Marketers' enthusiasm about digital-video advertising is easy to understand: Representing the fastest-growing Internet ad format—with 43 percent growth projected for 2012, according to eMarketer—video ads encourage a “lean forward” response from viewers that other digital ad formats would be hard-pressed to match. They also can be a cost-effective way to enhance content-marketing initiatives. But as with any medium, video advertising is not without its challenges. This article provides an overview of the digital-advertising landscape.
According to a recent comScore report, in October 86 percent of the U.S. Internet audience spent an average of 1,267 minutes viewing online video content. Online video ads accounted for nearly 15 percent of all videos watched during that same month and, according to a report from Cisco, will account for two-thirds of all consumer Internet traffic by 2015. In terms of dollars, eMarketer projects that digital video ad spending will reach $7.1 billion by 2015.
Advertisers have at their disposal four types of video advertising formats:
1. Prerolls, takeovers, and similar linear video ads: These video ads are much like TV ads, appearing before, between, and after sponsored video content. They are commonly associated with professionally produced content on broadcaster sites, Hulu, or news sites. “In-stream video gets around the clutter problem of banners, focusing the attention on one ad at a time, like TV,” says David Hallerman, an eMarketer analyst, in an interview with CMO.com.
2. In-banner video ads: These rich-media ads are triggered within an ad banner, often expanding past the banner placement to play. In-banner video ads are trafficked into several different IAB standard ad units. As such, the costs are lower than linear video ads, and the campaign logistics are similar to that of a standard banner campaign. “If the goal is audience reach, like TV, then you see a mix of banner and in-stream inventory,” says Ed Haslam, SVP of marketing at video ad network YuMe, in an interview with CMO.com. “This approach favors awareness over brand lift.”
3. In-text video ads. These are rich-media ads triggered by a mouse-over of sponsored text.
4. Stand-alone ads as content (social video). These are typically longer-form videos that are produced to be entertaining or useful with the purpose to both sell and get shared socially. Populating a YouTube channel with a Web series of entertaining video can generate viral lift through sharing in social-media channels.
Pricing for video ads typically comes in two flavors. Impression-based pricing is most commonly seen with in-banner and preroll digital-video ads; it doesn’t account for consumer interaction. Performance-based pricing rests on the principle that time and attention are the ultimate goals. Cost-per-user-initiated view (CPV) is the most common performance-pricing model. Though there are multiple ways to implement performance-based models, they all come down to allowing the consumer to choose the video ad they want to see (as in Hulu AdSwap) or how they want to view it (as in YouTube's TrueView).
A Trio Of Obstacles To Adoption
Given its favorable projections, why aren't the numbers for digital-video advertising higher now than they are? Many marketers and their agencies perceive several obstacles to adoption:
1. Price: This refers not to the price of distribution, but to the cost of producing video ads. These days, the majority of digital-video advertising currently running in premium video content is repurposed from TV creative. “If you are a brand that is already doing TV advertising, the investment has already been made,” YuMe's Haslam notes. “Then the ROI is on CPM differentiation. Even at $10 to $30 CPMs, video campaigns typically deliver brand and purchase intent lift for less total investment than static campaigns.” For advertisers that don't already have video creative, Haslam says, “We are seeing the emergence of self-serve tools for SMBs to create video ads. . . .As adoption grows, production costs will come down.”
2. Execution, trafficking, and tracking complexity. There is still no way around this for large-scale campaigns delivered across different publisher and video networks. It's a complex game, and it's getting more complex as large video advertisers look to squeeze the most value from their investments in content.
In particular, there is still a great deal of debate over which KPIs should be used. Online video network Tidal TV conducted a 2011 study evaluating whether the click-through-rate (CTR) metric was a valid performance measure, with some arguing that three-screen convergence is leading us toward a TV-like gross ratings points (GRP) metric combined with CTR.
“Digital buyers, however, believe that solely taking this approach overlooks the unique digital components—targeting, engagement and analytics—that make online video so attractive and cost-efficient,” the report states. For these media buyers, KPIs like video completion rates (VCRs) are more compelling.
3. Not enough premium inventory. Marketers want their professionally produced digital video ads associated with “ultra-premium content,” like TV episodes and clips. “This inventory is generally bundled with the TV upfront and disappears quickly,” Haslam says. “A lot of online video gets consumed during the day. People are watching brand-safe content during the day that we call ‘premium midtail.’ You're going to see the segmentation that happened on cable TV also happen on the Web.”
eMarketer's Hallerman has a blunter take. “Scale is the biggest challenge because audience size still favors TV. While the Internet’s share of major media ad spending in 2011 will be nearly 20 percent, TV’s share will be 38.4 percent. In 2015, TV’s share will still be at least 10 percentage points higher than the Internet’s.”
Next Page: Integrating video and social media a la Orabrush.
Marketers are finding that video is a natural complement to social-media marketing efforts. “The use of social-media triggers in and adjacent to video players—encouraging ‘likes’ or ‘follows’ without taking the user away from the video—is proving very effective for video advertisers who also have aggressive social media programs,” Haslam says.
The Old Spice ads work brilliantly in this regard. The original video ad has drawn more than 35 million views on YouTube and is credited with making a faded brand top of mind again. Klondike's video ads, including its crowdsourced ads, drove such sales increases that the company ran short of its signature foil wrapper. Both campaigns were amplified by social-media integration.
Then there's Orabrush, a digital-video advertising Cinderella story. For eight years Orabrush founder Dr. Bob Wagstaff tried everything, including an infomercial, to build awareness and retail distribution for the tongue brush he invented. None of it worked until then-marketing student Jeffrey Harmon suggested selling the product online. Wagstaff liked his ideas; after some frustrating false starts, Harmon turned to YouTube.
“We were trying Facebook. We tried AdWords. We tried a bunch of other stuff. The reason we went with YouTube and videos was not necessarily because it was a great strategy—it was because nothing else was working,” says Harmon, now Orabrush CMO, in an interview with CMO.com.
Harmon struck gold. The original digital video ad for Orabrush generated millions of user-initiated views at a cost of a few hundred dollars and a little time spent reaching out to acquaintances who could write, shoot video, and act. Harmon credits much of the campaign’s ongoing success to understanding how best to leverage the YouTube ecosystem.
“I watched enough YouTube that I understood what played well in that environment,” Harmon says. Those early videos generated awareness, demand, and credibility that had eluded Wagstaff. Orabrush even got on the shelves of Wal-Mart with the help of video and some guerilla marketing.
Since then, Hanlon has learned a lot about using video to both sell and generate awareness for the brand. He says he keeps a close eye on what he calls the “critical metrics,” all of which are YouTube-specific: views, comments, likes, and favorites.
If Harmon seems like a shill for YouTube, it's only because it has worked brilliantly for Orabrush so far. “Our focus is 90 percent on YouTube and 10 percent exploring other options,” he says. “If another option emerges, we'll shift quickly. We're not married to YouTube. We're married to the bottom line.”