Aiming to wrest more advertising revenue from online video, several companies, led by ad giant Publicis Groupe and including Microsoft, Yahoo, CBS and Hulu, have spent the past year testing online-ad formats to figure out what consumers want.
It turns out they want choice.
Tests found that “ad selector,” a format that lets online-video watchers pick one of three companies’ ads to watch, outscored other ad formats, including the much-maligned “pre-roll” ads that consumers are often required to see before viewing online video clips.
The new research shows that consumers are likelier to watch and recall an ad that they choose than one that is forced on them. “Having to select an ad makes consumers more engaged,” says Beth Uyenco, global research director of Microsoft’s advertising and publisher solutions group.
All told, the ad selector beat out about 30 ad formats now being used by the media companies that participated in the study. That includes interactive online video ads, which drop down over the video screen and allow viewers to click for more information; clickable videos, which let viewers click on hot spots within the video itself to learn more about a product; and “skins,” or ad graphics that surround the video-player screen.
The research was designed by Vivaki, a unit of Paris-based Publicis that buys hundreds of millions of dollars of online ad space annually for clients such as Procter & Gamble, Coca-Cola and Wal-Mart Stores.
Ad spending on Web video has been damped in part by the many competing video-ad formats, media companies and advertisers say. Advertisers say having to create different types of ads for different sites boosts production costs, and they have long complained that they spend too much time and resources on re-sizing ads.
The lack of standardization has created “a reluctance to shift more money into online video,” says Jean-Paul Colaco, senior vice president for advertising at Hulu, an online-video site jointly owned by Walt Disney, General Electric‘s NBC Universal and News Corp., which also owns The Wall Street Journal.
There are greater “cost implications” for the production of online-video ads than with TV and radio advertising, says Nancy Ryan, media director for Allstate Insurance Co. The Allstate unit was one of six marketers, including DineEquity‘s Applebee’s Neighborhood Grill & Bar, Capital One Financial and Nestlé‘s Nestle Purina PetCare, that participated in the research, along with two well-known advertisers that declined to be identified.
Video ads are among the fastest-growing parts of online advertising. U.S. spending on such ads is expected to grow by 40% this year to $1.4 billion, says research firm eMarketer. Consumers spent an average of 193.2 minutes watching online video in December, up 13% from a year earlier, according to Nielsen.
But online video is still a small part of the broader advertising landscape. Marketers, for example, spent about $66 billion in the U.S. on TV ads in 2008, according to a research firm owned by ad-holding company WPP. Media companies say video could be drawing many more ad dollars than it is.
Media companies are also eager to find an alternative to pre-roll ads, which put off many Web surfers enough to abandon a video before it plays.
Despite that problem, pre-roll ads have become the closest thing to an industry standard; they are easy for marketers to create, because they are often essentially TV ads applied to a new purpose.
The ad selector began as a format created by Hulu. It was then reworked by the companies involved in the project to include ads from three different brands, rather than three different versions of an ad from one company. Competing brands won’t appear together. If a Web user doesn’t click on one of the ads, the host company’s ad server will chose one at random. The advertiser isn’t charged if his ad isn’t downloaded.
The ad-selector format was tested against pre-roll ads for almost two months on a handful of Web sites, including CBS.com and Discover.com. Click-through rate for the format—the proportion of viewers who clicked through to the advertisers’ site—were more than double that for standard pre-roll ads. Consumers were twice as likely to remember what company the ad was for after watching the ad they had chosen.
Media companies say coming up with an ad format offered across many Web sites will help them better measure an ad’s effectiveness, something marketers are increasingly clamoring for as they move more ad dollars to the Web.
“Online ads will never have the massive reach of a 30-second spot on ‘American Idol,’ but Web ads can give you better awareness and impact,” Microsoft’s Ms. Uyenco says.
Enshrining the ad selector as the default format for online-video ads would take time. To help it stick, Vivaki is pitching the format to all its clients and hopes to have “tens of millions” of ad dollars to buy this type of ad, says Tracey Scheppach, Vivaki’s innovations director.
Nestlé Purina has signed on. “It is definitely a model that warrants investment,” said Michael Crawford, its vice president of consumer communications and insights, in a statement. The company declined to disclose how much it will spend on the format.
CBS Interactive says it will begin using the new format in the second quarter, while MSNBC.com, the Web site owned jointly owned by Microsoft and General Electric’s NBC, says it will roll out ad selector soon. MSNBC.com has two large brands seeking to use the format, says Moritz Loew, senior director of national sales for its digital network.
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