Play It as It Overlays

Google earned kudos in September 2006 for enticing video-sharing site YouTube away from its rivals and into the Googleplex. But almost immediately the question came up: How do you earn money from a free site that streams 1.9 billion minutes of video a month?

Ads were the obvious answer, but YouTube isn’t exactly an ad-friendly environment. Some of the videos are professionally produced, but copyright issues abound. The rest are quirky, user-generated clips most marketers wouldn’t want to get near.

Then there’s the linked questions of ad format and user acceptance. Viewers are coming to YouTube for entertainment at the rate of 130 million unique visitors a month. Running a 30-second ad before a two-minute clip (known as a “pre-roll” ad) delays that gratification and irks users. According to Google’s research, 70% of viewers closed video content when they encountered a pre-roll ad.

Now Google thinks it may have a solution with InVideo, a platform it began testing in August with select YouTube advertisers and content providers. When a user clicks to a YouTube clip with an InVideo ad, the video starts to play at once. Within 15 seconds, an overlay bar covers the bottom 20% of the player screen, possibly with animation or interaction. After another 10 seconds, that overlay reduces to a small button that the user can click during the video.

Clicking on either the bar or the button pauses the video and brings the user into the ad. InVideo is testing two kinds of experience: letting users watch a player-in-player video ad or taking them into a more interactive environment. In either case, they can click out of the ad content at any time and return to the paused video.

InVideo went into test with a lot of entertainment brands, such as Universals Studios’ “Evan Almighty” as well as music videos from Warner Music Group and Roadrunner Records. The ads are being sold on select content sites within YouTube — the company’s admission that advertisers won’t want to appear next to most of YouTube’s content, which is either copyrighted, risqué or just plain dumb. In many cases, the trials have matched ad to content, for example, linking an overlay for New Line Cinema’s “Hairspray” to a styling how-to video from modeling agency Ford Model Inc.

“When it comes to video ads on nonprofessional content, we see a large drop-off in audience when we ask them to watch a 15-second video before the clip,” says Ian Schafer, CEO of marketing agency Deep Focus. “This overlay option is a much more palatable one.”

Other video sites and networks already are offering virtually the same type of overlay ads, including YuMe Networks, Adbrite, BrightCove and the VideoEgg Network. In fact, since the YouTube test announcement, VideoEgg has been running a header ad on its home site that fingers Google as late to the video-overlay party. “We’re delighted with all the talk about new video ad formats and who invented the overlay,” it reads. “Advertisers are taking notice. Let’s get on with it…”

“We’ve run more than 250 campaigns with more than 100 major brands over the last year or so using the overlay format,” says VideoEgg CMO Troy Young. “So who commercialized this format is not really in question.”

Young points out that the line between ads and content is blurring online, and TV-style ads that get in the way of video content will underperform for sure. “In the on-demand world that is the Internet, advertising is either entertaining or helpful or both, and consumers elect to what degree they want to spend time with it,” he says.

In a company demo of VideoEgg’s overlay link, which is known as a “ticker ad, the video clip launches and a few seconds in, the viewer sees an arresting tagline, “Lose the manboobs,” with a Flash animation of runners. Click on the ticker, and you’re taken to a 30-second video ad for Nike Plus, the running shoe-iPod Nano combo. Viewers can click through the ad to the Nikeplus.com Web site, or they can return to the paused clip and resume viewing. Ad frequencies are capped, so after a few viewings the ticker ads don’t display anymore.

VideoEgg often includes post-roll video in its overlay campaigns, and both VideoEgg and YouTube InVideo include display-ad space on the video player. VideoEgg charges $20 for every 1,000 times the ads are shown; YouTube’s InVideo test reportedly is priced the same.

Video ads on YouTube will pose special challenges, many observers point out, because the site grew to popularity ad-free. Early comment to the official YouTube blog shows that some viewers aren’t taking the ads without complaints. One blogger noted that a Firefox add-on meant to stop videos from auto-starting will also block the YouTube overlay ads.

It’s worth noting that early users also raised a ruckus when ads started appearing on the home pages of Web e-mail services from Google, Yahoo! and Hotmail. Now, few people blink at those ads; most see them as the cost of keeping the service free to users.

Google’s relative lack of brand-advertising experience might pose a larger long-term problem. “YouTube can be a fantastic branding and awareness engine, but that’s not something Google has been particularly great at monetizing,” Schafer says. “Google has been great at direct response, utility and practicality. But they haven’t been able to create equally great awareness-driving campaigns.” He says Deep Focus isn’t involved in the InVideo test but has run overlay efforts with other networks, with strong results.

At any rate, the time of year seems right for experimenting with ads inside YouTube clips. “Kids are going back to school, they’re on their Facebook pages and looking at MySpace, and the fall TV season is starting,” says Karen Sharpe, CEO of interactive agency Sharpe Partners. “All [YouTube’s] competitors are right out there, so it should be a very fair test.”