Monday, April 2, 2012, 9:14 AM ET|Posted by Will Richmond
The age-old question of whether viewers will pay to skip ads will be put to the test in the online video industry with "SkipIt," a clever new service SpotXchange is launching today. For participating publishers, a SkipIt "chicklet" appears when a video ad starts playing; if the viewer clicks on it, the ad closes and the content continues. Each ad skipped costs the viewer $.10, which is automatically deducted from their pre-funded account. When an ad is skipped, the advertiser receives a credit from the publisher who is paid a percentage of the viewer's fee by SkipIt. (see SkipIt's video at bottom for more)
Initial publishers testing SkipIt include CineSport, Film Annex, IDG TechNetwork, OneScreen, Tech Media Network and Tetris Online. Combined, SkipIt estimates this will represent 20 million video ads presented each day to over 100 million viewers.
Michael Shehan, SpotXchange's CEO, explained a couple of weeks ago when he previewed SkipIt for me that the service is intended to empower viewers with more choice about which ads they watch, reduce wasteful spending by advertisers and deliver a more satisfying experience by the content publisher.
I can see how SkipIt would be compelling for advertisers and publishers. SkipIt's 10 cent charge is equivalent to a $100 CPM, rich enough so the publisher's split will be greater than any CPM they likely receive today (Michael wouldn't disclose it, but I'd assume the split is 75% to the publisher). And advertisers have little to lose; if viewers are willing to pay to avoid their ads, they clearly weren't interested, so SkipIt improves efficiency.
The real unknown here is whether users will embrace SkipIt. in other words, will they pay to skip ads? Michael cites SpotXchange's own research that 30% of respondents would pay to skip if they had the choice. Of course there's a world of difference between what users say they would do and what they actually will do. At first glance, 10 cents per ad skipped doesn't seem like much, and certainly people are willing to routinely spend freely on other little indulgences (Starbucks comes to mind), so adoption could be strong.
One interesting question to ask is how much might a regular pattern of skipping ads cost an average online video viewer each month? Well, in February, comScore reported that approximately 7.5 billion video ads were delivered and there were 179 million U.S. Internet users who watched video. That means if ads were evenly distributed across all viewers, it would have cost each viewer $4.19 in February to skip all the ads they were presented (7.5 billion ads x $.10 per ad skipped divided by 179 million users). For a little more than a cup of Starbucks, the average viewer could skip all the video ads they were presented each month. Not a bad proposition.
The above calculation should be tempered by the fact that there's no "average" viewer. If we assume a typical "80-20" rule applies here, then 20% of viewers watch 80% of videos, and therefore see 80% of those 7.5 billion ads. Even at this rate, the 35.8 million heavy viewers (179 million x 20%) would pay approximately $16.75 in February to skip every ad shown them. The other 80% light viewers would only pay $1 for the month.
Bottom line, at today's online video ad volume, it wouldn't be terribly costly for those who really detest ads to opt out entirely. I think the more likely scenario though is that viewers would choose only a subset of ads to skip. And this is where I think SkipIt's biggest vulnerability lies: it requires a lot of thinking and acting on the part of viewers. Just in an average 22 minute TV program online, at least 6-7 SkipIt decisions would need to be made. All of this fatigues the viewer, who will inevitably feel "nickeled and dimed" and tune out. Rather, an upfront offer that says "Click here and for 50 cents you can skip all of the planned ads" would be much more compelling. Or maybe a monthly or annual subscription. In other words, to succeed, SkipIt's key challenge is streamlining the process of skipping.
Only time will tell how well SkipIt is accepted, but what's truly interesting here is how the online video user experience continues to differentiate itself from typical TV. Rather than forcing viewers to watch ads, they're being given more choice. Like other initiatives such as YouTube's TrueView, Hulu's Ad Selector, VivaKi's ASq, AdoTube's Polite Pre-Roll and Solve Media's branding message, SkipIt introduces new flexibility for viewers, publishers and advertisers. That's a welcome step for all and serves to make the online video medium ever more compelling.