Thursday, October 28, 2010

Now That We Know That Pre-Roll Ads Don’t Scale, What’s Next?

According to Tubemogul’s most recent report, pre-roll ads don’t scale. In fact, viewers will do almost anything to ignore them.

Tubemogul did the research because they wanted to answer a simple question. What percentage of unique visitors to a media company’s homepage will end up watching a pre-roll video ad?

The answer? 13%.

Not surprisingly, few publishers publicly disclose this info even though they have it.

So, what does the 13% number mean exactly? It’s not simply the fact that pre-roll ads don’t scale. What is means is that without scale, the current economics of commercial production won’t work.

Currently, advertisers justify the cost of creating great advertising on the number of people that will see it. A $750,000 production budget is easier to swallow when 30 million will be exposed to it.

When the number is 30 thousand rather than 30 million, well, what client is going to approve a $750,000 budget for 30 thousand people?

You see the problem.

Which means if agencies are going to continue to create great, original work, one of two things needs to happen. We need to find a new way to create scale online. Or, a new model by which to pay for the creation of advertising.

As for the former, it seems that we're heading in just the opposite direction. The industry’s ever more precise modes of targeting just make audiences smaller, not larger. More and more devices are being created to give more and more control to the viewer.

As viewers gain more control, intrusion will no longer be acceptable. Viewer-initiated advertising will become more prevalent.

This means only one thing. Audiences will get smaller in the future, not larger.

Pre-roll used to be the fall-back position. “Oh, pre-roll scales,” we would kid ourselves. We can’t kid ourselves anymore.

What does scale online is the amount of time people spend with a brand. Online, as we have mentioned in the past, is about how long, not how many.

Can advertisers justify how much they spend on creating great work based on how long people are engaged with the work?

Certainly.

It's called view duration compensation. (For more on view duration compensation, go here.)

It works like this.

If the view duration data says that most viewers, on average, watched 60 out of 60 seconds, the agency and production company make more than if viewers, on average, watched only 10 of 60 seconds.

In effect, it will offer advertisers the ability to pay their agencies based on how valuable viewers find the spot to be.

That should be attractive to most advertisers.

Especially when the current belle-of-the-ball, pre-roll, has turned into such a pumpkin.

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