• by Tod Sacerdoti , August 13, 2008

On a recent agency tour, I was asked the same question in Atlanta, Dallas and Los Angeles.  How can ad agencies convince DR (direct response) clients to run online video advertising?

The answer is simple. Before DR clients can or should be "convinced" of anything, the industry has to solve some key issues in order to make online video advertising profitable for them. Otherwise, what the client ends up facing is a series of small budget and, likely, unsuccessful test campaigns that prove to be nothing more than a waste of everyone's time.

The key outstanding issues for DROV are:

1.    Price: Current pre-roll CPMs are so high that most DR video campaigns are significantly ROI-negative. More, most branded publishers will leave unsold impressions blank rather than price them effectively for DR advertisers.

2.    Creative: DR video advertisers haven't created and tested a wide range of video creative in the same way that they have been willing to test display advertising.  This is likely because they haven't established budgets for this category and no vendor has created a cost-effective solution to resolve the issue.

3.    Measurement: Nearly every DR video campaign measures ROI only on the video inventory. All industry research suggests that online video advertising, particularly pre-roll advertising, increases conversion lift across all media.

The price issue can be solved by establishing tiered pricing structures -- a standard across most online and offline media categories. Essentially, branded publishers will need to accept DR campaigns at rates that are likely 33% or less of their current average price.  Once the price tier is established across a scalable volume of branded inventory (not social media or other low value inventory), immediate and significant budgets from DR advertisers will be seen.

The creative issue must be jointly addressed by advertisers and vendors.  First, advertisers need to make a committed effort to find ROI-positive offers through the rapid development and testing of DR video advertisements. Simply regurgitating DRTV or other video content has not been effective to date, as the Internet is a different medium.  Second, vendors must either provide technology solutions that reduce the cost and increase to speed of video creative development or be willing to bear some of the cost of the creative development.

Proper measurement of the impact of video advertising across all online advertising efforts including search, display and video is the best way to evaluate measurement. By creating a proper control group, taking into account other online and offline campaign efforts, advertisers can measure the lift that is solely applicable to the video campaign.  For example, our initial studies demonstrate that for new product launches, video advertising will both increase search volume and increase search conversion.

By jointly committing to solving these issues and putting skin in the game, online video advertising publishers and vendors can develop a DROV business that will significantly expand the category.  In fact, if search and display are any indication, the DROV category may be the majority of the business in the future.