• by Gavin O'Malley  @mp_gavin, August 27, 2007

"OMG advertising!!" is what splitforces, one YouTube commenter, had to say about the InVideo ads unveiled on the site last week. Scattered up and down YouTube's comment threads, early reactions to the new format varied from mean and critical to favorable and constructive.

A commenter named fardousha warned: "If ads invade youtube, i will desert it," adding: "What attracted me in the first place is ads free quality time. Long story short, it ain't a good idea."

"I really like the InVideo ad," remarked gsully224. "It is MUCH better than a preroll ad, and more innovative and interactive."

Seconded gatorspit: "I think they did a good job with this, much better then tacking [an ad] on the front like most video sites do."

The top video-sharing site online with a lively commenter community, any change to YouTube's structure or design invites instant criticism and discussion. To no one's surprise, YouTube's decision to finally allow ads to invade the walls of its video player triggered a torrent of user commentary last week.

YouTube's InVideo ads are semi-transparent overlays, which run at the bottom of its video player, and stream for 10 seconds about 15 seconds after a video begins. Many of the Flash animations are interactive, as users can click through to an advertiser's linked URL or streaming video spot.

Of the 20 or so advertisers that YouTube said are testing its InVideo units, ads have already appeared on the site for New Line Cinema, BMW, Fox and Warner.

As YouTube's rivals--and some of its users--have noted, YouTube is not the first Web video company to experiment with Flash overlays.

"You ripped off VideoEgg!" commented bdc2005, in reference to the video technology company, which has championed pre-roll video ad alternatives since its launch in 2005.

Brightcove and Adbrite are at least two other companies with experience in the area of overlays.

Like the response from YouTube's community, industry reaction to the InVideo ads has been mixed.

According to Brightcove CEO Jeremy Allaire, advertisers are not particularly fond of the overlay format.

"To our disappointment, there has been extremely limited uptake by the advertising community around these formats," Allaire said in an email, citing advertisers' continued preference for pre-roll ads as one reason for the failure of overlays.

T.S. Kelly, head of research at Media Contacts, the interactive arm of media-buying firm MPG, said he passed on the InVideo tests with YouTube because the format is "unproven."

"I really wasn't too excited about it," Kelly said of YouTube's initiative. "I'm excited about new opportunities around online video, but I'm not really sure that this is going to move the needle for our clients."

For Adam Shlachter, partner and group director at Mediaedge:cia's MEC Interaction, the InVideo ads are fine, but he and his clients are more interested in an ads' targetability.

"They could work depending on what a client is trying to achieve," said Shlachter. "But, I want to know how they plan on targeting the ads. That's where things get interesting."

Going in the face of convention wisdom, Brightcove's Allaire insisted that advertisers have not felt a consumer backlash from pre-rolls.

"For premium brands and content, the basic pre-roll and companion banners are yielding extremely attractive CPMs and there is little evidence that :15 ads have any negative impact on end-user viewership behavior," Allaire explained in his email. "In fact, our own metrics show that sites that run without any ads, and then introduce :15 pre-rolls and banners achieve identical usage and performance (e.g. no drop-off in users because of ads) on their content."

If only due to the sheer novelty of the event, many YouTube users have been actively seeking out the new ads.

Unable to find the spots, a commenter named adrigent complained: "If we don't see the ad, how can we decide whether its annoying or just nice??"

U.S. online video ad expenditures are expected to total $775 million in 2007--up 89% from last year, according to market research firm eMarketer. That number represents about 4% of the projected 2007 U.S. online ad spend of $19.5 billion.

Separately, YouTube late last week rolled out several new community features to further promote user engagement.

In an effort to encourage more "constructive" comments, while deterring spam and abusive comments, YouTube is now helping its community to moderate comments with a positive (+) or negative (-) vote.

Users can now discover the top-ranked videos, and view the last five videos that any user rated. The list is posted in a user's "channel." People can also now see a video's rating history under "more stats."