What Type Of Web Video Ad Is Best?

Source: http://money.cnn.com

March 14, 2008: 08:05 PM EST

Mar. 17, 2008 (Investor’s Business Daily delivered by Newstex) —

Two types of online video ads have emerged as the clear leaders, though which one will lead the way is open to debate.

For at least a few years, the emerging online video advertising market will be dominated by TV-like video ads and by small text ads that appear near the bottom of a video as it plays.

CBS CBS expects to wring record revenue from sales of full-motion video ads for its live online Webcast of the NCAA men’s basketball tournament this month. Meanwhile Google GOOG, the Web’s search leader, is testing so-called overlay ads, small text ads that appear near the bottom of a video as it’s viewed online.

Both formats have pluses and minuses. It’s too early to call either one a slam dunk sure thing for advertisers and Web companies, says David Hallerman, an analyst at research firm eMarketer.

“It’s at an experimental stage,” he said. “Anybody who tells you what the format winner is going to be in video ads three or four years from now is blowing smoke.”

Others agree.

One example is Brightcove, a firm that helps companies add video to their Web sites. It’s signed up with Google to place Google’s overlay ads with client videos.

But many Brightcove clients prefer using TV-like pre-roll and post-roll ads that run before and at the end of a video, says Adam Berry, Brightcove’s senior vice president of marketing and strategy.

Length Of Ads An Issue

“Since the beginning of 2006, we have supported a number of formats including pre-roll ads, post-roll and overlay ads,” Berry said. “There isn’t a one-size-fits-all.”

Google so far has ruled against adding pre- and post-roll video ads to its YouTube and Google video sites. It says most consumers won’t sit through a 30-second pre-roll ad to view a video online.

Instead, Google is selling overlay ads that are similar to the text ads it sells and places with search results.

One fan of Google’s video ads is Pinkbike.com, a Web portal for mountain biking enthusiasts. Pinkbike joined Google’s ad program late last year.

The company wanted to make money on the videos on its Web site without using pre-roll ads, says Radek Burkat, Pinkbike’s founder.

“We have never done pre- or post-roll ads because they are ineffective — people either stop watching the videos or they just leave the site frustrated,” Burkat said. “I want to make sure my users enjoy the experience on the Web site.”

But other companies like pre-roll video ads. Ad agencies like them because they look like TV ads, says Brightcove’s Berry, whose clients include Dow Jones and DuPont (NYSE:DD PRB) (NYSE:DD PRA) (NYSE:DD) DD.

Yet advertisers have to be selective in choosing where to run their ads, says Berry.

“Only when there is a lot of demand for a video are consumers more willing to watch the (accompanying) ads,” he said.

Analysts say pre-roll video ads may have gotten a bad rap from misuse. A 30-second pre-roll before a mere two-minute video clip simply doesn’t work for many viewers, says Brian McCarthy, senior vice president for business development at Revver, a video site.

“A lot of people tried to push 30-second pre-roll ads into the market,” he said. “It was too much.”

There is a lot incentive for Google and others to crack the online video ad market. Sales of online video ads in the U.S. will jump to $4.3 billion in 2011 from $410 million in 2006, says eMarketer.

Much of the growth could come from advertisers looking to reach consumers who spend more time surfing the Internet than watching TV, says Hallerman.

“Part of the shift toward video ads online is going to come from the biggest TV (advertisers),” he said.

Many analysts say full-motion pre-roll videos are best for pushing company or product brands. Text-based overlay ads, they say, are better for helping spur online purchases.

One advantage for overlay ads is that advertisers can better target such ads. With its overlay ad program, Google strives to best match ads with the content in the video. Text-based overlay ads appear at the bottom of a video as it continues to play.

The video stops if the consumer clicks on the ad to get more information or buy a product.

Expert Village Likes Overlay

Unlike pre-roll, overlay ads are fairly unobtrusive. And they are interactive, which serves consumers and advertisers better, says Phil Leigh, an analyst at research firm Inside Digital Media.

“It enables a consumer to click through and actually complete a transaction,” he said.

Expert Village, which offers professionally produced how-to videos online, is testing Google’s overlay ads. Results have been positive, says company founder Byron Reese.

“We have been waiting for an efficient way to monetize video that paid us well and that preserved the user experience, that was targeted and fit our format,” he said. “We could not be more excited about it.”

Expert Village also uses pre-roll ads on many of its videos. Reese stopped short of proclaiming overlay ads as a replacement.

“We test all kinds of combinations, trying different things in different categories; monetizing our pages is very complex,” he said.

One reason for keeping pre- and post-roll ads is revenue. TV-like video ads are expensive. They fetch the highest rates among video ads. Advertisers pay about $20 to $25 each time a pre- or post-roll ad is viewed 1,000 times online.

The strategy for selling overlay ads varies. Advertisers can pay a rate based on the number of times consumers see an ad while watching a video.

They can also choose to pay a fee only when a consumer clicks on an ad or makes a purchase. Advertisers pay less for overlay ads than they do for pre- or post-roll ads. But that could change in the next few years if overlay ads lead to more sales, says Revver’s McCarthy.

“When an overlay is targeted properly, advertisers will see it as being the most valuable,” McCarthy said. “And they will pay the most for that.”

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