ability to measure the return on investment for an online video advertisement makes this form of video advertising a unique and attractive value proposition.
Greater monetization of online video faces several interrelated challenges. Effective monetization of online video will be based on the user experience, but both users and advertisers must be willing to experiment with new formats. While pre-rolls, mid-rolls, and post-rolls are currently in use, it is still too early to determine which ad formats will ultimately resonate best with users and advertisers. In order to better monetize online video viewership, online video aggregators and content sites must provide a compelling mix of substantially large audience sizes and high-quality inventory to advertisers. The most significant factor limiting the amount of high-quality online inventory available to advertisers, particularly on YouTube and MySpace, is the challenge online video aggregators face regarding the unauthorized use of copyrighted material. In order to qualify for the Safe Harbor provision under the Digital Millennium Copyright Act, a service provider must “not receive a financial benefit directly attributable to the infringing activity.” This prohibits YouTube, MySpace, and other video aggregators from monetizing any video content which is not expressly licensed to the site by the copyright holder. While YouTube and other aggregator sites are expected to ultimately make more headway with content partnerships, the amount of high quality inventory available could be limited in the near-term. Furthermore, given the wide range of subject matter and quality among user-generated videos, mainstream advertisers may maintain a cautious stance toward advertising in a UGC environment, opting instead for placement around higher quality professional content, of which there is relatively limited supply. Control over the context and environment in which a brand is presented is crucial to many clients, and YouTube and other sites with a large supply of user-generated content must address this concern in order to drive further monetization. Finally, a large percentage of high-quality online video content currently available is general news (CNN, MSNBC, NYTimes), sports (ESPN, FoxSports), or run-of-site type inventory that may not enable the degree of targeting many advertisers desire. A potential lack of both appropriate and targeted video inventory could prolong the path toward greater monetization.Online video consumption will continue to grow rapidly over the coming months as users view many forms of content online, including full episodes of their favorite shows, music videos, news segments, sports highlights, and content created exclusively for the Web. There will be continued experimentation with various ad formats by Yahoo!, Google, and others, as advertising dollars shift to online video and content providers and aggregators strive to meet this demand with more compelling and effective advertising placements. The pre-roll format will continue to be the most common form of video advertising in the near-term, spots are expected to shorten in length, with a greater proportion of 10-15 second ads. Content providers and video aggregators may work to improve the quality of the video viewing experience to make ads more seamless and less disruptive. Mid-roll ads will likely continue to be used for long-form professional content, such as full-length programs on ABC.com, CBS.com, or NBC.com, though will likely be less common during short-form content. Streaming video on TV network sites may be more suitable for mid-rolls in part because it is most similar to a TV-like experience. While content licensing agreements are center-stage at the moment, relationships will be forged over the coming months as Google and others integrate better copyright detection technology. Ultimately these agreements should help grow the supply of professionally produced online video content, helping to meet advertiser demand for high-quality inventory. The monetization of user-generated content, however, will likely prove more challenging and develop more slowly. More dramatic organizational changes could occur within advertising agencies where barriers still often exist between the traditional creative teams responsible for television commercials and the online advertising teams responsible for rich media, banners and text ads. Greater cross-media cooperation within agencies should lead to higher quality video advertising created exclusively for the online channel, as opposed to television commercials that are simply repurposed on the Web.
Thanks comScore Networks & Lehman Brothers Research, February 2007.
1 comment:
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Binu Thomas
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