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RSSMost importantly (and most expensively) they've turned to content delivery networks like Akamai, Limelight Networks and Panther Express. Sites will never be able to completely escape the high costs of content delivery, so publishers are looking for new methods of monetization. Foremost among these is video advertising: the delivery of either pre-roll or overlay ads that appear during video playback.
Early showings have been a disappointment, and with CPMs heading through the floor, this is a dynamic that is unlikely to change in the foreseeable future. There are many reasons for the failure of video advertising, but some of the foremost issues include: the dearth of monetizeable content, the high production costs of video ad creation, audience rejection of the format, and the resultant poor performance of video ads compared to other forms of advertising.
As a rule of thumb, assuming typical file sizes, CDN pricing, and completion rates, it costs about a dollar for every thousand videos delivered. In order to offset these costs of distribution, research shows video viewership needs to generate a $1 CPM. In the case of in-video advertising, whose dominant forms include pre-roll, post-roll, and overlay, that $1 is hard to come by. Because of completion rates, post-roll is a mostly ineffective form of advertising, and very few sites have the kind of content that makes possible persistent pre-roll without massive audience defection.
This leaves overlay, typically a form of PPC advertising delivered in a small pop-up within the video frame. Due to inventory constraints, typically no more than 50%, and often less than 25%, of all videos will display an advertisement, meaning that the true CPM must be between $2 and $4, a price point which is, practically speaking, impossible to secure in today's market.
In-page advertising may offer a more viable option for publishers, as the $1 CPM hurdle may be easier to overcome with traditional banner advertisement and sponsorships. This is well-trodden ground, however, with a decade of experimentation in online advertising providing lackluster results for all but a handful of sites.
As the market continues to develop, video advertising that commands both the spend of big brands and the attention of audiences may indeed come along. But that market is years away. In the interim, sites are best off doing what they have always done: monetizing banners where possible, and focusing on customer purchases and subscriptions elsewhere.
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Again... the problem is nobody has included the consumer in the discussion. It is the bottom up method of addressing the challenge. What aspires your audience? what generates interest among your audience? What in a content they are subscribing more and more to? Do you have that nano-scale information?
Pre-roll ads: well.. when I watch MSNBC videos, whenever there is a pre-roll I surf web content below it and then revert back to the video once the roll is over. Isn't it natural the these CPMs can't find a bottom yet???
So the fundamental approach will be to go back to the drawing board, look at the target audience and their needs, evaluate the pain points around audiences that are driving them to the property and then take a stock of your inventory, realign with the message category and hypertarget brand messages through user aspired activities. HOW?? we are trying to hack it ;)
The internet is viewed as click through advertising which is what it is good for but doesn't appeal to mainstream brand advertising.
Now, video is just one medium that will be used a in new generation of integrated, interactive ads. These can be grabbed and shared into blogs, start pages and social networks transforming into fully integrated, rich applications when they are embedded. Effectively what will we have are fully interactive broadcast units, which are served as ads.
Once awareness of these new ad formats reaches some sort of tipping point we are going to see an increase in clicks and engagement. The user is more likely to engage with them due to the utility they provide and the continuous fresh content they have the ability deliver.
And this brings me to my final point. When these new ads start rolling out, media owners and ad servers will have to change their attitudes and update their old models of "rich media". The 30-40k file size limit is exactly that – limiting – and antiquated at nearly 10 years old. It seems completely ridiculous that users are still being served these dreadful formats and it’s not surprising that the click through rates are falling below 0.1%.
Oh! And forget those metrics too. Engagement and interaction will be the yard sticks measuring all new online advertising activity.
http://www.thisisopen.com
Tying video ads to video content is the disconnect here. Video ads can be placed in almost any form of content much like display ads can and so have almost infinite amounts of available inventory.
Even with instream video, many TV station and newspaper groups (several of whom we work with) are seeing an increasing adoption of video ads and commanding healthy CPMs given the effectiveness of video above almost all other forms of online advertising.
I know catchy titles usually get lots of reaction, but the thinking here is dated and doesnt represent the current market. Market research shows online video as the fastest growing segment of online advertising, so "dying" would be a word that comes to mind when you look at the facts.
