• by Lydia Loizides , Op-Ed Contributor, March 7, 2007

Being a solo act these days, I spend a lot time pondering the unanswered questions of my professional life like, Is technology X going to disintermediate market Y? How are consumers changing their expectations with respect to advertising-supported content online? How do you explain to an aspiring online executive what broadband is (no joke!)? The one that has really plagued me of late has been, what is the true value -- to the consumer, of course -- of behaviorally targeted ads? In other words, if ads were smarter, would response rates increase?

Before I attempt to answer this puzzler, let's take a step back and at least narrow the playing field a bit to the online video ad market. What are the basic assumptions here? First, that online video ads yield a higher rate of interaction. A recent study by InsightExpress found that click-through (CTRs) and completion rates for pre-roll video ads were, on average, 0.72% on content rich/content-specific Web sites, 0.52% for run-of-network advertising, and 0.35% for brand-name, premium Web sites. Not bad and definitely better than a kick in the pants. But remember, banner ads used to yield in the 3% range -- and now sit at 0.2% worldwide.

Next, consumers will interact with online video ads because the media can be "contextualized." Possible, but I suspect that the equation is a little more complex than that. Recent data shows that performance varies based on content channel.

Online Video Ad Click-Through Rates (CTR), by Content Channel, Q4 2006

Gaming 0.87%
Careers 0.71%
Autos 0.63%
Business 0.60%
News and information 0.57%
Entertainment 0.54%
Sports 0.53%
Travel 0.12%
Health 0.06%

Source: InsightExpress

Again, for the lower five, not stellar performances -- but gaming, careers, autos, business, and news and information are achieving respectable CTR. But why? Well, stop and think about who the advertisers would be in each of the categories, the mode the consumer would be in (in other words, how open would they be to demo- and sector-appropriate advertisers in the category) and finally, the impact of the medium of delivery (in this case video) for the category. In other words, does the message delivered as video enhance or deter the efficacy of the message and product?

Well, I haven't come up with the answer yet, and the ad-serving technologies and ad networks that are cropping up to service this sector couldn't be covered here in 500 words. But I will leave you with this: a report published by Morgan Stanley, "US Internet Advertising Outlook, 2006 - 2010E," estimates that U.S. search marketing CTR will be 11.7% in 2007 and will grow to 12.6% by 2010. Search marketing may not be sexy or new, but it is contextual. So, when comparing the efficacy or the "smarts" of new advertising mediums or platforms, perhaps we should consider the mode of the consumer as the most influential factor on efficacy, rather than assuming that rich and targeted will yield better results. Thoughts? You tell me.