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I posted last week about why I though that Google’s new overlay advertising product would be good for the whole industry; Gootube has both the volume of inventory and the advertiser relationships to make the overlay a standard ad unit.

The other notable thing about Google’s new ad product is how the ads are being targeted, or rather how they are NOT being targeted. The New York Times quotes Eileen Norton, Google’s Director for Media Platforms:

Ms. Naughton also said advertisers would be able to take aim at specific channels and genres, as well as demographic profiles, geography and hour of the day.

What is notably missing from this list, especially from Google, is contextual targeting. I wonder if this suggests that contextual targeting is not as important for online video ads as it is for text link ads.

Online, Google’s adsense has been the premier form of contextual targeting, and it is primarily about direct response.

Television advertising is primarily about branding. Direct Response TV (infomercials) make up a very small fraction of TV advertising and they typically run in latenight and overnight time segments when both ratings and ad prices are low.

The question is whether online video advertising will look more like online, or more like TV.

For long form video online, it seems less likely that contextual advertising will be a good match. Long form video is more of a “lean back” experience, where the viewer is less likely to click on any ad, even a highly contextual one. That makes it hard for direct response advertising to work.

Short form video online may be more promising as viewers may be more willing to click away. People from online video analytics comapnies tell me that less than 50% of online video streams are watched to the end, with the bulk of the drop off occurring in the first 20% of the stream.

When you combine this with the fact that both Youtube and VideoEgg are seeing click through rates on their overlay ad unit 5-10x higher than typical online banner ad click through rates (according to the NY Times article), it seems more possible that direct response advertising will work for short form video online.

But two factors complicate this situation. The first is that neither Youtube nor VideoEgg are actually using contextual targeting today. The second is that the current advertiser base for VideoEgg appears to skew heavily towards “cool” entertainment ads (gaming, movies, TV and music), or at least so it appears from their sample advertisers. The same is true of the few Youtube ads that I have seen “in the wild”.

These early adopters may have more compelling video ads that are not as representative of the mass market – it may be easier to get someone to click away to watch a Superbad trailer than an ad for Tide, even a good one.

If indeed it is true that targeting against channels, genres and demographics is sufficient for video advertising, then this is great news for online video startups. Google accuracy at contextual targeting its text ads benefits greatly from the vast volume of ads that it serves, and from its very low cost compute infrastructure. Targeting against channels, genres and demographics requires a lot less volume and a lot less computation, which levels the playing field substantially.

I’d be interested to hear what readers think about whether contextual targeting will be the way forward for online video advertising.

  • http://mgopinath.blogspot.com Tech Thoughts

    I think i need more than 30 mins time to read this nice article :). Looks like worth reading. Let me start reading after commenting.

  • http://www.kidmercuryblog.com kid mercury

    i think it could work, although i am more interested in new delivery models that allow video services to do a better job of learning about users and generating leads. i think something like this could be built on top of existing video services.

  • http://podtech.wordpress.com/ podtech

    To me contextual advertising will be a homerun in video. In the head and torso you’ll see classic branding opportunites but their interaction with communites in the tail will be the contexual linchpin or ‘holy grail’ for video. YouTube is smart to take the low hanging fruit while the market and advertisers develop their planning and buying habits.

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  • http://kickstand.typepad.com Jordan Mitchell

    Nope, and here’s why. While I don’t have data to support this, I’ll bet the vast majority of video consumption is entertainment-related vs. transactional/informational. As you pointed out not too many posts ago, the success of contextual advertising revenues (as least in search) comes from *transactional* use cases. I think adsense monetizes informational (browsing) use cases .

    Doesn’t seem like the entertainment use case would predispose someone to click on a relevant ad. They’re just not in “need more info” mode, they’re in “show me another video” mode. In short, I think video ads will be more like TV and less like online direct response.

  • http://northerndialogue.blogspot.com Erkko

    the usage of shorter online videos, and the flow of accessing them can be so random, that my guess would be on contextual advertising having the upper hand. It just fits the mind-set of a watcher well, low commitment & fast consumption.

  • http://rashmi.wordpress.com/ rashmi

    Good post.

    I dont think that contextual advertising will work as well for video. First the user is not in a mode to look for “related info”. They are more in the mode of watching another video. Also, Jordan’s point about informational / transactional use cases makes sense.

    We have been thinking about similar issues in the context of SlideShare: http://www.slideshare.net (social sharing of powerpoint & pdf files). I think contextual advertising makes more sense in that case…

  • Adam

    Its not relevant – yet. Video is still in its infancy and the only advertisers that are willing to spend $ in this stage are brand player.

    Will DR work in Video? Absolutely. What is more relevant at this stage is how do you measure / target a viewer? Or another way to look at it -Is it more important to know the nature of the content or the viewer?

    The answer is the viewer. Google doesnt need to understand the content when they understand the user. The ads will be somewhat related to the content. Chances are they wont serve a Bud ad on a Video about babies. But you will see the habits of that individual viewer have an impact on the ad type served.

    After all that viewer of the baby video could be a 25 yr old man.

  • http://www.firefighterblog.blogspot.com Mike

    A little company I have become an investor in is LookSmart, (LOOK). They recently announced an agreement has been reached with a smaller video platform enterprise to provide ads on videos they host.
    Where Google offers scale and depth of advertisers smaller LookSmart could find it easy to add new advertisers as this method of advertising ramps up.

  • http://www.nicherockets.com Scot Standke – Internet Business Consultant

    Just getting in front of the potential client is reason enough to give it a whirl.

    The ease at which one can browse online, coupled with the attention span on an Internet user makes perfect sense.

    Just getting your product or service in the face of a semi-relevant prospect should be well worth.

    JMHO

  • http://www.admoogle.tv Chris Baillie

    I am very excited about the reality of the “video plus box” being beta tested by Google at present.

    This as you may all know will allow any AdWords advertiser to run a thumbnail video ad. next to their text ad on Google Search.

    I was so excited that I started AdMoogle, a media company specialising in developing and placing professional TV commercial quality video advertising for any SME.

    Check out http://www.admoogle.tv if any of you get a moment.

    I believe we can be creating these “TV ads.” free within 12 months on the basis of receiving a (repeating)commission on converted client sales.

    Chris Baillie
    CEO/Founder
    AdMoogle.