Monday, August 20

Now, the Clicking Is to Watch the Ads, Not Skip Them

Found on NYtimes.com

FOR generations, advertising interrupted the entertainment that
Americans wanted to read, hear or watch. Now, in a turnabout,
advertising is increasingly being presented as entertainment — and
surprisingly, the idea of all ads, all the time, is gaining some
favor.

One reason is the proliferation of broadband Internet connections,
which make it easier for computer users to watch or download video
clips. That is enabling media companies, agencies and advertisers to
create Web sites devoted to commercials and other forms of advertising
for amusement, rather than hard-core huckstering.

Oddly, the trend runs counter to another powerful impulse among
consumers: the growing desire to avoid advertising. TV viewers, for
instance, are spending billions of dollars a year for TiVo and other
digital video recorders that help them zip through or zap commercials,
and click-through rates for banner Web ads are declining.

The difference between "watching a commercial on a Web site and in
your living room," said Michael Jacobs, executive vice president and
executive creative director at MRM Worldwide in New York, is that
online is "an opt-in audience; you're choosing to be there."

"It's the nature of the Web to offer a destination you know you can go
to and know what you're going to see," said Mr. Jacobs, whose agency
is part of the McCann Worldgroup division of the Interpublic Group of
Companies.

"There's certainly an audience for entertainment as part of the
offering," he added. "The numbers seem to support it."

For example, veryfunnyads.com, a broadband Web site operated by the
TBS cable network, has delivered more than 63 million video clip views
since its introduction last August.

"It's a very straightforward premise: You're going to have a funny
experience, and you're going to have it every 30 seconds," said Ken
Schwab, senior vice president for programming at the TBS and TNT
networks, parts of the Turner Broadcasting System division of Time
Warner.

The funny-ad Web site is part of a rebranding campaign for the TBS
network, which carries the theme "Very funny." The goal is to
cultivate an identity for TBS as a home for sitcoms and humorous
movies.

"A lot of people talk about zipping through commercials because the
average break doesn't hold the promise of being entertaining," Mr.
Schwab said. By contrast, he said, "we have a very clear consumer
proposition, on the site and in our shows."

The concept of veryfunnyads.com has been expanded onto TBS, Mr. Schwab
said, as the network will "call out" some commercials as "very funny
ads" in hopes of keeping viewers from changing channels.

"I'm in the industry, and I'll fast-forward through the ads most of
the time," said David Droga, creative chairman at the Droga5 agency in
New York. "But I'll stop for the good ones."

"You put choice on the table, you change the whole game," Mr. Droga
said, adding: "Everything is about control. If an ad is interesting to
you, you'll have the conversation with the brand. If it's not, it's a
waste of time."

In about a month, Mr. Droga plans to test his theory with the trial
introduction by Droga5 and its partner, the Publicis Groupe, of a Web
site named honeyshed.com.

Mr. Droga described the concept as "MTV meets QVC," offering consumers
in the intended audience of ages 18 to 30 product information in the
form of entertaining video clips rather than traditional commercials.
The clips are to run two to three minutes apiece, he added, and be
presented by hosts considered authorities in categories like cars,
clothing or computers.

"The only reason we have any chance of being successful is
transparency," Mr. Droga said — that is, "if people know they're being
sold to, you can celebrate the sell."

The USA Network unit of NBC Universal, part of General Electric, also
intends to climb aboard the pitch wagon celebrating advertising as
entertainment with an online effort centered on brand-centric content.

Plans call for a Web site next year that would include commercials and
movie trailers as well as features like social networking and tools
that would let visitors make ads of their own. The site is tentatively
named didja.com, as in "Didja see that?"

"It's all about relevance," said Chris McCumber, senior vice president
for marketing and brand strategy at USA Network. "Consumers want to be
entertained on their own time, on their own terms."

"If a spot is not relevant, you're going to want to tune it out," he
added. "This will be a platform for consumers to experience their
favorite commercials or find out more information about a product."

•

The proliferation of portals dedicated to advertising as entertainment
could mean the trend is already peaking, just as cover articles in
magazines about a stock market boom are often followed by plunging
indexes.