We operate Utarget.Fox, a global video ad network (www.utarget.co.uk)
Pre-roll is the most popular way of monetizing video content and cpm’s have fallen from heady experimental days to allow for commercially viable campaigns. Also, ComScore research shows UK online video viewing has grown by 10% over the past year.
Contrary to your view that user have rejected pre-roll as a format, the majority of research I have seen says the opposite. Users have grown up believing content should be free online. In the offline world the same people are prepared to pay for that content when delivered via their mobile phone or television set. Users know there is a trade off and that is seeing a targeted, relevant pre-roll ad before the content they see. If that content is short form then the ad should be between 10-15 seconds or else, yes, you will risk alienating your audience.
We are running more and more campaigns planned and bought by the TV agencies. Traditionally there has been a problem that the creative agencies have not been briefed to include online video when shooting their TV campaigns. The cost of re-cutting creative after the event is expensive. Include online video at the beginning of the planning cycle and you remove the additional cost. As a result we are seeing online video included in more and more campaigns.
Therefore the CPG entry into video advertising is commencing. One of the ingredient for them to jump on board was always price. Your acknowledgement that publishers are under pressure to recoup their CDN charges, allows for Brand advertisers to achieve a favourable pricing point for volume commitments.
As for poor performance, ADTECH ran a European wide piece of research in December 08. Online video proved more responsive than all other online formats. You even state on your own website that videos are 400% more likely to convert.
The market is maturing, and is tipping, and will evolve to become the dominant advertising market globally. There is no doubt this jump will take time, but it will happen!
Instead, programming and audience will focus on tighter communication and ad dollars will find those clusters. While the revenue exchanged in each cluster will be smaller in that cluster, overall the total volume will expand. We all tend to forget that even the best TV broadcasters had to bundle sup-par inventory with their prime time, and we focus our economics on the best case ads, not the "popeil pocket fisherman" (You know you can still get them?)
Does anyone _really_ want to go back to the yellow pages and newspaper ads instead of craigslist and google?
No one wants to admit they are still the "buggy whip" manufacturer....
full disclosure: In addition to starting Lightningcast, the ad technology behind Platform-A that Hulu and others use, I'm an advisor to Zadby, a Launchboxdigital funded startup, that has a model for placing advertisers with audience clusters on YouTube content that I believe is very cost effective, and I manage product development at AffineSystems, which looks for logos and other objects inside of online video.
2. Anyone who knows the dollars available overall are trekking through much muck and mire so gamely, that if you are looking for an increase in one place they have to be stolen from somewhere else. Picky choosey time here.
3. Viewers will have to get used to seeing ads and that free mentality will eviscerate (spelling?) as they will be as common as TV or TV online, etc. Live with it or pay for it - which won't happen.
overstating things here a bit, wouldn't you say? perhaps you should clarify the objectives of the ads you claim are failing. I can certainly agree that direct marketing or CPC type advertising only interested in CTR is at risk in video. However, brand advertising, is not at all in the same boat. First off, on TV there is no click-through so let's keep that standard in mind. Second, one of the larger categories of brand advertisers are CPGs, most of which do not sell consumables online. Hence, the click-through measure is useless here. Third, recent tests on recall rates on brand advertising in online video have shown substantive positive results.
Now as far as the $1CPM, that's been more in the UGC space and more of eCPM than a CPM. Hence, this may have more to do w/a need to better curate their sites than because CPMs are that low. Indeed some of those sites should get less than that given their content, but I've seen plenty of UGC sites do a great job w/curation. Blip.tv comes readily to mind, but so does Howcast and several others.
It may be a tad early to sound the death knell of online video, but good luck w/that ;)
One good example is http://www.beautifulstranger.tv, a fashion site which interviews good looking people (mostly women) on the street. While they describe the clothes and accessories that they wear, a frame next to the video puts up links for each product. Click on a link and an ad is shown in a window. A good example of advertising and content working together without friction.
