Commentary

Are Video Ads The Next Digital Bubble?

These days, two things about digital video ads are hard to avoid: (1) news informing us about the rapid growth of videos as a leading form of digital advertising; (2) actual video ads that pop up, grow in, slide over, and find every other conceivable way of presenting themselves to us as we try to consume content we actually care about.

It’s my opinion that the growing popularity of video as a form of digital advertising is a bubble that is bound to burst. I am referring specifically to video ads that appear on content sites, as opposed to pre-rolls and similar ads that appear as part of content videos.

Remember contextual ads, those double-underlined words or sentences, that, if you had the misfortune of mousing over them, would open a small hovering ad? Companies like Kontera and Vibrant took off like bright rockets in the night. Before long, these ad-tech stars came back to earth (some landing more softly than others) and the dreaded pop-up links became nearly extinct, to the collective relief of online users worldwide.

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We should ask two questions about the parabolic trajectory of this particular form of digital advertising. First, why did they become so popular in the first place? Second, why did they lose popularity so rapidly?

The main reason contextual ads rose in popularity was because, when first introduced, they showed much higher engagement rates than traditional banner ads. Advertisers and publishers alike clamored for these miraculous new ad units that fit seamlessly within their content.

The main reason for the rapid collapse was, quite simply, that these ads were extremely intrusive, and the majority of impressions were most likely due to users accidentally hovering over the infamous double-underlined words. Users rapidly adapted, learning to spot and circumvent the telltale signs of these ads. Engagement rates plummeted. Publishers and advertisers fled. Companies failed.

The parallels with the current video ad craze should be self-evident to anyone who actually spends any time online. The first time I saw one of those self-expanding, auto-playing, inline videos while reading an article, I was admittedly intrigued. Today, as soon I detect one of them within my peripheral vision, I can feel my attention focusing tightly on the text as I seamlessly scroll the page so that my gaze can leap right over the video, landing cat-like on the next line of text as I scroll the ad out of view. For those publishers uncaring enough to play these videos with audio enabled, I typically immediately close the offending window, or, if I really care about the content, I will look up toward the video just long enough to find and click the mute button.

There is one fundamental difference between contextual ads and video ads that, in my opinion, will cause video ads to outlive their contextual counterpart. For contextual ads, once users learned to avoid the double-underlined words, the number of impressions plummeted. For videos, thanks to the industry definition of viewability, even if I completely ignore the video, mute it, or close the offending window, in most cases it will still count as a video impression. Hence it will take much longer before advertisers start to realize that their money is going down the toilet, or for publishers to realize that these ads are sometimes driving their own readers away.

This difference is equivalent to adding a powerful booster to the rocket that is propelling video ads skyward. But the same gravity-like forces that caused the contextual advertising rocket to crash are tugging inexorably on the video advertising rocket. As anyone who has studied physics – or simply tried throwing a stone up in the air – will know, a larger boost means a faster rise and higher trajectory, but the ultimate path will still be parabolic. And the crash will leave a larger crater.

14 comments about "Are Video Ads The Next Digital Bubble?".
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  1. Ned Newhouse from Conde Nast , June 9, 2015 at 4:33 p.m.

    Video works because of CMO comfort for branding without a click through AND the agencies like it because they can spend a lot of money quickly without digital accountability.  Video will especially continue to work until CMOs start insisting for decent and informative HTML5 ads become the norm.  THey continue not to fund any kind of creativity in banner ads and thinking it going to work.  Sort of like running a 15 sec TV ad with no sound and expecting results. We dont have banner blindness, we have bad creative that insults people, not worthy to stop and take action.

  2. Leonard Zachary from T___n__, June 9, 2015 at 4:58 p.m.

    Mobile and Video Ads are in the first inining of its evolution.

  3. Paula Lynn from Who Else Unlimited, June 9, 2015 at 6:05 p.m.

    Bigger, better, more intrusive has been the pattern since the first digital finger. How far will the video digital ad companies with their pushy account take it before the bubble bursts ? There will come on the other side with no ad apps or no video or no pop ups popping up. Greed, pure greed.

  4. John Osborn from Turnstil™, June 10, 2015 at 12:29 p.m.

    It will be interesting to see if your prediction comes true Paolo. Brand advertisers and agencies for years have paid high premiums to TV networks and local TV for the opportunity to view an ad, with no guarantees of engagement or viewability. And lengthy TV ad pods have been high on the list of most intrusive, interruptive methods to deliver a marketing message. Yet television still commands high premiums because that's the way it's always been done. As that money shifts from TV (television) to T/V (Television/Video), will advertisers finally demand guaranteed viewability, and be willing to pay for it? There's a shortage of premium pre-roll inventory right now. So your questions of when, how and why are fascinating to ponder and to watch as the marketplace responds.

