Above the Crowd

Perfect Online Video Advertising Model: Choose Your Advertiser

February 27, 2009:
idea_bulb

Many companies and visionaries have pontificated about the future of video ads and different techniques for monetizing online videos.  A big part of this is driven by the fact that while YouTube is a huge user success, its a less proven monetization success.  On a recent trip to NYC, an idea came up which I can’t get out of my head, and the more I think about it, the more I believe that it is the Holy Grail for the future of online advertising.  But before I disclose the big “ah-ha,” a few caveats:

1) No one will ever monetize commodity content well.  If the same video is on YouTube, Veoh, and Metacafe, you won’t have the “right” to ask the consumer to wait for an advertisement.  Only by”controlling” unique/premium content can you ask the user to participate with advertisement.

2) Some networks, like ABC, are already doing a great job with online video advertisement.  I have heard numbers as high as 80% of the revenue per viewer hour compared with regular network television.  That said, I think the model below will dramatically enhance this number.

3) Having multiple sales forces selling the same premium video advertisement is counter productive. It drives down pricing.

4) “Distribution” is a confused word online.  Everything can be one-click away.  As such, there is no real reason to have someone “distribute” your video in the old classic sense – especially if it is important for you to control the advertising.

Enough with the caveats — here is the idea.  For online premium and unique VOD content, content owners should let the user pick one of a group (say 4-9) of sponsors for the show they are about to watch.  With online video this would be easy.  As you launch the show, it gives you an array of thumbnail choices for sponsorship.  The great thing here is that all parties win.  The consumer is happier with the advertising because its relevant to something on their mind, and they are more likely to pay attention when it “interrupts” the programming.  The advertisers gets a user that has qualified themselves as being interested in the product or category which is huge.  Known intent is massive.  And lastly, the content owner will likely end up with ad rates higher than they have ever seen previously.

In many ways, this is similar to how a user “self-declares” their interest when typing a Google search.  And this is way, way, way better than behavioral targeting.  When you think about it, behavioral targeting is a euphemism for “guessing”.   Just because I am a male between 18-24 and watching “Lost” doesn’t mean I want an XBOX.  You are more likely to guess that i might want it, but you would be 10X better off if I chose XBOX as my sponsor at the start of the show.  Then you would KNOW I have interest — no more guessing.

Making predictions is always a dangerous game, but I am fairly certain that this will be the video ad model of the future.  It makes way too much sense not to work.

3/4/09 Follow Up Note: 

I received some great direct feedback on this note from many leaders in the field including the CEOs of Hulu and Brightcove.  The main message was “we already thought of that and we are already doing it!”  I guess there are no new ideas only good ones thought of again.  But the good news is that they all agreed this is a powerful model.  On fair criticism is that it requires a great deal of liquidity in terms of numbers of advertisers to make this happen.  I suspect that is right, and as a result this may not play out for some time.  But when it does, it will be powerful.

28 Comments

  1. ThatGuySteve February 27, 2009

    Brilliant idea. I just have one question.

    How are you charging for the ad’s? You can’t guarantee any particular CMM because it is purely the users choice; and lets face it, some ads aren’t up to par and a thumbnail worth is not going to make you want to view it.

    Other than that I think it is a great way to make the user part of the experience while showing them an ad at the same time.

    Reply
    • Jordan February 27, 2009

      To make people click on logos before content sounds a lot like the “Free iPods!!!” ads that we see everywhere. People are skeptical of a need to engage with an ad or a service in order to get to content. Its been done before, and failed.

  2. Rich Barton February 27, 2009

    Interesting. Doing this on the front end of the video might cause a dropoff problem. I don’t want to be reminded beforehand that i am going to have to sit through ads. Much better to get me into the flow first and then interrupt me. Problem with doing it at the first interrupt, again, is dropoff. Anyway, def’n worth experimenting, but my guess is that asking the user to do ANYthing is a pretty big hurdle. Also, not sure why this idea is confined to video format on the web. If it’s going to work, it would likely work for ESPN.com, too.

    Reply
    • bgurley February 27, 2009

      This is why I offered the caveats to separate premium content from others. Lost or CSI or Entourage or any programming of this quality will have no problem getting users to step through one extra click. ABC has required a plug-in install of MoveNetworks (which is a click and some time), and they have more web usage than any other network. I think drop-off would be minimal.

  3. Adam Jackson February 27, 2009

    All good points about declaring intent up front. I think people would take the few seconds to click 4-9 logos before being served up a show (either with their TV remote or their mouse).

    There will always be a problem with advertisers that want to be in front of viewers but no viewer would click on. These advertisers pay good money because even though consumers hate their ads, they are effective at driving sales.

    Examples:
    “Head On” tv commercial campaign
    The Snuggie (a personal fav)
    Debt consolidation
    Sub-prime lenders

    These are messages nobody “wants” to hear, but, once delivered, conversions are obviously good enough to keep the big dollars flowing into the campaign.

    The distribution networks may have to allow the view to choose a few sponsors but then still slip-stream a few duds in there to make sure revenue is maximized.

    Reply
    • bgurley February 27, 2009

      Great point. Mystery box at 3X CPM?

    • Stu February 27, 2009

      I think you’re right. “Head On” is a push advertiser and they won’t be interested in this model. But there will still be websites for them to advertise on. For instance, I doubt YouTube will have you choose your pre-roll because it would add too much friction to the website.

