How do you make money on the web? Over the past few years that has emerged as the million – or in the case of YouTube (STOCK QUOTE: GOOG) $1.5 billion - dollar question.
Last month Break Media, an online entertainment empire that creates content aimed at men ages 18-34, announced that it had come a little closer to finding online revenue answers. In partnership with Panache, a company that develops software to run video advertising on websites, Break conducted an 11-week study of the way users interacted with video advertising in four recently standardized formats. The results will help businesses tailor online ad campaigns more specifically to given products, and allow online content providers to offer more valuable ad opportunities to those advertisers.
Despite technological advances, the rise of social networking and thousands of new ways to procrastinate, it turns out that with few exceptions, content providers make money on the web the same way they do in print or on television—with advertising. But, it’s hard to make money from a system that’s not understood, and while ad agencies and marketing experts have studied print, radio and television for years to determine what kind of ad campaigns work, and which ones flop, very little research has been conducted on web advertising models, and rates, sizes and formats still vary widely.
In May, the Interactive Advertising Bureau standardized definitions for four types of video advertising, allowing Break and Panache to compare those forms against one another with selected ad campaigns. The standardized video formats are
1. Pre-roll: an ad that simply plays before the content you want.
2. Interactive pre-roll: the same thing but with a prompt to click and go to another site.
3. Non-overlay ads: an ad that sits in the frame of video content but not over the content itself.
4. Overlay ads: appear over the video content you’re watching.
Break Media CEO, Keith Richman, explains that while businesses are eager to shift dollars into online video, the lack of information about the impact of videos on the consumer makes those campaigns a hard sell. “There’s just not enough data and metrics available to justify shifting those ads,” he says.
Richman illustrates the point by comparing an online video ad placement to television. TV ads conform to standard lengths and formats and their effectiveness is well understood across a wide demographic spectrum. Online, there are dozens of different types of video ads, and the Break-Panache study is the first to make a side-by-side comparison of different video formats.
The study found that viewers are much more receptive to online advertising than many industry experts had previously thought. “We’re finding out that people are willing to sit through an advertisement to get to a specific piece of content they’re interested in viewing,” said Richman. “Which is really good news for us.” The completion rate for 15-second pre-roll spots was 87%.
All of these results will help advertisers run more targeted online campaigns. Businesses now know that interactive pre-roll ads with bright colors garner a click-through rate of more than 11%, which is extremely high compared to a static ad. And sites can now justify charging a premium for those spots. On the other hand, a business looking to promote a specific product might choose an overlay, 97% of viewers kept them up while watching content, offering higher exposure and requiring less of the viewer for success.
Richman notes that the one caveat of the study is that Break Media’s demographic, 18-34-year-old men, is very specific. “For advertisers trying to reach this audience, you can be confident we’re right on the mark,” he said. “Everyone else needs to take it as more of a guideline.”