  5. Ed Papazian from Media Dynamics Inc, June 10, 2015 at 1:07 p.m.

    @John, it's a bit unfair to keep contending that TV networks and stations offer advertisers no guarantee of "viewability" when, in fact every ad runs from start to finish on the viewer's TV screen and if there is some sort of extremely rare technical glitch that interrupts the ad or garbles it, appropriate compensation is always offered.

    As for "engagement"----or the lack of it--- due, mainly, to rising ad clutter, advertisers are as guilty as the networks. In the mid-1960s when the standard in-program break in primetime was 60-seconds long and featured either a single "60" or, less commonly, two "piggy-backed" 30s for different brands for the same corporation, advertisers championed the switch to stand-alone 30s at half the price of "60"s---to lower their CPMs. Again, in the 1990s, advertisers pressured the networks to sell stand-alone "15s" for the same reason---to lower CPMs. In both cases, it didn't bother anyone on the advertiser side that shorter lengths meant more individual messages per break----hence less impact per commercial.

    Since then, it's been the networks and cable channels that have added to the ad clutter in their breaks---as a way to off-set lower dollar yields per ad due to rating fragmentation by selling more spots----so, they, too, are guilty. But advertiser's shouldn't get a pass on this issue.

  6. Paolo Gaudiano from Infomous, Inc., June 10, 2015 at 1:32 p.m.

    @john, glad to be providing some food for thought! It's hard to predict when we may start to see a bubble. Based on the roughly 18-month cycle for contextual ads, and given the added stickiness of video ads I mentioned, my guess is 2-3 years before we start to see a noticeable decline. Also it will be important to tease out different forms of video ads (as I mentioned, pre-rolls are a different beast because by definition if it's a pre-roll it means someone was looking for video content in the first place). The current viewability debate will also have great influence.

  7. Doug Garnett from Protonik, LLC, June 10, 2015 at 5:15 p.m.

    Great post. I thoroughly agree - although it's less on the viewability & cost questions and more on the simple fact that we aren't finding that video ads reach consumers as effectively (and I mean communicate with them in ways that are compelling).

    The content can be just fine. But it's far easier to create and put up a video ad than it is to find a way for people to see it where it's compelling.

    One reason is that the digital user is generally "on a mission" (in some shape or form). That makes them unlikely to care about a message from an advertiser that's outside the mission. With traditional TV by comparison, the viewer has settled into viewing and that seems to put them in a spot where they're open to new things like your advertising (I don't have firm research showing this - but some solid qualitative work that suggests this idea).

    I'm sure digital enthusiasts will complain. But the reality is - this is the stuff that matters first and foremost:  reaching the human with a message when they're ready to receive. All the convoluted tech theorizing simply can't over-ride the human.

  8. cara marcano from reporte hispano, June 10, 2015 at 5:18 p.m.

    #ROI not just #cpm as Ed says here. 
    Video without sound just seems odd @ #engagement and as #content play to drive #sales. 
    Why would anyone want to watch a good video without sound? 
    The media budgets are over-indexed in digital and things that folks don't seem to be able to define for ROI and sales growth and yet continue to invest in.
    Look at the lack of investment in #Hispanic and other segments and the inability to lead with segment insights with the budgets, despite the fact that we see segment marketing driving sales.
    An example of this is the new Whirlpool campaign targeting Single moms. Their sales are up 6% taking that segment insight of the single parent and running with it. I dont' see anyone up 6% doing general market digital and yet you still hear folks suggest a digital budget should be 100% of the media investment. In some cases for some brands, the budget should be 100% on Hispanic media. I see no evidence for 100% on digital. The systematic bias of what one other media professional referred to in another comments section as the "system" keeps a lot of us who are engaged from driving sales as we would like. 
    I agree with Ed here and the history he provides and his defense of traditional media. 

  9. Paolo Gaudiano from Infomous, Inc., June 11, 2015 at 6:50 a.m.

    @doug - I completely agree. I have previously expressed the opinion that advertisers only go so far as to ask themselves "how can I get the attention of the reader?" rather than asking themselves how they can make themselves relevant to the reader in the context of whatever it is they are doing at that particular moment. This is much more relevant for direct response campaigns than for branding campaigns, but even in the latter case, getting people's attention is not necessarily enough, and in some cases it can backfire.

  10. Robert Helstrom from Sightly, Inc., June 11, 2015 at 11:36 a.m.

    Forced view auto-play video ads in-display are legacy ad units and the fallout has already begun—witness the recent industry uproar over viewability, which most publishers are struggling with. You exempt pre-roll ads on video content (i.e., in-stream ads) from your bubble speculation, which I agree with—especially the skippable ads vs. the forced view ones. The good news is that by combining skippable pre-roll with dynamic ad personalization and advanced audience micro-targeting, the end of annoying video ads may not be that far off.

