The absence of a killer-app ad model is arguably the biggest question hindering the growth of the online video ad market. While TV has grown $68 billion fat on, for better or worse, a fairly consistent ad format, the online space has no such tried-and-true standard. And it may never have just one. While some publishers are selling pre-roll ads, a number of companies are betting on an entirely new opt-in approach, one they say will be less annoying to consumers and offer better returns to marketers.
"It helps the creative process to not even think about pre-roll as an option," said Ian Schafer, CEO of Deep Focus, which last week launched a non-pre-roll ad campaign for Dewars on the new Onion News Network. To reach online video audiences, marketers have to be comfortable with the idea that people are ad-averse, he said. He finds it encouraging to see marketers integrating into original online content -- like Dewars is doing with The Onion -- and he's also interested in overlays, clickable graphics that appear over a video and allow people to opt into some sort of advertising.
Embracing the ad-averse
Several companies are banking on that format, including Videoegg, which has ad formats that appear along the bottom of the video or perform some action on the page that invites viewers to watch an advertiser's content. It has also launched ads around the menu area of its player, which become visible when someone chooses to share a video or move on to another in the playlist.
"We're chipping away at the online-video-monetization gap," said Videoegg Chief Marketing Officer Troy Young. Right now, he points out, bankers and venture capitalists are underwriting the cost of delivering such video as the market looks for ad solutions and ways to bring marketers into the fold.
Another company, ScanScout, has launched with the hope of selling contextual advertising around the body of the content in places where ads may not appear. The ads aren't interruptive, said Doug McFarland, unless someone wants them to be interruptive. When asked why anyone would ever proactively click to see advertising, an action many of the models depend on, he points out that's the model other online success such as Google and Advertising.com use.
"If you can serve things that are contextually relevant and correlated with user behavior, you can see someone's interested and you've done the best you can do at this particular moment," he said.
'Ripe' for the clicking
Ben Jones is the sales director at VideoClix, a company built around the idea that an interruptive ad model continues to offer advertisers diminishing returns. His company's technology allows users to click on items within a video -- say a Sub-Zero fridge in a cooking video -- and be taken to more info on the product. Marketers pay for such clicks.
Ripe TV, which is on cable video on demand, broadband and mobile, runs brief seven-second pre-roll ads and graphical overlays that frame the video or run along an edge of a video, producing the units in house. Said CEO Ryan Magnussen: "No creative agency is equipped to do what we're doing."
That may change, however, as such alternative solutions gain share. New opportunities such as VideoClix and ScanScout lack scale -- something especially important as online video siphons off dollars from TV, the ultimate reach vehicle.
"We're bound more by scale than by technology," said Tracey Scheppach, video-innovations director at Starcom. "As the ad opportunities start to scale, you'll see more creative investments in the productions or the creativity."
"The pre-roll scenario is only the very beginning of it, and it'll go away, and we'll have better things to do," said Dorian Sweet, executive creative director for Tribal DDB, San Francisco.
Weighing content value
Of course, for some content, a pre-roll or interstitial ad is the price to pay for premium content. ABC.com, of course, has had success building 30-second breaks into its full programs offered online.
"There's a clear value exchange to being able to watch 'Grey's Anatomy' with limited commercials," said Ms. Scheppach, video-innovations director at Starcom. Recall for the ads on ABC.com generally hovers in the high 80% range. But she points out many of those half-minute breaks are more than TV spots: ABC lets marketers incorporate games and other interactive elements into them. And ABC this week will introduce a feature that brings up an advertiser's billboard within the video player whenever a viewer pauses the program.
As Deep Focus' Mr. Schafer notes: "Video ads don't necessarily have to be video."