"I don't think it is so much about putting entertaining commercials on
the Web as it is about brands providing immersive experiences for
consumers of which entertainment is a component," said Mr. Jacobs of
MRM, whose agency recently won praise for musical Webisodes for Intel,
directed by the humorist Christopher Guest, which are appearing on Web
sites like youtube.com and itgetseasier.com.

The responses to a survey this week on the Adweek Web site
(adweek.com) suggest that advertising as entertainment is still a work
in progress.

As of yesterday afternoon, 13 percent of respondents agreed the
portals were "great fits for the current pop culture," while 43
percent called them "too limited and doomed to fail." The remaining
respondents, 44 percent, agreed with a statement that they are
"complete wild cards; let's wait and see."

MySpace Hires Industry Expert as Video Ad Sales Head

Tom Bosco has been named VP of video ad sales at MySpace, reports ClickZ.

Bosco takes the title at MySpaceTV, but his responsibilities span the
breadth of the social network. MySpaceTV launched earlier this summer
and has already become the second most popular domain on the internet.

Video is an increasingly important focus for MySpace as it adds
content, not only from the Fox television network, but also a variety
of content partners.

Bosco previously worked on the launches of MSN Video and Yahoo Video.
It also served on the Interactive Advertising Bureau's committee to
set standards for online video ads.

Tuesday, August 14

Online Video Gets Boost From Blockbuster Buy

JUST LAST WEEK BLOCKBUSTER ACQUIRED the MovieLink download service.
The reported purchase price was somewhere in the $20 million range,
which when all is said and done might be one of the biggest steals of
the year.

MovieLink is a service founded 5 years ago by the movie studies that
offers consumers downloadable movie rentals and/or purchases. It was
the studios' attempt to do what the major airlines did when they
launched Orbitz in 2001. Prior to the creation of Orbitz, the airlines
watched as Travelocity and Expedia were quickly scaling their business
and becoming both a competitor and a vendor. Their solution was to
join the fray and they did so successfully with the creation of
Orbitz.

Several hotel brands attempted to follow Orbitz' lead and launched
Travelweb.com in 2002. Unfortunately, with many millions invested, in
both infrastructure and marketing, little traction was ever achieved,
the site URL was sold off to Priceline and the venture disbanded.
MovieLink has ultimately met a similar fate to Travelweb's rather than
following in the steps of Orbitz.

MovieLink was launched in 2002 and received an estimated $100 million
in investment from its ownership group of Warner Bros, MGM, Sony
Pictures, Universal Studios and Paramount Pictures. The launch of the
business was ahead of its time in 2002, and still is today. Because
the service only achieved limited traction it was being starved of the
continuous investment it needed, while exhausting the patience of its
owners, I believe.

Online movie distribution is an area that I think yields much
potential. The future of the movie distribution business will quite
possibly involve the release of a film not only in theaters, but on
cable, online, via your iPod or your cell phone, all at the same time.
The movie distribution system will undoubtedly evolve and change from
what it is today. The main factors of this change will be independent
studios and billionaires like Mark Cuban who are funding projects with
multi-platform launch (think HDNet Movies). All it takes is an
independent director to take a chance on distributing a compelling
film and putting it on YouTube to have it watched and spread virally
by millions across the globe. This will be the ultimate catalyst for
change.

While I think it's a matter of when and not if, the when may not be
for many years. And whenever that time comes, the impact will be felt
across the advertising industry as well. Can you envision the release
of a new movie for free over the Internet that features commercial
breaks or is sponsored by a sole advertiser much like some TV programs
(i.e. "24" on Fox and "The Closer" on TNT)?

I think this is a strong possibility. We are already seeing a
grandiose shift in how distribution/content companies from the new Dow
Jones/News Corp to Comcast are leveraging their platforms. While a
free WSJ.com seems all but certain a year from now, a less certain but
not entirely impossible free or highly discounted cable service from
Comcast that relies on advertising in lieu of subscription revenue is
something that has to be considered.

This is why the MovieLink acquisition is so interesting. Blockbuster
has been gaining share and has finally become the competitor to
Netflix many thought it should have been years ago. For only $20
million, Blockbuster has now aligned itself even closer with the movie
studios, and is in a great position when it comes to distribution and
potential commercial sponsorships of movies online.

