Like a lot of you, I spend a lot of time online, and a good amount of it is watching video. As I've often said - at VideoNuze's Online Video Ad Summits and elsewhere - advertising is critical to online video, because, with the exception of paid services like Netflix, Amazon, iTunes, etc, the vast majority of online video is free and ad-supported. Despite how important advertising is, I'm constantly amazed at how untargeted so many pre-roll ads still seem to be.
I'm not claiming anything close to a statistically significant study here. But because I pay relatively close attention to pre-roll ads, I have a pretty decent handle on how relevant the ads are or aren't, at least to me. This morning I saw a perfect example. Tempted by a tweet, I watched a video on Boston.com of a truck flipping over on a local highway. I actually watched it 5 times to see what would happen with the pre-roll. Each time, one of 3 versions of an ad for cable operator Charter Communications played. All nice ads, however, Charter only operates in the Worcester, MA area and further west, not even close to where I live, which is served by Comcast, Verizon and RCN. Why am I seeing this ad over and over again when I can't even buy their service?
As this week's TV advertising upfronts kick-off, the inconvenient truth of live TV viewing's ongoing decline should be on the minds of everyone in the ecosystem. The days of forcing viewers to tolerate almost a minute of advertising for every two minutes of TV programming they viewed are fading. With DVRs now approaching 50% of American homes, viewers are more in control than ever, and live viewing's decline will accelerate. One bit of good news for both TV networks and advertisers is that online video advertising is maturing in time to help. Following are 4 reasons why online video advertising's appeal should grow:
Two conversations I had last week, with executives at two separate independent video content companies, one based on a pay model, and the other on an ad-supported model, struck the same theme: the "grass must be greener" for other's model.
These conversations were illustrative of others going on across the video landscape today. Everyone's grappling with which model offers more profitability, stability and growth. At least for now, ad-supported appears to have the "greener grass".
Paid sites are struggling with the fact that so much video has come online in the past couple of years that the bar to get users to open their wallets moves higher each day. The question becomes, "what sorts of video are consumers truly willing to pay for when so much is now available for free?" Of course, the more free stuff there is, the less compelled users feel to pay, even to get something good. Thus a major struggle ensues for pay sites to generate sufficient volume to become profitable.
The rising supply of video makes life equally tough, if not tougher, on the ad-supported sites. Breaking through the noise with quality content is no simple trick. Great content is table stakes. I think the real differentiators are great marketing and distribution which leads to significant awareness, traffic and revenues. So skills like knowing how to create a viral wave, strike partnerships with portals that have real teeth, and syndicating to many smaller players, are all paramount. And that's all before the skills required to sell ads and actually generate revenue.
The grass will remain greener for ad-supported for some time to come. When broadband to the TV becomes widely adopted, Hollywood is willing to cannibalize DVD revenues, formats are further standardized and consumers are better acclimated to broadband delivery, the pay model is going to take off. The ad-supported model is no layup, but with the right ingredients, success is currently attainable.