Thursday, October 22, 2015, 1:02 PM ET|Posted by Will Richmond
What’s a viewer’s willingness to pay in order to have an ad-free video experience? The question is in focus yet again with yesterday’s announcement of YouTube Red, the company’s long-rumored $9.99/month ad-free service. Unfortunately for YouTube Red, in its case, willingness to pay is going to be heavily influenced by the fact that YouTube has arguably the most viewer (and advertiser) friendly video ad model, which will undoubtedly impact interest in paying for YouTube Red.
We’ve all had the experience of skipping a YouTube “TrueView” ad after 5 seconds in order to move to our desired content. YouTube highlights that the ads are skippable and even displays a countdown clock (3, 2, 1) so you know when to click to move on. Advertisers benefit too, by only paying for ads that aren’t skipped.
The TrueView format is far more viewer-friendly than preroll or midroll ads that aren’t skippable and increasingly show up in heavier loads when watching TV programs online. To be sure, YouTube runs plenty of unskippable prerolls as well, not to mention those pesky overlay banners. Conversely, there are plenty of great videos on YouTube that don’t have any ads (incongruously, see Jimmy Fallon’s videos, for example).
YouTube Red is beefed up with lots of other features in order to help drive interest (ad-free music service plus kids and gaming, originals by some of its most popular creators, downloads for offline viewing, background play to enable multi-tasking, etc.). The originals feature also has the added benefit of mitigating competition from Vessel, which is pursuing exclusive window deals with some of YouTube’s biggest stars.
Still, the fundamental question remains, will YouTube users - long accustomed to a free-viewing experience with minimal advertising interruptions - pay $9.99/month ($12.99/month if bought in-app on iOS) for a completely ad-free experience?
It’s the same type of experiment that Hulu is running by offering its new “No Commercials” plan for $12/month, an upcharge of $4/month vs. its “Limited Commercials” plan. And of course it’s the same “freemium” type approach that countless other services like Spotify, Pandora, etc. offer.
Netflix has become the poster child for success with ad-free subscription services, spurring many others to believe they too can succeed with the model. YouTube has a massive user base to promote YouTube Red to and it’s offering one month free starting next week, so it’s likely the service will generate lots of trial. But converting trial members into long-term paying members still looks like a steep challenge.