New advertising formats, timing could help monetize online video advertising

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Advertisers and marketers have always been about getting their products in front of audiences as effectively and frequently as possible--after all, consumers need to see or hear about a product before they can decide to buy it. It should be no surprise, then, that with the number of eyes migrating to smart TVs, tablets, PCs and smartphones to watch online video, businesses are beginning to allocate some of their ad revenue to the online video streaming market. eMarketer predicts advertisers will spend $3.8 billion on online video ads this year, out of a total of $42.52 billion on all digital ads. But what is the best way to advertise to online video viewers--or is there even one "best" way? FierceOnlineVideo takes a look at how advertisers are approaching the challenge of marketing to online video audiences--and how successful they have been.

Monetizing online video ads: A 'huge opportunity'

Advertisers have been looking for a successful economic model for online video ads since the industry began growing at such a rapid pace during the past few years.

"We've seen… video advertising greatly increasing in the last year," says Andrew Lipsman, vice president of marketing and industry analyst at comScore.

Lipsman adds that while 30 percent of content videos carry at least one video add, there is still "a huge opportunity to increase the monetization by making it so that available inventory can be monetized."

Image source: eMarketer

The analyst says he sees market space for new advertising models to emerge. He believes the Hulu "ad choice model," in which a consumer has a choice of three different types of ads, could gain recognition and more widespread acceptance in the years to come: "I think that's a pretty clever technique and I suspect ads end up being more effective. It's interesting but I haven't seen it used and I'm actually curious why."

Clark Fredricksen, vice president at eMarketer, Inc., suggests Google TrueView, which allows viewers to skip an ad after five seconds, may also gain traction in the coming years.

"This is Google's way of guaranteeing deeper engagement and viewability than a more interruptive ad that people might miss or check their phone while it's playing," he says, adding that an advertiser does not have to pay for a skipped ad--an attractive and simple solution to the model of allowing viewers to skip commercials.

eMarketer also predicts that the gap between TV ad spending and digital ad spending will narrow in the coming years. While in 2011 the difference between the two was $28.67 billion, by 2017 eMarketer forecasts it will shrink to a mere $14.85 billion.

The right timing: Pre-, mid- and post-roll ads

Part of finding the right advertising model for online video concerns the placement of advertisements within a content video. Marketers can run ads similar to TV commercials before, during, or after an online video; these are called pre-, mid- or post-roll ads.

"Pre-roll [advertising] is generally considered the most annoying from a consumer standpoint, particularly 30-second pre-rolls, which are basically just re-skinned TV ads. Skippable ads are gaining in popularity but are not as effective for obvious reasons," says Rob O'Regan, editor of eMediaVitals.com.

Image source: eMarketer via emediavitals.com

Advertisers can also opt to place a companion ad in the rolling commercial that stays stationary while the rest of the ad runs. According to the Interactive Advertising Bureau [IAB], a companion ad is comprised of "text, display ads, rich media, or skins that wrap around the video experience [and] can run alongside either or both the video or ad content."

Companion ads are considered effective because they ensure a viewer is exposed to a company's advertisement, whether static or more complex, for a prolonged period of time, says the IAB: "The primary purpose of the Companion Ad is to offer sustained visibility of the sponsor throughout the video content experience. Companion ads may offer click-through interactivity and rich media experiences."

Fredricksen says advertisers should evaluate their primary goal before choosing a type of ad. "There's little question that a video ad can be a far more engaging format than a static image," he explains. "On the other hand, it's all about getting bang for your buck. If direct response is your goal, banners and display is the way to do that."

An up-and-coming player: Native advertising

In the last few years, a new type of ad has been gaining recognition and challenging the types of commercials that have become an established part of the online video industry. Native ads are videos that are part of a publisher's original content stream and require the viewer to actively click play rather than automatically rolling before or during a content video. Viewers are much more likely to react favorably to a native ad because they have made the choice to play it rather than being forced to watch it.

Native ads are exemplified in an October 2012 study conducted by Nielsen for native social video distribution firm Sharethrough and Stolichnaya Vodka. The companies measured viewers' reactions to a Stolichnaya ad campaign, "The Most Original Night," featuring three music videos showing people drinking Stolichnaya.

Among the findings: The campaign drove "an overall 30.8% brand lift in purchase intent among those who were exposed to the video through both paid placements and shared views," a dramatic increase that prompted Nielsen to proclaim that online video is becoming one of the "hottest topics" in online advertising.

Sharethrough also conducted a separate study using Nielsen's Online Brand Effect "to compare the effectiveness of its native video ads in affecting brand lift metrics like awareness, purchase intent and favorability with that of the popular pre-roll video ad unit." It used five advertisers' campaigns and presented them to viewers in pre-roll and native advertising formats, with the pre-roll limited to 15 or 30 seconds.

Image source: "Comparing Resonance for Native and Pre-Roll Video Ads with Real-Time Metrics," Nielsen / Vizu case study

This second study, conducted in March 2013, confirmed and further solidified the findings of the previous report. In the example of Jarritos, a Mexican soda company, native ads generated an 82% brand lift among viewers who watched the ad, while pre-roll ads garnered a mere 2.1% brand lift. And in an interesting twist, "[u]sers measured in the case study were more likely to respond to the brand survey negatively after being exposed to the pre-roll creative than the native ads." This means marketers could actually be turning audiences off with the wrong kinds of ads.

Show me the money: Channeling revenue to online video advertising

Although more marketers and companies are warming up to the idea of promoting their products through online video advertising, eMarketer's Fredricksen says the industry still has a long way to go.

"It's important to remember that the bulk of video ad dollars still continue to and will probably always go toward TV, at least for the foreseeable future," he cautions. "The reality is that, while video is growing faster than almost any other digital ad type, it still is a sliver of what TV is."

This doesn't mean, however, that advertisers are giving up on finding a way to capitalize on the market segment. According to eMarketer, of the total digital ad spending this year, 8 percent will go specifically to online video, up 3 percent from only two years ago.

"A lot of brand marketers have found... that [video] has the sight, sound and motion that TV ads have, but the difference is that online video can be better than TV in that it's a lean forward medium," comScore's Lipsman says. "When you're watching video on your computer, you're much more likely to stay engaged with it. What a lot of brands have found is when they plug online video as one of the different variables into their market mix models, they have very good results."

This hypothesis would explain while many companies run ads on TV, during online content videos and also as display or companion ads. For now, the best model may be a mix of all three--or even more--different formats.

Perhaps O'Regan sums it up when he says, "advertisers just want to reach audience."

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