• by Gavin O'Malley  @mp_gavin, February 22, 2008

Testing a cost-per-engagement model, Web video technology company VideoEgg has launched a network offering advertisers a more measurable way to reach engaged consumers using video and rich media.

The AdFrames Brand Response Network is designed for advertisers to negotiate a price for engagement, thus offering a more valuable indicator of consumer interest. The model diverges from the standard model in which advertisers buy online inventory based on impression--spending a set amount per thousand delivered views, what's known as CPM.

"Advertisers need to move beyond the metrics of eyeballs and evolve from 'how many' to 'how good,'" explained Troy Young, chief market officer of VideoEgg. The new model, added Young, "takes risk away from the advertiser, while offering them a "predictable approach to distributing highly targeted video."

Microsoft is one of the first companies to use AdFrames to distribute video content promoting Microsoft Office. The ads will run across the Eggnetwork, which includes hundreds of social sites and applications.

"VideoEgg's AdFrames approach allows us to deliver high-impact video messaging to an engaged audience," said Jamie Conner, media manager with Microsoft.

The AdFrames solution distributes video or rich media through an expandable ad unit that can be formatted to fit any size on a page, widget or online game. AdFrames also plans to align incentives across the delivery network by compensating publishers on user engagement.

Engagement doesn't begin until a user rolls over the ad, and the AdFrame Invitation has expanded into an overlay. AdFrames includes a countdown during the rollover to ensure that the user is not engaging with the ad inadvertently.

Because VideoEgg manages the entire process, advertisers avoid paying further money to third-party rich media companies that traditionally format the advertising assets, according to Matt Sanchez, CEO of VideoEgg.

"Video is the richest, most effective way to deliver brand messages," Sanchez said.

To expand the distribution of its invitation-based video ad network, VideoEgg last month secured partnerships with three popular content-sharing communities--Metacafe, iMeem, and Buzznet--increasing VideoEgg's network by 50 million unique users, along with its exposure to social video-sharing communities.

The partnerships, according to Sanchez, were facilitated by enhancements to VideoEgg's Eggnetwork, which the company launched in late 2006 for advertisers to place ads in user-generated video across social networks including Bebo, Dogster, hi5 and Tagged. The Eggnetwork ad platform now allows deployment of video advertising in any Flash environment.

Founded in 2005, VideoEgg has based its success on opt-in ad technology that stands in contrast to unpopular pre-roll video advertising. VideoEgg taps social networking data to aggregate appropriate audiences for advertisers. Targeting tools help advertisers identify and interact with relevant consumers.

In September, VideoEgg secured another $15 million in funding led by Focus Ventures. WPP, August Capital, and Maveron also contributed to the round.

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

In April, WPP invested an unknown sum in VideoEgg with the intention of exploring its various ad-serving methods.