An interesting bit of research from the ad industry opens some potential issues for the future of video advertising online. The data shows that pre-roll ads for video do quite well, and in fact exceed the expectations of the advertisers in terms of performance. In fact, research says that people today will generally watch a pre-roll ad. That sure sounds like good news, but it’s in fact troubling given some other data.
One advertiser told me that mid-roll ads (embedded in the content) were five times as likely to cause a user to abort delivery if they occurred in the first 20% of the content. No matter where they occurred other than the beginning, they were four times less likely to be viewed. Post-roll ads were skipped by over 70% of the viewers. If you rolled two ads before the content, the second ad tripled the chance of viewers abandoning the content, and with three or more the odds of abandonment went up by over six times. Similarly, multiple mid-roll ads increased the abandonment risk (by a slightly smaller ratio).
You can see the challenge here, I suspect. You can really only have one pre-roll ad or you risk disengagement. That tends to make ad sponsorship of longer experiences more difficult. The only good news is that where TV shows were the content being viewed, users tolerated mid-roll ads better, though they continued to disengage on multiple pre-rolls and though mid-roll success was sharply lower. But if only one ad per content experience is allowed, and if that ad likely has to be short or you risk disconnecting the viewer, then the yield on that ad would have to be truly astronomical.
The other interesting stat is that a third of advertisers liked online advertising because the targeting reduced their costs, and a further 50% said that one of the values of online targeting was to “control costs”. That sure sounds like people trying to spend less online, not more. But it’s not the end. Social network integration with advertising and even more directly with local advertising and retail are threatening to impact the longer-term future for in-video ads. Google and Facebook are engaged in the Great Ad War, with both striving to link friend recommendations with local search and LBS (Google leads there at the moment with the recommendation engine in Google Places).
Mobile/local advertising in any form is a big deal because what makes it valuable is that the mobile user is typically out trying to buy something when they encounter it. That makes them a much hotter target for ads, but it also makes them a target for a more direct fulfillment. Step one might be “show a shoe ad to someone walking past a shoe store”, and step 2 might be “offer the person in the shoe store a better deal on the shoe they’re trying on”. Step 3 is then “Let the person try on a shoe and then simply shop for the right size, style, and color online”. Local services, in short, could actually tap money out of online advertising by converting interest to purchase without ad intermediaries.