Despite what you may think, your ads, and ad dollars, don’t get thrown into a void if you invest in online video advertisement. This kind of thinking comes from how we talk about commercials – we’re “forced” to watch TV ads, but we can click the “skip” button or just ignore online ads. As a result, it’s perfectly normal for an advertiser to think television is the preferable medium to spend money on, and furthermore to wonder whether it’s economical to advertise online at all. But online video advertising isn’t just economical, it’s the best use of your ad dollars.

Let’s break down how online video advertising compares to television advertising, point by point.

Formatting

Online video advertising can offer more flexibility and variety than a normal television ad. Television tends to sell advertising in 15-second increments, which is why most ads are exactly 15 or 30 seconds long. Online advertising doesn’t necessarily require these limitations, so ads can run as short or long as they need to (though keep in mind that polling suggests the shorter, the better). Therefore, you can focus on getting your message across as effectively as possible, rather than worrying about hitting a certain running time.

Advertisers can also typically pick when their ad should play in relation to the primary video content. As a company, you have the choice of whether your ad should play “pre-roll” (before the video), “mid-roll” (during the video, which pauses), or “post-roll” (after the video). Of these options, collectively called “in-stream” advertising, pre-roll is the most popular. This is because playing an ad before a video is generally believed to be less annoying for the viewer than interrupting their content, but more likely to be seen than an ad which only plays if and when the video is finished. Other sites may offer additional features such as banner ads that appear over the video as it plays, or the ability to add a “skin” that visually extends the advertisement to the surrounding page. These and other interactivity options have been shown to increase engagement with viewers, which we’ll talk about more further below.

Reach

While television has long sought to track and categorize its viewers by age, location, gender, and interests, it does so with outdated technology and statistical guesswork – surveys physically mailed out to one viewer for every few thousand. As a result, television networks can only give broad outlines of a typical viewer’s age and income. Meanwhile, the very nature of the Internet means that analytics tools can profile viewers on a person-by-person basis and with an incredibly high degree of accuracy. Whether through analyzing viewing patterns, or using information volunteered to the website (think of how you sometimes give your age and location when signing up for an account), YouTube and other sites of its ilk already have infrastructure in place that far outpaces television’s that allows them to offer high levels of targeting based on a variety of demographics. Theoretically, if your business is aimed toward single mothers with young children who live in northern Ontario and make between $25,000-$50,000 a year, that level of specificity is entirely possible.

But that’s a website that just uses extensive contextual clues in order to deduce the likely identity of its viewer. Facebook and Twitter, social networks built around users sharing nearly every detail about themselves, have loudly been moving towards video advertising as a cornerstone of their business in the near future. What this means for you, the advertiser, is that soon you may be able to tap into more accurate consumer data that users have volunteered, including what pages they’ve Liked or brands they follow.

Cost

For a long time, the standard for advertising was a cost-per-mille (CPM) model, in which the advertiser was charged at a rate of X amount of dollars per one-thousand estimated viewers. The greatest advantage of online advertising – at least for you, the advertiser – is the trend away from the CPM model, and towards what’s called a cost-per-action (CPA) payment model. In this system, the advertiser is only charged for the ad space when the viewer responds to it in some way – say, by actually clicking the ad and checking out the product’s website. It’s an advertising fee based on how effective your ad is, rather than paying to get the ad in front of as many eyes as possible and crossing your fingers that people respond. It also causes the hosting site to be invested in your success; if YouTube is only getting paid if the viewer follows up on the ad, they’ll be encouraged to make advertising as user-friendly as possible, for both viewers and advertisers, so as to increase the chances of follow-through.

Television, in comparison, can only work in the CPM model. There’s no way for TV to account for whether viewers are or aren’t paying attention to specific ads – maybe the viewer left to go make a snack in the other room – but you still have to pay. So while 64% of websites have moved to a CPA model, television’s been left behind by the technology. Furthermore, while the remaining 36% of websites use some form of CPM, they’re on par with television rates, charging an average CPM of $24.60 to television’s $25.

Engagement

Commercials have long been the bane of the television viewer. As the explosion in the last decade of TiVo and other digital video recorders allowing fast-forwarding has shown, many people have a low saturation point for advertising in general. Every hour-long episode of television is made up of approximately 44 minutes of content, with an additional 16 minutes of commercials. That means just over 25% of all time spent watching (live) television is spent watching ads.

Meanwhile, if a viewer chooses to watch that exact same episode on the television network’s website, only 8% of the viewer’s time is spent watching ads. For every hour they spend watching video, 55 minutes will be of actual content, with only 5 minutes of advertising. And again, that’s the metric when watching professionally-produced television series online. If random videos on YouTube come into the equation, the ad time per hour plummets.

Having viewers see fewer ads may sound like a bad thing, but remember that thanks to the power of online analytics, your video is targeting a much more specialized audience. Some websites, such as Hulu in the United States, even allow viewers to select between a handful of ads. So instead of having 16 minutes of their hour filled with ads that may or may not even target them, the viewer will experience 5 minutes of ads either aimed directly at their interests, or that they chose. Thus, consumers are less fatigued by a lengthy onslaught of ads, and instead willing to pay attention to a few that are right in their wheelhouse. As such, it’s no wonder that web video creates higher recall in viewers, improving over television by 139% in general recall, 185% in brand recall, and a whopping 200% in message recall.

Conclusion

Again, it comes down to how a change in technology allows for specialized targeting. If television is a shotgun, spraying buckshot over a wide range, then online video is a sniper rifle, zeroing in on the target. Combine that with online video’s trend towards a cost-per-action model, and it means a higher yield of customers for every dollar spent.

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