Heavy's Husky Targets Young Men With Skins

IN THE NEVER-ENDING PURSUIT OF additional inventory, video
entertainment site Heavy.com has launched an ad network named Husky.
To set itself apart from other ad networks flooding the market, Husky
is targeting Heavy's core demographic of young men and specializing
initially in "skins"--a branded ad format that wraps around a site's
video player, and arguably interferes less with a consumer's viewing
experience than pre-roll advertising.

Heavy is in discussions with about 25 medium-sized publishers, which
would give its network an aggregate audience of 50-60 million unique
monthly visitors, according to company co-CEO Simon Assaad. (That
doesn't include Heavy-owned sites, including a sports site due this
fall to be dubbed Burly Sports.)

"We are starting to build out channels," Assaad explained. "Like in
the area of action sports: It's hard for advertisers to find a large
volume of those guys anywhere. So, if we can put together a bunch of
those sites with one to two hundred thousand visitors each, that would
make a great audience."

One the Husky's first major sponsors is New Line, which is using the
network to promote films this fall. Other advertisers include Coors,
Nissan, Panasonic, Diesel, Axe, Sony and Nike. CPM Rates for the skins
are between $10 and $20, according to Assaad.

The Husky Network wraps any video player--YouTube, Revver or Google,
just to name three--with a branded ad. Husky also hopes to lure
advertisers with the ability to access specific psychographics,
including vertical networks covering such areas as music, gossip-
entertainment and action sports.

Despite Heavy's confidence in video skins, Assaad insisted the skins
are just the beginning.

"We'll be experimenting with all different types of ad formats," he
said. "But we've been testing skins for three years, and we know
they're very effective."

At the beginning of the year, Heavy received $20 million in capital
funding, largely from Polaris Venture Partners, to expand beyond
bloopers into sports and other areas.

Facebook's Widget Middleman

Business Week:

Facebook was clearly onto something when it started letting outside
software developers create applications that can be added to users'
profiles: The social network has seen a surge in site traffic and
registered users in the months since the announcement. And users are
reveling in the newfound availability of programs that let them do
everything from rate music to build a family tree to count the days
until President George W. Bush leaves office.

What's less clear is whether and how many of these outside developers
will make money from their inventive applications. Matt Sanchez wants
to change that. On Aug. 13, the 25-year-old chief executive of online
video service VideoEgg announced his company will sell ads for any
outside developer creating interactive, shareable programs—known as
widgets—for Facebook. For small widget makers, many of whom run
several-person startups without an ad sales team, let alone VideoEgg's
20-plus person sales force, the potential partnership is an
opportunity to turn their fun creations into profitable businesses.
Funding Widgets with Ads

Sanchez sees connecting widget makers with advertisers as the next,
inevitable, step for Facebook. Once an online hangout exclusively for
college students, Facebook opened its site last year to the Web
surfing community at large and in May, announced its open-access
policy (see BusinessWeek.com, 7/23/07, "The Next Small Thing").

Since then, the company has been evolving from a social network second
to News Corp.'s (NWS) MySpace into something akin to a Web portal à la
Yahoo! (YHOO) or, even, an online operating system. "The platform
represents a really important shift to where social networks are
going—moving more to this operating-system model where people develop
rich applications and tools for the site," says Sanchez.

The only thing keeping Facebook from becoming to the Web what
Microsoft Windows is to the personal computer, says Sanchez, was a way
for the majority of third-party developers to build profitable
businesses off of Facebook. "A key piece of the ecosystem that needed
to emerge was an ability for application developers to make money,"
says Sanchez.
Facebook Encourages Piggy-Backers

VideoEgg is already working with about 50 application developers
including Rock You!, Flixster, and Scrabulous, which allow users to
share photos and music, show off their favorite movies, and play
Scrabble, respectively.

Ads are shown on "canvas" pages—the Web page that loads when a user is
installing a new application on their personal page. Some early ads
include movie ads that play trailers of films such as Beowulf and The
Bourne Ultimatum when a user mouses over a video screen embedded in
the ad. Facebook does not allow third parties to place ads on users'
personal pages. VideoEgg shares the advertising revenue, giving 60% to
the developers.

For its part, Facebook is fine with developers using its platform to
spread, and make money from, their programs. At the company's recent
F8 press conference, executives stressed that they would not ask for a
share of the advertising revenue. The Facebook team sees its payment
in the ability of third-party applications to draw in more users and
encourage established users to spend more time on the site. The more
time users spend on the site, the more likely they will see Facebook's
own ads.

