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The State of Online Video Advertising 2013

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But there's still the nagging issue of online video advertising's 6%: Why isn't online video advertising getting more of the online revenue and total video advertising pies?

The problem is that TV advertisers are still not comfortable with online video ad practices, says TDG's Niemeyer. "Compared to broadcast TV, the measurement data generated online is to a large extent unacceptable to television media buyers because it lacks accredited demographics," he explains. "Meanwhile, many advertisers are struggling with the hyper-targetability offered by online video, which is something they are not accustomed to on broadcast television."

Online Models That Work

Back to the viewers: For all the complaints that they make about online TV ads, the fact is that most are prepared to live with them -- as long as they are reasonable. For advertisers, the lesson is clear: "There is a balance [required] to make the length of the ad commensurate with the length of the content," says FreeWheel's Foyle Abel.

TDG's Niemeyer agrees. "It is simply silly to expect people to sit through a 30-second spot to see a 20-second news clip," he says. "To keep people from clicking away, the ad length should be adjusted in line with the clip length, with the clip offering more viewing time as a matter of perceived ‘fair value.'" This is why 15-second spots are becoming common on the web.

Ad Choice

Advertisers can find more success with viewers by letting them choose the ad they want before playing. 

There are other ways to make online ads more palatable. For instance, some sites allow viewers to skip the ad after watching 5 or more seconds. This gives the viewer an illusionary sense of control, which is highly prized by web surfers. If the advertiser knows its business, its message will get through in those precious few seconds, before the viewer takes advantage of the opportunity to click to the content.

The style of online video ads can help make them more appealing to viewers.

For instance, advertising that is targeted to viewers' interest -- as evidenced by the sites they surf to -- is more likely to hold their attention. An infomercial touting the latest Range Rover will play well to viewers on a Range Rover enthusiast site (as proven by one of this writer's relatives, who watches such content voluntarily).

Skytide's Hurley puts it this way: "Craig Davis, the Chief Creative Officer of J. Walter Thompson, nailed it when he said, ‘We need to stop interrupting what people are interested in and be what people are interested in.' When you buy advertising, you are really buying access to an audience and the relationship that they have with the content. Why not provide them with more great content rather than try to annoy them?"

Sponsorships can be an effective form of online video advertising. In this model, the sponsor's name is splashed all over the content, bolstered by occasional online ads. "Speaking as a consumer, I find that sponsorships which give me short-term access to premium content leave me with higher brand recall and positive associations about the sponsoring company," says Hurley. "The sponsorships on Hulu come to mind."

Third, ads that are just plain enjoyable to watch will appeal to viewers. The proof of this point can be found in the "world's best commercials" TV shows that crop up from time to time. The annual Super Bowl lineup of highly produced commercials also proves this point.

The reason viewers dislike most commercials is simply because they find these commercials to be boring. Create commercials that entertain viewers, and chances are they won't complain. In fact, they may even seek these spots on YouTube.

Getting Past the 6%

There is a key flaw with much of online video advertising, a flaw that may explain why it has yet to achieve breakout status. The flaw is that the bulk of video ads are just that -- they are video ads, period. In other words, these ads are just prepackaged collections of video and audio that don't offer interactivity, the "secret sauce" that makes the internet such a powerful consumer-grabbing medium.

Put another way, many online video ads are akin to playing audio-only radio spots on broadcast television: They do not exploit the full potential of the medium. To say the least, that's a shame.

"What makes online advertising so unique is that viewers can interact with this content, if the advertiser takes the time to create the opportunities," says IAB's Rothenberg. "This is a potency that broadcast TV, radio and print simply cannot match. As one-way media, they expect the consumer to sit through their presentations, offering nothing in return. But on the web, online ads can let the viewer explore what appeals to them, and form two-way relationships that exist far beyond a mere 15-30 seconds of pre-roll."

For online video advertising to truly achieve its potential, it must embrace interactivity. Yes, forced viewing works; the audience numbers prove it. But interactivity offers the opportunity for advertisers to go past relying on viewers' desire for content, to offering interactive ads that are engaging and interesting in their own right.

"As individuals, we live in a visual paradigm ruled by sight, sound and motion, and when you add interactive elements, it creates a powerful, memorable experience," says Tal Chalozin, co-founder and CTO of Innovid, a company that provides online advertising platforms. "Consumers are choosing to lean forward and engage with interactive video ads," Chalozin adds. "Now that the technology is available at scale, rewarding the viewer's attention, instead of demanding it, is definitely starting to pay dividends to marketers across the world."

Finally, let's not forget that content providers also have access to a wealth of information about individual surfers, in terms of what they are interested in seeing. This means that online video ads can be selected to match each viewer's passions and desires; improving the chances that they will connect with the product/service and buy it.

"Consumers and advertisers have always had a handshake agreement: ‘Watch this ad and in exchange you'll be entertained by great content,'" says Joe Apprendi, CEO of Collective, a provider of multiscreen media management and audience buying platforms. "The beauty of this model in digital, with the availability of real-time audience data, is that for the first time, advertisers and programmers can deliver an online ad experience in not only a personalized way, but one that drives greater relevancy for the consumer at the scale the TV advertising industry demands."

The bottom line: Online video advertising has the potential to be a far more effective tool than its broadcast TV cousin, and to deliver better results. As 2013 progresses, time will tell if advertisers grasp this truth and run with it -- and if online video advertising breaks its 6% ceiling.

This article appears in the forthcoming 2013 Streaming Media Industry Sourcebook.

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