In the age of the DVR, most consumers have no patience for commercials. An increasing number of people no longer watch television programming when it actually airs anymore, opting instead to record and watch it without ads. Online video ads, the ones that appear before the intended content will load, don't get much love either—most are terminated as soon as the skip button appears, yet marketers are still spending money on those coveted preroll spots. Video ad spending is projected to grow 22 percent annually, and with the traditional online video advertising model quickly succumbing to the same pressures that television advertising faces, marketers need to know there's a better way to monetize video advertising.
From six-second Vines that flood social media to original programming from platform providers, online video is booming. Hoping to duplicate the success that Netflix has seen following the release of its original programs Orange Is the New Black and House of Cards, Yahoo, for example, is getting serious about video. CEO Marissa Mayer has announced that the company is fueling its video strategy with two new original series, and has hired former Today show anchor Katie Couric and Good Morning America's Bianna Golodryga to join Yahoo's news video production group. Hulu, which started out as a platform for television reruns, now has at least a dozen of its own original programs. And, in July, Amazon announced plans to invest $100 million in original video content this quarter. Even television network giants have embraced the Web; many now offer exclusive video content online.
Interest in on-demand video—be it user-generated video, television programming, or entirely original content—is growing. Smartphones and tablets have made it possible to watch videos whenever and wherever, creating greater viewing opportunities for consumers and more advertising avenues for marketers, says Andrew Lipsman, vice president of marketing and insights at comScore, a media analytics provider. Still, getting consumers to engage with ads hasn't gotten any easier.
Linear Ads Are Losing Their Luster
Consumers aren't the captive audiences they once were, trapped into watching television advertisements because there was no way to avoid them. Now they can fast-forward through a television commercial or "second screen" on their mobile device while they wait for the show to return. "Online, the story is even more bleak," Lipsman says. Most preroll video ads can be skipped after only a few seconds of run time, and those that can't are easily ignored. Viewers can hit mute or open a new tab and browse a different Web site while the ad runs.
As a result, preroll advertising is suffering—there are only three clicks for every 10,000 ads, according to Jonah Goodhart, CEO and cofounder of Moat, an advertising analytics and intelligence provider. The reason for the disappointing results, Goodhart says, is that "marketers are building advertisements for online video the same way they would build them for television, and failing to recognize how different the two channels are."
For one thing, online advertisers can take advantage of programmatic marketing, which automates the delivery of data-driven, targeted, and personalized experiences to consumers as they interact with a brand's various touch points, all in real time. With regard to video, programmatic ad buying means that brands can use first-party and third-party data to determine which consumers are most likely to be interested in certain products or campaigns and serve the ads containing the most pertinent content.
Though more dynamic than traditional ads, even programmatic advertisements are limited by their linear form. Most of the time, these 30-second videos are meant to merely raise brand awareness, leaving consumers no way to engage further with the brand. "Where there