Plenty of Ad Money to Go Around

Since adopting its open-access policy, Facebook has grown to 35
million active users, up from 8.9 million users in September, 2006
(see BusinessWeek.com, 8/6/07, "Fogeys Flock to Facebook").

Through a partnership with Microsoft (MSFT), Facebook places
interactive, poster-like ads on the left and sometimes on the bottom
of users' personal pages. The site also sells its own flyer-like ads
that can be posted to particular networks, and it places sponsored
info in its "news feed" section, which updates users on the recent
activity of others in their network. News-feed ads are capped at one
per day, says Facebook spokesman Matt Hicks. The company also develops
Facebook pages for particular brands and campaigns. But it's not in
the business of placing ads on behalf of outside developers. That's
where VideoEgg comes in.

Facebook isn't worried about third-party developers cannibalizing
demand for its own advertising. There is plenty of money to go around.
According to an Aug. 9 report by eMarketer analyst Debra Aho
Williamson, advertisers will spend $900 million on social networks
this year. By 2011, that number will reach more than $2.5 billion.
Facebook and MySpace, the leading social networks, will grab more than
70% of that market, according to Williamson. "Social networking is
proving to be a true revenue driver," said Williamson.
Will Users Balk?

While Facebook may be embracing advertising—even when it doesn't
directly get a cut—it's not clear that its users will respond
favorably to an influx of ads. After all, groups of vocal users have
fought changes as seemingly benign as automatically updating friends
about their recent activity (see BusinessWeek.com, 9/8/06, "Facebook
Learns from Its Fumble"). Such users may not want to listen to more
words from their sponsor during their online social time.

Sanchez, for one, isn't worried. He believes that most users
understand that the trade-off for a great free service is ads. "It's
part of the implicit contract there," says Sanchez. "The ads just have
some level of entertainment and engagement value."

Curtain Falls On Google Video

Google Video had a short life. A year and a half after Google bought
the service in an attempt to compete with YouTube; the firm is closing
the book on it.

Forrester Research analyst Charlene Li was quoted in the L.A. Times to
say, "Google Video was a failure. They focused on video while YouTube
focused on the community around video."

Not often does Google not succeed, but in this case the company has
proven that even it can suffer a pitfall. Google had partnered with
CBS and the NBA for this effort hoping to produce a successful
ad-supported platform for video producers.

YouTube trumped the site with their free, user-generated content,
which was ultimately Google Video's downfall. Former CBS president
Larry Kramer was also quoted in the L.A. Times saying, "It was just
clear the audience was more interested in free. But they were also
willing to watch ads. Nobody knew that was going to be the case."

The final bow for the site will take place on Wednesday, August 15th.

Monday, August 13

And the Tables Turn: Video-Sharing Site Sues Major Music Label

In a reversal of how these things usually work, video-sharing site
Veoh is suing Universal Music Group, reports Variety.

The lawsuit follows what Veoh says are a series of threats from the
music label. Like other video sites on the internet, Veoh has fallen
under criticism by media companies because users sometimes share
copyrighted material. But Veoh itself has, to date, not been sued over
that or other issues.

Veoh is seeking a jury trial that it hopes will establish guidelines
for what kind of responsibilities it, and sites like it, have for
policing uploaded material. Most sites say they're not liable for
copyright infringement as long as they remove the offending videos as
soon as they're flagged by the holder.

Are Skins, Bugs or Tickers The Holy Grail of Web Advertising?

From the WSJ

By KEVIN J. DELANEY and EMILY STEEL
August 13, 2007; Page B1

Video Web sites have spent the past year searching for the Holy Grail
of online advertising: ads that don't annoy consumers and still fetch
high prices from advertisers. Now some believe they're beginning to
figure out what works and are starting to cash in.

Sites ranging from Google Inc. to Break.com1 have been experimenting
intensively with replacements for the preroll, the video ads that
users are forced to watch before viewing a clip. Advertisers liked
prerolls because they could use commercials already produced for TV in
the spots, and Web publishers loved the high prices they commanded.
But users grew annoyed by the intrusion, and Google's YouTube and
other video-sharing newcomers rose to popularity partly by ditching
the format.

A BETTER SOLUTION?

