As a video ad industry executive, I am often asked to provide perspective on two topics: new innovative video ad products, and what Google is doing. These topics have been combined recently with a slew of questions about Google’s TrueView ad unit for YouTube and its value for advertisers.
Lets take a closer look at how TrueView works:
1. The video ad is skippable by the viewer after five seconds
2. Because it is skippable, the video ad can be of unlimited length
3. The advertiser only pays for the video ad if the viewer watches it for 30 seconds (or until the end, if the ad is less than 30 seconds)
4. If the viewer watches the video ad for 30 seconds (or until the end, if the ad is less than 30 seconds) then YouTube counts it as a “YouTube view” on the advertisers video page on YouTube
So, here’s my perspective on who benefits:
Value to viewers. There is no doubt that TrueView is good for viewers. The average skip rate for TrueView is greater than 80%, which means that the vast majority of the time the viewer is skipping the ad. Since most viewers would prefer to have no ads or the ability to skip uninteresting ads, the value to the viewer is clear.
Value to publishers. The value to publishers appears to be high, for two reasons. First, TrueView is generating comparable CPMs to linear pre-roll ads. These high CPMs are generated because TrueView is an expensive ad unit for advertisers and priced on a per completed view rate. In fact, if you back out the per view pricing on a CPM basis, many advertisers would be paying CPMs well north of $100. Second, the greater than 80% skip rate means publishers lose less viewers as a result of showing ads. Our data suggests that at least 25% of viewers leave the page when they see a pre-roll video ad, and TrueView is reducing this churn.
Value to advertisers. The value to the advertiser remains to be determined. On one hand, the YouTube views generated by the TrueView ad unit are in high demand because they lead to more viral viewing of the video within the YouTube ecosystem and high view counts make agencies / creative folks look good. In fact, video advertisers have been buying YouTube views from many vendors for years and, although few can quantify the value of a YouTube view, they are willing to pay a huge premium for them in the marketplace. On the other hand, most advertisers will end up paying a significant premium for TrueView and will have a CPM back out to rates that are $30, $50 or even over $100 on CPM basis. At those rates, it is very hard for most advertisers to have a compelling ROI; no advertiser I talked to could justify the rates on a standalone basis.
However, there are a couple of caveats where advertisers are seeing unique value:
1. Advertisers that have highly compelling creative, such as a TV show promo, movie trailer or humorous advertising, will have a more efficient campaign CPM with TrueView. These advertisements tend to have low skip rates (such as movie trailers), and therefore TrueView becomes much more cost efficient. In fact, rates can be as low as $10 to $30 on CPM basis, which is very low for TrueView.
2. Advertisers with long-form creative, such as pharmaceutical or political advertisers, find unique value in the TrueView unit because you can run creative of any length.
At this time, the movie industry seems to be the greatest advertiser beneficiary of the TrueView ad unit because both caveats apply: They have highly engaging ads (who doesn’t want to watch the “Prometheus” trailer?) and they have long form ads (usually 60 seconds to two minutes).
Value to Google. It appears that TrueView is nearly the perfect ad unit for Google, as it combines a pro-viewer and pro-publisher ad unit with compelling economics to YouTube. In addition, the offering allows Google to leverage its greatest strengths from search and display: ad targeting, scale and a single ad platform buying experience.
For advertisers, the long-term question remains whether TrueView can continue to justify the premium price in the marketplace as budgets continue to grow. The combination of selling media (impressions) with a social offering (YouTube views) is unique in the marketplace. (This is the equivalent of Facebook offering a free “like” every time a viewer clicks on a Facebook display ad.) However, there is no standard for measuring popularity on YouTube, as ROI is still evolving across social media channels, so the value of TrueView remains to be determined.
My belief is TrueView will continue to garner a significant market premium because YouTube views will continue to be in demand. But there’s still a lot of unanswered questions – and advertisers may be willing to go elsewhere if they can get the same value and viewer engagement at a lower cost.