YouTube's Monetization Plan: Overlay Ads That Aren't 'Intrusive'

Viewers Decide Whether They Want to Click on Messaging to See Longer-Form Spot

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NEW YORK ( -- It's been almost a year since Google's $1.6 billion purchase of YouTube, and what's the killer ad model it's introduced? It's a simple flash-based ad overlay that appears across the lower 20% of the screen shortly after a YouTube video launches. It stays for about 10 seconds and, if a viewer doesn't choose to click on it and enable a longer-form video ad, it goes away.
The new format lets viewers decide whether they want to see the longer-form ad, rather than forcing it upon them.
The new format lets viewers decide whether they want to see the longer-form ad, rather than forcing it upon them.

Even though tests have been running on YouTube for more than a month, Google brass is just now talking about the ad format that it's rolling out in videos on the site. It has tested the ads with movie advertisers such as New Line Cinema and Weinstein Co., along with automaker BMW.

Less viewer abandonment
YouTube executives said they went with a smaller overlay because they believed it would be less intrusive. The new format lets viewers decide whether they want to see the longer-form ad, rather than forcing it upon them, said Shiva Rajaraman, YouTube product manager. Should a user choose to click through to a video ad, the content they were originally watching automatically pauses. He said that the company's tests found viewer "abandonment [of the video] is much higher, greater than 50% in some cases, with typical pre-roll."

According to Google executives, early test results indicate less than 10% of users close the overlays. They also said click-through rates are five to 10 times a typical standard display ad (meaning the ads on YouTube are getting a click-through rate of 2.5% to 5%). Three-quarters of those who clicked on an overlay watched the ad.

Overall, test clients appeared satisfied. Rinku Mahbubani, interactive media supervisor at GSD&M, Austin, Texas, who coordinated BMW's involvement in the test, said she was intrigued by how the ads didn't interrupt the viewer and were interactive. BMW is running ads that link to either a 30-second spot or a branded-entertainment video called "Relearn to Drive," testing the two against each other to see what kind of video ad works best in the environment.

'Fewer limitations'
"There are fewer creative limitations because it's not limited to 15- or 30-second pre-roll," she said. "The consumer has the opportunity to decide how much time they want to spend with your brand."

Erin Foxworthy at Palisades Media, which bought ads for Weinstein Co., said she appreciated that the test allowed her to target by specific piece of content, which she often isn't able to do when it comes to online video. She hopes, in fact, that when YouTube rolls out the formats more widely, targeting will get more precise.

YouTube is the most-visited video site on the web (according to comScore Video Metrix, YouTube had 66.3 million unique visitors in June), but it is not the first online media seller to test flash overlay formats: VideoEgg sells advertising in video and on page in 14 of the top 20 social networks, Brightcove has offered up a similar ad format and Ripe TV has experimented with several different kinds of flash overlays. This week fledgling video ad network YuMe introduced a series of flash overlay ads.

But even though YouTube's roots are as a video-sharing site where people can post footage of cats flushing toilets and little cousin Nicky's birthday party, that bastion of one-off user-generated content isn't what is being monetized under the new system.

Focus on professional content
Indeed, much of the content that is monetized is professional or semi-professional content: videos from Warner Music Group and how-to footage produced by Ford Models TV. Ads will also run on user-generated content from those enrolled in YouTube's partner program, which requires partners to create good serial content and abide by copyright rules.

"This solution isn't necessarily intended for all YouTube videos but on a select group of partner sites," said Eileen Naughton, who in a new elevated role as director-media platforms at Google oversees the search giant's sales of, well, nonsearch media.

When asked if this was the first sign of YouTube's evolution away from a pure video-sharing site and into an aggregator of more professional or higher-quality content, Mr. Rajaraman played that notion down.

"I wouldn't say the site is necessarily evolving in the sense of leading toward these monetizing partners directly, but users will get an opportunity by joining partner programs to be rewarded like any other content provider," he said. "We'll expand that program over time. There's always a home for user-generated content on YouTube."

However, it's hard not to wonder what YouTube becomes as the professional and high-quality content begins to drive the site's revenue.

'Mid-tail' content
John Caplan, chief operating officer at Ford Models, calls YouTube "a great partner" but suggests that the next inning of the site's evolution could see it sorting so-called "mid-tail" content from the Long Tail videos. Everyday Joe's videos, he said, aren't necessarily predictive content whereas "Ford has a regular schedule of content going live every day."

The media buyers agree. "It's a safer strategy to stay within professional video because you know what you're advertising on," said Ms. Foxworthy. "They have the inventory."
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