Monday, July 27, 2009

Online Video Advertising: Finally Getting Some Respect?

After years of confusion and endless trial and error, it seems the media industry is finally figuring out how to more effectively monetize online video with advertising. And while online video viewing is still miniscule compared to TV viewing, effective ad formats that provide reasonable revenue streams to content providers and do not aggravate viewers will open a flood gate of great content.

The pre-roll has gone from pariah to relative acceptance thanks to shorter, more entertaining units and better targeting. Simple tools like countdown clocks that tell you how many seconds to the start of the actual video also make the pre-roll more tolerable. CNN uses this tool quite effectively.

Although the consumer refrain “I don’t notice the ads” seems more relevant than ever, it’s hard to argue the effectiveness of a single ad, playing 12” from your face while you wait for a piece of content you requested. (All the more so with the audio track being pumped through your earphones.)

Traditional 30-second ad units also work well in a longer form premium content environments like Hulu. But the ad load is far smaller than on the corresponding TV airing. – one unit per break, representing ¼ of the TV commercial time. Hulu’s plan is to charge more for the ads based on performance.

It will be interesting to see the results of Comcast’s highly publicized new Web-TV trial which will include significantly more ad time than Hulu. It will foster some meaty discussions between advertisers and networks on the market value of a low clutter environment.

Overlays are also finding their place and seem to work best in informational content. At driverTV, we are seeing 3% and higher click-through-rates for the lower screen overlays accompanying our new car video overviews. You can see a sample here:

The other truly compelling aspect of all online video advertising is the additional ad messages that can live outside the video player and reinforce the in-video messaging

All in all, it seems like a recipe for growth: great content along with advertising you can’t skip or ignore.

Monday, July 20, 2009

Does Free Lead to Paid?

There is an interesting debate swirling around media industry blogs in response to the following question:

Does it make sense (and lead to long term profitability) to invest tens of millions of dollars in a new media platform, give it away free for years, build a big following and then figure out how to make money?

I think it is fair to say that the jury is still out on the 3 highest profile examples of this model – Facebook, Twitter and YouTube. All have massive followings, have become iconic brands and yet are losing significant sums of money every month.

Advertising seems to be the best way for these companies to monetize such enormous reach, but initial response from the ad industry has been circumspect as they question the impact and acceptance of ads in social media and user-generated content environments.

Another compelling option is to charge consumers and/or companies for some customized and/or premium use of the service. I guess at the end of the day, this model depends on how valuable the service really is to its users.

A year ago I started using Pandora – the free online music service. It would be an understatement to say that I am completely hooked - 95% of the music played in my home is streamed through the Pandora iPod app.

The company recently announced that free listening will be limited to 40 hours per month, but can be extended to unlimited for that month for 99 cents. Seems they will also be focusing more aggressively on advertising. Advertising around songs is a long-proven model. (They also have a premium version of the service that is ad free.)

As I provide my credit card info to Pandora, I guess free does lead to paid in this sample of one.

Friday, July 10, 2009

The Importance of Influencers

Spent some time this week with some ad agency execs chatting about the challenges of building an audience for branded video content on the web. One told me about a piece of humorous content they created for a major package goods company. They posted it on all the usual outlets – YouTube, Facebook, MySpace. It languished until a popular YouTube vlogger praised it. Views spiked from 10,000 to 250,000 in a week.

There is a distinct hierarchy in the social media system and at the top are the people with the ability to influence the stream of conversation. 360i just published a social marketing playbook and in it illuminates this hierarchy, describing 6 levels of participation:


The Creators and Critics share the top, are mutually dependent on one another and often exchange roles. For example, a popular blogger or vlogger might be all about identifying interesting content that they praise and send off on a viral run.

Now more than ever, you need friends in the right places.

Monday, July 6, 2009

Online Video Misperceptions

I have been looking at some recent research regarding online video consumption. Yes it is growing explosively (+40% year over year.) But it is definitely following the laws of “if you have a little and it grows a lot, you still probably have a little.” It’s like when your favorite stock goes up 50% in one day, from $1.00 to $1.50. Sounds big, but in the scheme of things, not really.

When I asked a sampling of friends here in NYC what percent of their total video viewing is online versus TV, responses ranged from 15% - 50%. (I am leaving mobile out of this discussion for now.) Seems my sample was skewed towards early adopters or the results reflect the enormous inaccuracies of memory based data.

The actual number, across the entire population – 1%!

This from a recent well documented study by a big name research organization. Another study showed online’s share at 2%. Like that micro cap stock, even 50% year over year growth doesn’t have that big an impact.

98% of video consumption is still happening in front of the television. Looking at another way - the average American watches nearly 160 hours per month of TV and just over 3 hours of Internet video.

No wonder the television upfronts seem relatively healthy with broadcasters and particularly their stronger cable network siblings feeling upbeat.

Is there a huge disruption lurking?

I think so. Everyone online is watching video. (80% of web users according to the latest data) They are just taking lot of small bites – 3 minute clips of Sarah Boyle, or a 2 minute news segment from Iran, or a user generated clip emailed from a friend.

It just doesn’t add up to whole lot of time and most of what is being viewed is still user-generated with poor production values.

A few things need to happen to significantly move the needle. First, more professionally produced (30 Rock, Heroes, etc) and semi- professionally produced (Next New Networks, My Damn Channel) content needs to find a home and an audience on the web. (Hulu, for all its success and publicity still only generates a fraction of the total online video viewing.)

Second, viewers need to begin looking at their computer as more of an entertainment viewing device and hub – watching in full screen format (as opposed to a 300X250 pixel window) and connecting to their home TVs using new applications like Boxee and the Hulu desktop.

If online viewing is 2% now, where will be in 12 months?