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RSSWhile the dynamics of supply and demand exist in all online ad markets, most categories are demand-driven because of enormous amounts of inventory oversupply. However, pre-roll video is different. On the demand side, pre-roll video is rapidly emerging as the single most desired and highest performing online branded ad unit on the Internet. On the supply side, publishers have been slow to integrate pre-roll and to drive traffic to their video sections, and high quality inventory continues to be fundamentally limited.
Pre-roll demand is primarily driven by the strong general interest in video and the units specific strengths with regards to high volume distribution, guaranteed impression capabilities and burgeoning publisher support. Further increasing demand is the fact that pre-roll is outperforming other video units on most performance metrics. For clients targeting commercial views, pre-roll is by far the best value on a cost-per-view basis. In fact, in-banner video is often 10 times or more expensive on a cost-per-view basis, unless of course it is auto-played which comprises the comparison. For clients targeting clicks, pre-roll delivers five to 20 times the click-through rate of comparable banner or sponsorship units. Lastly, multiple studies of online video have further demonstrated that pre-roll scores strongly in measurements of brand recall and brand lift.
On the supply side, high quality pre-roll video inventory is fundamentally limited. Publishers are getting much more savvy in regards to highlighting video content and driving traffic to the video section of their site, but it is simply not driving enough impressions. Lower tier or high volume user-generated publishers are trying to repackage their inventory in hopes it will be perceived as high quality, but the market is simply not valuing this inventory in the same way. The supply problem will likely be solved, but it will take time.
So, is pre-roll inventory cheap or expensive at its current price? Supply and demand would suggest it is correctly priced but it is more interesting to consider pre-roll pricing on a relative basis, such as compared to television. Here is where disconnect occurs. The standard argument would suggest that prime-time television inventory is priced around a $15 CPM and high quality pre-roll inventory is priced at around a $30 CPM, so online is clearly overpriced. However, the "M" in the CPMs of television and pre-roll are fundamentally different, thus creating the M&M problem.
First, television impressions are based on overall viewing statistics -- but a significant percentage of viewers skip the ads, are out of the room or simply don't watch them. Pre-roll impressions are user-initiated, so the actual view-per-impression ratio is much higher. Second, online video impressions include companion banners that stay on the page during the play of the subsequent video. This additional impression is not counted as an impression in the pre-roll CPM calculation and, if so, would decrease the CPM price of pre-roll. Lastly, online video ads are delivered to active viewers who are awaiting a piece of content that they personally selected. No study has quantified the difference, but the value of this impression is clearly higher than a passive viewer.
When pre-roll CPMs are adjusted to address the M&M problem, pre-roll and television pricing appear comparable. These facts, along with the high performance metrics of pre-roll and increased support from publishers, suggest that the pre-roll unit is going to continue to gain traction. In fact, I predict advertiser demand will grow faster than inventory supply in some categories and we will find pockets of pre-roll inventory that actually go up in price significantly over the next twelve months. If that happens, pre-roll pricing may end up being overpriced after all.
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For me the principal value of pre-roll has always been the same as banners: that is the ad is only shown when a page request ( or play request)has been sent signifying active live participation by the viewer. No other medium can make this claim. While you can hit the back button, most pre-roll is also coded with no-skip.
As others have pointed out, most pre-roll environments also only have one unit and most sites are limiting plays/session. If I watch an hour of video on CNN.com I bet I would only see about 10 units vs. 20+ on air.
It is true that the pre-roll clicks are fantastic, but let's not skip over the fact that you CAN click. Last time I checked I can't click on my TV, allowing further engagement with your message.
The reality is that TV CPMs have largely been flat for years due to over supply and declining value. Along comes a new higher value form of TV and what happens....the market sets a higher price.
In a time when broadcast/cable TV is struggling to justify their CPMs, pre-roll should be a welcome tool in the buyer's bag to deliver the power of a new form of television to their clients.
Second thought: In the recent weeks we've seen a transition to longer forms of video (As Hulu and NBC direct). Longer forms will probably make mid rolls more popular in the market and will give us bigger "shelf space" So the question that should be raised is what will be the effect of mid rolls on M&M
I enjoyed your ‘M&M’ analogy, it strikes a chord with a lot of what I see here in the UK.
It was questions like ‘how do I determine the true value of online video?’ and ‘how do my users actually consume my streams?’ that prompted us (Nedstat http://ww.nedstat.com >) to develop a product that would allow us to measure views at the point of consumption (the browser/player) rather then trying to extrapolate out from the server.
We termed this technique ‘Stream Sense ™’ and what it allows our clients to do is to absolutely understand how many of their audience start a play list (which could contain a pre-roll, the main content and a post-roll) and accurately measure how many saw the paid for clips, for how long and at with what frequency.
An additional benefit of using the point of consumption as the collection point is that we can seamlessly combine ad views served by a third party network with the main content served on the client site, at a unique user level. This enables clients to understand the impact of ad formats, duration and frequency on site behaviour and brand equity in really powerful ways.
As you mention, having rich and useable information about streaming consumption is a key requirement that advertisers should be demanding before parting with marketing dollars. The WA industry is reacting to this call, and leading edge solutions like Stream Sense are in the vanguard of the drive towards the true monetisation of video online.
I am always leary of claims like this Tod. So if the same advertiser is running a pre roll ad and a Leaderboard ad for example (at different times and on different pages) -- the consumer is 5x - 20x more likely to click on the video ad seeking "more information about the advertised product or service" versus the leaderboard?
Is it possible the consumer is just trying to turn off or shut down the preroll ad in the way of the content they want to see and they generate a false click through in their attempts to so.
Companies selling Pop Up ads used to make similar claims as you have here and it just seems to lack a degree of common sense.
Standard TV will have about 4 ads per pod, making each ad compete with the others for the viewer's attention (assuming the viewers are actually there at all, and not getting a snack).
Online has 1 advertiser per pre-roll, and it's pretty evident they are paying attention, and NOT getting a snack, because of the click thru rates are very high.
If we, in the online world, were to alter CPMs for pre-roll to account for the lack of clutter in our video viewing environment, then the Standard TV $15 CPM should actually be somewhere around $300 (1 ad in pre-roll versus 20 in Standard TV - 20X$15).
As a result, when accounting for "clutter", pre-roll is a virtual steal for advertisers.
Thanks for the great info.