As the owner of one of those alternatives, we first thought about how to harness the power of video to extend motion advertising to the Web. Looking at the success of YouTube and viral/home made video, one would conclude there is great potential to extend video into the business world. But how?
Focusing on a non-intrusive approach may get more consumers to view video ads. Keeping in mind people or "consumers" need to buy things almost on a daily basis. But serving them up in places that consumers are there to view other content is perceived by many as intrusive.
Business Directory's in the past have for the most part failed--with the exception of the big players like Yellow Pages/Yellow Book. Replace the thumbnail pictures representing the company and their products with Video, and we believe you have something. Make it much more affordable (leave out CPM's) and create a low monthly fixed cost and people in a down economy can suddenly afford to pay for advertising. Add a social/business networking element and you have interaction. The interaction helps businesses perfect their product offerings. Add the ability for business to create and offer discount coupons and you have happy people paying less than retail.
Altogether you have Hot Pluto; a non-intrusive, affordable, interactive and far reaching video advertising solution.
We are the first to realize we have a long way to go with content and traffic but it is catching on! That is why we are offering FREE upgrades with the understanding there needs to be a convergence of content and traffic to make a site successful. We are patient but have a specific goal we get closer and closer to each day.
Brett Hill-CEO http://www.hotpluto.com
Yes, the poor economy, CDN + ad serving fees , a plethora of video ad inventory & slashed corporate marketing budgets have all contributed to lower CPMs for publishers in 2009. However, the publishers who produce"top quality / premium content" are still garnering high CPMs and are selling out of their inventory (eg Hulu,+$40CPMs, ESPN,+$30 CPMs, CNET, +$30CPMs, etc.).
OK, I do agree that video ad spend hasn't grown nearly as fast as we all had originally thought, but as Steven Comfort mentioned, no other online ad segment is expected to grow at +30% yr/yr growth for the next few years. I don't even think Search Marketing spend is even forecasted to grow at these %s over the next 5 years, right? Even though its all relative to the size / scale of each online ad segment since Search is on a much bigger scale.
In fact, I've had many conversations over the past few months with several CMOs and agency media planners where they believe that 2009 is "The Year of Branded Video Content" creation where many brands will start to shift budgets towards the development of video content libraries on their own corporate websites. Verticals like CPG & Entertainment will lead the charge and many other verticals will follow. As more and more content producers and marketers pour more resources into video(ie content or ads), its only natural that there will be a 2nd wave of video ad spend growth once the economy comes back.
That said, I attended a broadband video schmooze event last week sponsored by Will Richmond's VideoNuze, and the panel speakers clearly were supportive of investing and developing online ad models complementary to their traditional business. http://www.videonuze.com/blogs/?2009-03-19/Digesting-the-Broadband-Video-Leadership-Evening/&id=2131.
The online video ad market should best be described as "developing" vs. "dying." Regardless, emerging business models and technologies are required before it will become a primary revenue source. And these investments in these models and technologies are raging in full force.
You can reference our blog at www.inlethd.com/blog for further discussion.
I defy anyone to name a segment of the online ad world that will have more incremental media dollars allocated to it (from the Top 200 brands that move the U.S. ad market) over the next 3 years...
If anyone remembers responses I've had to previous online video posts for the past year (doubt anyone would), I've consistently said CPMs NEED to fall. Back when we were garnering $25-30 CPMs, there was little revenue coming in. As CPMs have fallen, I've seen overall revenue rise dramatically.
This stands to reason. Too much video and not enough revenue means empty video running...monetizable video. It's better to sell through 90% at $12 than 40% at $30. And that's what's happening.
On the unfortunate side, however, UG video will die a death of a thousand cuts, and this represents a large portion of online video. After all, how many videos can one view of teens dancing to music, or teen boys doing ridiculous and dangerous stunts? Not only that, who wants to advertise in that stuff?
Advertising for good content will continue to find pre-roll partners who are willing to pay a reasonable CPM for 100% share of voice. Pre roll is a near guaranteed view of an ad, and at current levels of $15-18, it's a bargain versus on air advertising. I suspect online video advertising will grow dramatically in the second half of 2009, and continue upward from there...for PRIME content.