Why Pandora Rocks -- And Online Video Advertising Should Start Over
I am a Tom Petty, Dave Mathews, and Ray LaMontagne kind of music guy, but lately, I can’t stop playing Lynyrd Skynyrd’s “Simple Man.” If Natalie Merchant, Patty Griffin, or Dar Williams want to sing me the phone book, I’m taking the call. I also enjoy newer music like Imagine Dragons, and this past Saturday night I saw Zedd perform at the Facebook Super Bowl party, so my status as the “cool uncle” remains intact.
Music services like Pandora give consumers more pleasure from their love of music, and in return, insert ads into these personal soundtracks (for non-paying subscribers). The strength of their ad offerings is audio-based ads. They also offer advertisers display ads within the online music player, video interstitials, and rich-media ads served on mobile devices, so they claim to deliver advertisers opportunities with “sight,” “sound,” and “motion.” The reality, however, is that their core strength is the audio ad served “one at a time” so users don’t sit through two commercials in a row before returning to their music (brilliant).
Online video companies (like Tremor Video, Hulu or YouTube), are more suited to deliver advertisers' sight, sound, and motion all in one ad execution. So, on the surface, these kinds of video-centric ad sales companies have a huge advantage over online music services, particularly at unlocking those coveted “TV dollars.” That’s one reason why YouTube netted $1.9 billion last year in global ad sales.
However, if you dig deeper and listen more closely, there is an overwhelming advantage online music services deliver to advertisers over video ads. The content Pandora offers a consumer is professionally created and of the highest quality imaginable, and consumers often memorize it. Online video content is significantly and inherently of inferior quality, and consumers perpetually forget and often regret watching it (like the video I saw last week of that deer farting).
High-caliber content allows a publisher like Pandora to do something no company in the video ad space can, or is willing to do: earn and nourish the attention of the advertiser’s target audience first, before serving an ad, and then sustain it after playing the ad. When you listen to music on Pandora, you hear multiple songs before you hear the first commercial. The content has tucked your attention in under a warm blanket well before an ad taps you gently on the shoulder and whispers in your ear. Comfortable and content (pun intended), consumers are more likely to listen to the ad than to abandon their experience.
In comparison, inferior content creates a perverse scenario driven by misaligned incentives. Video-centric publishers and networks bluntly force ads upon consumers before they even take their coats off. With zero confidence their content can hold the consumer’s attention, and a pay structure based on “ads seen or viewed,” the pre-roll ad is the standard offering, as is the revolting practice of “auto play,” which artificially inflates ad view-through rates while infuriating consumers. No wonder 41% of pre-roll ads served in front of short-form content are abandoned. The way the online video advertising ecosystem currently works, there is a greater incentive to shove more crap content online, then there is to invest in improving the quality of the content.
Does the effectiveness of the communication between an advertiser and a consumer improve if consumers have already settled in and digested some content before they hear an offer from an advertiser? Or does hitting them with an ad immediately get the job done? The latter is certainly driving huge revenue for video networks and aggregators -- but does the former deliver more value to the advertiser?
Here’s some food for thought. When a waiter comes over and shares the dessert options after you finish your main course, you tend to remember all your options and then pick one, right? But when that same waiter announced the specials earlier, when you first sat down at your table, you likely nodded but didn’t really listen, and then needed those options repeated when the waiter came back to take your order (and you ended up ordering something off the regular menu anyway, right?).
Pandora is serving up dessert, while online video networks and aggregators are pushing specials that are said, but not heard.
Instead of playing into the obvious short game video networks are playing, premium publishers would be better off hitting the reset button on their video strategy and going back to the common-sense approach of showing ads after serving the content needs of the consumer, and not before. The focus will shift back to quality -- and that would be music to the ears of both consumers and advertisers.