NEW YORK (AdAge.com) -- It's a seemingly simple innovation that could juice the online-video advertising industry by $100 million and help restore the economics of quality content creation: let viewers pick their own ads.
Publicis unit Vivaki and publishers like Hulu, Yahoo and CBS believe a new online video ad format, the "Ad Selector," will change the economics of online video, justifying higher rates for advertisers and more engagement for consumers.
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But Vivaki sees the format as a potential solution to an increasingly vexing problem: As high-value content, such as TV and movies, moves online, it earns fewer ad dollars and weakens the largely offline ecosystem that financed the content in the first place.
"The ad formats we are using are not properly monetizing the value of the value of the content," said Tracey Scheppach, senior VP-innovations director at Vivaki. "We know that as content becomes more digitized that the ad formats have to work harder so the ads continue to provide value."
Ad Selector seemed ideally suited to attack the problem. Advertisers would only pay when their ad was selected; publishers would get a much higher ad rate than a typical pre-roll. And consumers, of course, would at the outset of the video get to choose an ad from a category that interests them -- say automotive, fashion retail or food -- rather than being force fed whatever was cued up.
The concept was chosen as part of a yearlong research project Vivaki called "The Pool" as the format with the best potential to be embraced by publishers and brands. The format itself was invented by Hulu, but it had not been widely adopted because few advertisers had taken part.
To lure other publishers and agencies to embrace the concept, Vivaki figured it needed to build an ad server capable of placing those ads on major sites across the web. It toyed with the idea of creating a new joint-venture with tech providers but instead it created a coop with four start-ups: Panache, BBE's Vindico ad server, Visible Measures and Tidal TV. Panache will provide publisher-side integration, Vindico, the ad serving, Visible Measures, the measurement and verification, and Tidal TV, ad targeting.
Each of the coop members will get an equal share of an ad-serving fee, about 5% of the media buy. If, for example, an ad is sold at a $25 cost-per-thousand, the partners would split $1.50. (Vivaki doesn't get any money for selling clients into it, outside the normal agency fees it makes from handling clients media buys.) The revenue will support operations, but more importantly, help establish the start-ups involved in the video marketplace. "The economics wasn't the first question when you meet with these folks," said Tidal TV CEO Scott Ferber.
All the publishers that participated in Vivaki's "Pool" research -- Yahoo, Hulu, Discovery, BBE, Microsoft, CBS and AOL -- have agreed to take the ads. Notably absent is YouTube, which doesn't have much long-form content, but also does not yet permit third-party ad serving.
Initially, the start-ups involved were wary of working together since some of them considered themselves competitors. Ms. Scheppach summoned all four CEOs to Chicago and met with them individually before putting them in a room together.
"I think all of us, the CEOs, were entering that meeting with some trepidation," said Brian Shin, CEO of Visible Measures. "Is this a bake-off? It seemed like we were going to do different pieces. To her credit she was able to get everyone on the same page and working toward the same goal."
The biggest question now is whether other agencies will adopt the format. Initially Ms. Scheppach considered keeping Vivaki's involvement more discrete, so other agencies wouldn't view it as a Publicis-led project. "WPP could say they're not going to use it because it's from Vivaki but I think that's the wrong answer," she said. "We got it started but we're not leading it."
She dubbed it "The Rising Tide Co-Op," because the more publishers and advertisers participate, the better the entire ecosystem will work. She said the idea came from farming coops in her native Iowa, where individual farmers worked together to achieve a greater good.
And the system will need many advertisers if it's going to work, as each video will need to offer up ad options from at least three different categories, ideally varied enough so that they could be targeted at the interests of the consumer.
Adam Kasper, senior VP-managing director at Havas' Media Contacts, said he could see agencies viewing it as competitive, but that he'd feel obligated to at least try the format and offer it to clients. "I think we would want to test it and see how it works," he said. Plus, agencies may also participate for competitive reasons, he added. "You don't want a competitor out there saying they've got something you don't."
Mr. Kasper, whose clients include Carnival Cruise Lines, Fidelity and Volvo, has tried Hulu's Ad Selector and found it "valuable." The upside, he said, is it guarantees an opt-in impression unlike typical pre-rolls which are foisted on consumers. The downside is that if your ad is not selected, it might be hard to get scale quickly if you wanted to reach consumers with something timely.