What Works in Online Video Advertising?

Starcom MediaVest and its partners decline to name which formats are still in the running. But it says the competing formats are being tested against one of the most common kinds of online video ad, the “pre-roll,” a 15- to 30-second ad viewers commonly sit through before watching a video.

The “pre-roll” is by far the most common format asked for by clients of Brightroll, a large online network for video ads. “Pre-roll tends to outperform on nearly every metric tracked by advertisers—duration viewed, click-through rate, cost per view, brand lift, and change in purchase intent,” Brightroll Chief Executive Tod Sacerdoti wrote in his recent quarterly note on the industry. And in an economy where measurability and cost-efficiency are paramount, the ubiquity of the pre-roll is growing: In the fourth quarter of 2008, pre-roll accounted for 83% of ads placed by Brightroll, up from 63% in the same quarter a year earlier.

The similarity of pre-rolls to television commercials is part of the appeal to advertisers, some of whom are looking for the easiest way to shift ad spending from television to online. But some argue that pre-roll ads don’t take advantage of the unique opportunities afforded by the Web, like interactivity and customization.

ONLINE VIEWERS ARE IMPATIENT

“You have this war that continually goes on: On the one hand, you want to standardize for the simplicity of doing business and the ability to do more business,” says Randall Rothenberg, chief executive of the Interactive Advertising Bureau, a trade group that provides research and other services to media and advertising companies. “On the other hand, you have a medium that allows for infinite customization.” Last May, the IAB published its own guidelines for several different formats of digital video ads.

Running 15- and 30-second ads before videos may deter online viewers, who are more impatient than TV watchers. “A pre-roll interrupts the fundamental experience of online video consumption, which is snacking,” or watching short clips, says Brent Stafford, vice-president of business development at VideoClix. Based in Vancouver, VideoClix licenses a technology that lets Web publishers make people and objects within videos clickable—say, the jeans worn by Kevin Rose on his popular online show Diggnation. Click on the garment and a panel appears on the side of the screen with a description of the jeans and links to sites where they can be bought.

YouTube, the Google (GOOG)-owned site that streams more videos than any other publisher, has experimented with several alternatives to pre-roll. The site began letting advertisers overlay videos with “click to buy” links corresponding with what viewers are watching. For example, viewers of Monty Python clips on the group’s official YouTube channel are shown links to buy classic DVDs like Life of Brian and The Meaning of Life on e-commerce site Amazon.com (AMZN). According to Google, those links have helped the British comedy group increase sales of its DVDs by 23,000% since November, and surge in ranking on Amazon’s lists of best sellers. Google, the one major Web publisher not participating in the Pool, declined to comment for this article.

SOLVING THE PROBLEM

Although pre-roll has long been considered the standard, the industry is likely to support any format that a wide cross-section of advertisers puts its dollars behind. “We’re all waiting for the advertisers to allocate budgets to ad units,” says Brightroll’s Sacerdoti. “This is why the idea of a pool makes sense: If you get everyone in a room to agree and commit dollars, you could solve the problem.”

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