      But I think what this strategy does do is segment the market. An advertiser like BlackBerry would be willing to pay more for some advertising where the user chooses. Of course, if I am BlackBerry, this would only be part of my mix because I’d also want to reach people who haven’t thought about getting a BlackBerry. But I certainly think this would be a part of my mix and worth more to me than general advertising.

      I am a big fan of interactivity in online advertising. I think it’s underutilized. The unique quality of the internet as opposed to TV or print is that it’s interactive. User’s can actually become active participants. Most online ads though are passive, but I don’t see it staying that way.

  4. coolrebel February 27, 2009

    very interesting idea, bill. thanks for the thought. the key is relevance to the viewer. we’re working on an online video startup called Spotcher with a different take on the same principle. it’s a great and hopefully growing area. the better advertising meshes with content the more powerful it can be.

    Reply
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  6. Lena February 27, 2009

    i feel like this has been done before (see the original incarnation of weatherbug, way back in oh…2001? I distinctly recall having to pick an advertiser to sponsor the free app once a month, and it was irritating and heavy-handed). The issue still remains that there’s an expected audience in mind which will determine the 4-9 options up front. Also, me picking a brand I already like may have less ROI for the brand unless we’re talking about brands as sustained interest, not as directly selling products…for example, say I pick apple because I’m a fangirl, but I’m already kinda well equipped when it comes to that particular brand at the moment, so it would be more effective to have a different company advertise to me. Barring having a user select their favorite products and then delivering alternative advertisers that can be inferred, I’m not sure that you’d be able to prove a high value of my eyes on a brand I already <3.

    Your idea about self-declaration is interesting, and could be applied to this scenario in a less obtrusive way, since it’s possible to pass google queries into a web application and deliver content based on that. Doing something relational like based upon entry may ultimately be better than a direct request for self-selection of advertisers.

    For the record i think hulu does a pretty good job with keeping a captive audience throughout programs that are ad supported. I can opt out if i REALLY hate an ad, but usually don’t bother. I think advertisers don’t quite understand the value of the medium yet. I’m not about to walk away from anything, computer or tv (when hulu was still available on Boxee), when an interruption is brief. It’s the notion of commercial breaks on tv itself that’s kinda flawed, in my opinion, and that gave rise to the proliferation of Tivo & DVR.

    Reply
    • Shane Lundy March 4, 2009

      You are correct. SponsorSelect was invented by me and initially introduced by AWS on the WeatherBug desktop application over seven years ago. The concept was simple, let the user select the advertiser. SponsorSelect has now been spun out of AWS so that we can better serve the needs of our advertisers and expand on the publisher network that we built over the past 18 months.
      Shane Lundy
      President and CEO
      SponsorSelect Inc.

    • John Gaughan December 13, 2010

      Shane is correct in replying this was invented 7 years ago…however, it is not correct to say he invented the product..I did. Come on Shane…

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  9. Vada Dean February 28, 2009

    Beyond ads, let’s consider true relationships between brands and consumers. Brands can earn their way into communities by first underwriting the content they consume. They can stay there by proving relevant to the community. All of it demonstrable and measurable for both the consumer and the brand.

    Reply
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  11. Shane Lundy March 2, 2009

    Bill,

    I am pleased that you like my idea! As you may already know SponsorSelect was invented by me and initially introduced by AWS on the WeatherBug desktop application over seven years ago. The concept was simple, let the user select the advertiser. SponsorSelect has now been spun out of AWS so that we can better serve the needs of our advertisers and expand on the publisher network that we built over the past 18 months.
    In addition to allowing the end user to select who gets to advertise to them, SponsorSelect is the only network that guarantees that the end user will visit the advertiser’s site every time their ad is shown. This means a 100% click through rate at a fraction of what search or display ad campaigns cost. We call it On-Demand Advertising. We believe this approach represents a fundamental shift in how consumers will interact with advertisers and content. I would welcome a discuss.
    Regards
    Shane Lundy
    President and CEO
    SponsorSelect Inc.
    301 250 4114
    slundy@sponsorselect.com

    Reply
  12. Spencer Rascoff March 3, 2009

    Bill,
    A very smart idea. I like it.

    I forget which site I was recently on (ABC.com?) but one of them asked me up front whether I wanted to watch one 3 minute ad upfront and then no ads throughout, or watch 4 30 second ads throughout the program.

    So they’re already experimenting with asking the user to select advertising preferences upfront. I’m sure it will just be a matter of time before your idea is at least experimented with.

    Reply
    • Shane Lundy March 4, 2009

      Spencer, As you will see, this is not Bill’s idea. SponsorSelect was invented by me and initially introduced by AWS on the WeatherBug desktop application over seven years ago. The concept was simple, let the user select the advertiser. SponsorSelect has now been spun out of AWS so that we can better serve the needs of our advertisers and expand on the publisher network that we built over the past 18 months.
      regards
      Shane Lundy

  13. Hoo Kang June 5, 2009

    Neat idea.

    What do you think about the new Digg Ads? It’s similar, but crowd sourcing Ads for crowd content.

    Reply
  14. brian October 1, 2009

    I expressed the above model at a digital conference recently, most in room thinks this may be the way to proceed. matching not guessing is way forward

    Reply
  15. Рубен October 18, 2009

    Хм… А мне сдается, минусы намного превосходят плюсы.

    Reply
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    Reply
  17. Nice idea. This will surely be helpful. Thanks!

    Reply
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