  11. Paolo Gaudiano from Infomous, Inc., June 11, 2015 at 3:25 p.m.

    @robert - excellent point. I have previously commented on viewability standards elsewhere on MediaPost, but had overlooked the connection you highlighted.

    Given the performance reported by Google/YouTube on the skippable ads, it is shocking to me how many advertisers still choose to force viewers to sit through non-skippable ones. I doubt that annoying ads will end, but hopefully market forces will lead to the demise of the more annoying and less useful ad formats.

  12. Ed Papazian from Media Dynamics Inc, June 11, 2015 at 4:41 p.m.

    @Paolo, we should remember that branding advertisers need to gain full exposure for their video ads. They don't know, exactly who is going to be receptive so they must opt for platforms that "force" the viewer to watch.

    This brings up a very important point. I have mentioned it before but it bears repeating.

    As with radio, from the outset, TV viewers have been conditioned to accept commercial breaks that interrupt program content as the price they pay for being able to watch their favorite shows. This doesn't mean that many dont "zap" the commercials or fail to pay attention---they do----but in general, most TV commercials are "seen" to some extent by 50-60% of what is reported as the "commercial audience"

    In digital media---sponsored episodes of primetime network shows and some other programming being notable exceptions---the video ads are simply inserted into videos, that would be there anyway---with or without the advertisers. Digital audiences know this and resent the intrusions----and rightly so---as little or no effort has been made to create advertiser sponsored content that is unique and would not be available unless ad dollars paid for it. Nor have digital audiences been "educated" about this---so they are more tolerant of commercial breaks.

    Consider the contrast between the two platforms.  TV viewers recognize the advertisers' contribution to their enjoyment---many thinking that "the sponsors" have something to do with the shows on the creative side---which is not the case. So they do not resent commercial breaks as totally unwarranted intrusions; In most cases, digital audiences do not see any connection between the advertiser and the content so, for them, the ads are annoying distractions and very annoying.

    In my opinion, digital "publishers" and ad sellers need to find a way to link advertisers to appropriate content in such a manner that digital audiences feel the same way as their TV counterparts---that the advertisers' dollars are why the content is available to them, hence the advertiser has a right to at least expose his ads so they can be seen----even if the audience---or portions of it don't pay attention.

  13. Paolo Gaudiano from Infomous, Inc., June 12, 2015 at 6:24 a.m.

    @Ed - I tend to disagree with your interpretation of the difference between TV and digital ads for a few reasons. First, while most people probably understand the need for advertisement to support TV programming at a conceptual level, I doubt very much that while watching an individual show, their annoyance is influenced by that knowledge. I tend to agree more with @Doug's intuition that consumer behavior is fundamentally different when you have settled in front of the TV than when you are surfing the web.

    Second, online ads are much more invasive and "random" in the sense that during a TV show I have a pretty good idea I will run into some ads at some point, and when I do, I know that I have to put up with a few minutes of disruption and then will be able to get back to my programming. In contrast, digital ads are clutter that can appear in any format and at any time. If advertisers had the same control over TV programming that they have over digital content, you might find ads popping up every single time anything interesting is about to happen in a show, or maybe small "balloon" ads would overlay a scene whenever an actor uttered a "contextually relevant" word.

    Third and perhaps most important: on TV if ads come on I can do some channel surfing, but if I am watching a 30-minute show I am likely to stick around. On digital, with average page visits of under 2min and with an infinite supply of content, it is much more likely that an annoying, intrusive ad will drive me away.

    Let's hope that the convergence of digital and TV does not mean that some day TV ads will become as invasive as digital ads...

  14. Ed Papazian from Media Dynamics Inc, June 12, 2015 at 7:22 a.m.

    @ Paolo, I think that we are mostly in agreement, however, I don't think that the viewer's expectation of commercial breaks and acceptance of them as a price to pay for watching favorite shows should be dismissed. Of course, this feeling of general acceptance does not translate into a positive response to each commercial and, especially in situations where there are an inordinate number of ads in a break. But that's not my point. I'm saying that digital platforms, with their bewildering array of ad formats---all, interferring or vying for the user's attention at the same time he/she is trying to seek out or consume content, has ad added negative impact on the effectiveness of ad messages that should be addressed. One way would be to link ads to content in an orderly and expected manner---as is the case with TV---to avoid the needlessly disruptive and annoying consequences. In short, if digital wants more branding ad dollars it should organize itself as ad ad-supported medium, not one which barely tolerates ads, gives users many "zapping" options and is not the least concerned about piling as many messages of whatever configuration onto a given "content" page, thereby compromising the consumption of said content.

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