Why online video advertising desperately needs an overhaul.

Written on June 18, 2011

Online video advertising has been a growing source of frustration for a number of years, and the problem isn’t going away anytime soon, with the industry forecast to be worth $5 billion by 2014. Despite this rapid growth, both advertisers and content producers have failed to create a model which is both effective in terms of revenue and in generating customer interest, while at the same time allowing viewers to enjoy the content without repeated interruptions or annoyance. When it is not uncommon for pre-roll advertisements to go for a longer period of time than the actual video, it is clear that the industry needs a fundamental re-think.

Viewing a video online and watching television are two entirely separate scenarios which require fundamentally different approaches to advertising, and that is a concept which advertisers are yet to understand. While watching television, the viewer is almost always focused on that one particular activity: when you sit down to watch televison, that is usually all that you are doing, there is no desire or opportunity for multi-tasking. When on a computer however, if an advertisement begins the viewer just flicks to another tab until it is over and ignores the advertisement entirely. Such a scenario is beneficial for neither party: the viewer if forced into this unnecessary inconvenience while watching a video, and it is a terrible situation for the companies who are advertising their products: they have no way of telling if they are paying an advertising agency for an advertisement which the viewer isn’t even watching. Online video is an entirely new mode of content distribution, and it requires an entirely new mode of advertising.

The majority of revenue from video websites, including YouTube, comes from banner advertising and not from these frustrating in-video commercials: banner advertisements are significantly more effective in the online video space than in the majority of non-video online content. When reading an article, banner advertisements are often restricted in their usefulness due to the fact that the reader will scroll further down the page before they have a chance to glance at the advertisement. While watching a video, however, viewers will stay focused on one point on the page for the duration of the clip: and that is a powerful phenomena which is under-utilized by the industry as a whole. It is a very rare situation when an advertiser has the ability to be in full view of a potential customer for up to thirty minutes at a time while watching a video online, and at this stage nobody has been able to exploit that to anywhere near its full potential. Furthermore, YouTube and other video hosting services would likely be surprised how many people would be happy to pay a few dollars a month for the guarantee that they will not be interrupted by in-video advertising – and the potential revenue from that strategy far exceeds that  of the current model.

Online video is an industry which will not be disappearing anytime soon, and it is an industry which can and should be a great medium for advertisers to utilize: but right now nobody has developed a model which works effectively for content producers, advertisers, and viewers, and that needs to change.