How To Make More Money By Not Charging For Video Ads

How To Make More Money By Not Charging For Video Ads
by Ari Rosenberg, Thursday, April 13, 2006

WARNER WOLF COINED THE PHRASE "Let's go to the videotape" in the late '70s. He was a sportscaster on ABC television in New York, and that phrase would send us into a state of frenzy. For many in the region, Warner was the gatekeeper to sports video highlights each night. What made him unique--the impetus behind his catchphrase--was that he showed highlights from teams outside the New York market. I still recall that sinking feeling those times we abruptly broke from dinner only to tune in and see weatherman Frank Fields, which meant we had missed our serving of video highlights.

Today, Warner Wolf works in radio, sports is on twenty-four hours a day, and video is available anywhere you like it, including online. But is online where we really want our video served, or is this a case of the advertising tail wagging the content dog? I have been told on occasion not to throw the baby out with the bathwater, so let's see how we can put the horse back in front of this cart.

Just a reminder: the consumer is the horse. Consumers set the pace through their consumption. The lack of supply widely reported in this segment of online advertising is one sign that the horse is not eating what it is being fed. I spoke to a sales director at a major portal who validated this lack of appetite. The portal had a big content cross-promotion on its site late last year that involved streaming video, and yet the revenue tied to the pre-roll advertising (video ads that run prior to the video content) was minimal. "There just were so few streams relative to the promotion of the content, we hardly made any money," he told me.

This lack of consumption, however, has not stopped companies from pushing the cart right past the horse. This includes Klipmart, who profits from the creation and placement of video advertising online, without any responsibility for the development of the content the consumer grazes. Klipmart announced last week its executives are having conversations with media buyers regarding a simulated upfront for online video ad inventory. "Broadband video has become a must-have companion to TV advertising" said a Klipmart sales executive, "so it makes sense that it should be planned in the same way and at the same time as the traditional TV and cable upfront."

So Klipmart, here are a few questions for you: Will you be showing two- to four-minute clips of the video content you represent to give buyers a sense of the programming quality? Will you have the actors and directors on hand to further define the content's voice and what kind of person is apt to listen? Will you be presenting projected rating points by demo for each program, or will you just be talking about how many more "televisions were purchased last quarter versus the quarter before," and saying that inventory is really tight?

Sorry to pick on the very bright folks at Klipmart, but instead of a premature promotion of a simulated upfront, maybe they can lead the online video advertising market discussion down a path with less resistance from the horse they are riding.

This market subset has their eye on the right issues, such as content quality controls and better technical user experiences, for example. However, the irony is that companies involved in the production, purchase and sale of online video advertising produce and place the very barrier that prevents the horse from keeping pace.

Pre-roll ads are not the only kind of video advertising sold, but they are the most popular. However, unlike television, where viewers are conditioned to let a commercial have its day in court before we hit the clicker, the experience on the Web centers on greater control and even greater speed. Users who choose to engage with video content are easily frustrated by the 10 to 15 (or in some cases, 30) seconds of a pre-roll ad message. Try holding your mouse steady right now for 10 to 15 seconds and tell me how much you needed to fend off the urge to move or click.

David Verklin of Carat weighed in on this issue when he commented, "Commercials on the Web in broadband have to be 10 seconds, not 30 seconds like television." CBSMarketwatch has dedicated an entire ad campaign to convincing advertisers (and buyers) to run no more than 10-second pre-roll spots, all in an effort to improve the drop-off ratio they know occurs with readers who do not stick around to consume the content when met with a lengthy pre-roll ad. Both ideas are on the right track, but are not the solution that best serves the horse.

To ensure more video content gets consumed, publishers need to make the content easier to swallow by not selling pre-roll ads at all. Instead, sell two-and-a-half second "sponsored introductions" (just the advertiser's logo). When the video content the consumer requested is over, run post-roll ad spots where advertisers can share their creative wisdom, with the hope it earns the attention of the viewer instead of kidnapping it.

Inventory should stay the same, but you have given consumers fewer excuses to bail on content they are not used to digesting yet. Drop-off rates (which are never publicly discussed) should diminish, which means volume should grow. As for pricing the post-rolls and sponsored introductions, I encourage publishers not to charge for them at all. That is the biggest mistake publishers are making today. By assigning a high CPM value to one of their limited supply products, they are lowering the perceived value of the inventory they have the most of to sell (this issue does not, however, apply to video-only Web sites like Youtube.com or Maniatv.com.).

Instead, online publishers should use this high-demand, low-supply product as a zero-priced, added-value hook to induce purchases of larger allotments of their impression-based ad inventory at higher CPM's (slightly similar to how network television stations force advertiser to spend money on other dayparts in order to buy prime time).

Sometimes the best way to sell a premium product is not to charge for it at all. As for the carts, if they all keep applying the right pressure, but stay behind the horse, they will get to where they want to go faster than they think.

Ari Rosenberg is a media sales consultant. Prior to starting his company, he was the vice president of sales at IGN.com. He can be reached at ari@performancepricing.com.