That left a big question mark hanging over the online-video industry,
which saw huge growth in consumer usage but couldn't point with
certainty to ad formats that would pump up long-term revenue. Now,
with early results from their experiments with other formats, some
video sites say they're more confident they have an answer, and some
advertisers say they're seeing good results.

The sites and advertisers are now citing success with such things as
graphics that slide over the bottom of the video-viewing screen that
allow them to market to users without interrupting the clip. A user
can usually click on the graphic -- sometimes known as overlays, bugs
or tickers -- to pause the video and see more information from the
advertiser. Other marketers are seeing results with ad graphics that
surround the video player screen, often known as player skins,
especially when used in concert with video ads dropped into clips like
TV commercials. And the preroll itself has been reinvented, now
limited to as little as five seconds and sometimes including timers
that count down the length of the commercial in order to grab
consumers' attention without turning them off.

"Two-thousand-eight is going to be the year when we'll see video
advertising grow because a lot of the experimentation will have
happened this year," says Gokul Rajaram, a Google director of product
management. "People are going to start acting on the data." Research
firm eMarketer Inc. projects that U.S. spending on Internet video
advertising will rise to $4.3 billion in 2011 from $410 million last
year. And Google Video announced Friday that it would stop charging
fees for any of its videos, planning to rely solely on ad revenue.

No one claims to have totally cracked the video-advertising code, and
many sites and advertisers remain in the throes of experimentation,
with mixed or disappointing results to date. Some say the industry
hasn't yet figured out how to make video ads as interactive and
effective as they can be. Most big advertisers are still uncomfortable
having their ads appear alongside the unfiltered videos created by
amateurs on user-generated sites like YouTube. And there's a consensus
that video sites need to reach common standards for formats and how to
measure ads' effectiveness before marketers can adopt them without the
endless hassles of customization.

A skin, one of a few new Web advertising formats, wraps a movie ad
around a video.

Still, the early results are encouraging. Ogilvy Interactive, the
digital arm of WPP Group's Ogilvy & Mather, has found that ads
connected with online videos perform about three times as well as
online sponsorship ads and banner ads when it comes to a consumer's
brand recall. The branded skins on video players are one format that
has worked well for Ogilvy clients including Foster's Lager and
International Business Machines Corp.

"It's not intrusive, and it allows you to sponsor and create an
association with good content," says Maria Mandel, executive director
of digital innovations at Ogilvy Interactive.

The best results have come when the agency has used skins in
combination with placing 30-second spots within the clips. Ogilvy is
readying an ad effort for IBM that includes a specially designed video
player that has IBM skins and plays technology or business content
along with IBM ads. The agency is working on placing the player on
magazine and newspaper publishing sites. Brand recall and consumers'
intention to buy a product, another key measurement, are high with
such ads, says Ms. Mandel. For those reasons, Ms. Mandel says many of
her clients are shifting money out of traditional media into
online-video ads.

Video site Heavy.com4 says skins are the ad format consumers have most
consistently responded to, clicking on them for more information
between 1% and 2% of the time they're displayed. (Industry-wide, the
rate is generally just a fraction of a percent with many other kinds
of ads.) Heavy's video site, which NetRatings Inc. says had 720,000
users in June, this month is starting an online-video ad network
called Husky where it will sell ad skins to appear alongside videos on
other publishers' sites, such as Newgrounds.com5, which offers content
such as games and cartoons.

"We have a very good format," says Simon Assaad, Heavy Inc.'s co-chief
executive. He says a single skin usually generates less ad revenue per
viewer than a preroll ad, but a site can show multiple skins during
each video of several minutes. As a result, the total ad revenue per
video clip -- in the rough range of $30 per 1,000 times it's viewed --
can be equivalent.

Meanwhile, Break.com has offered TV-commercial-like ads within videos,
but another format it introduced a few months ago, which it calls a
"bug," has been generating more excitement among advertisers.
Break.com had 3.8 million U.S. visitors in June, according to
NetRatings.

Time Warner Inc.'s New Line Home Entertainment used bugs last month to
promote the DVD release of "The Number 23" on Break.com. Using the ad
format, a graphic on the film slid onto the bottom of a video as it
played; the graphic offered viewers who clicked on it more
information. About 2.5% of everyone who saw the ad clicked through to
learn more about the DVD release. "That's certainly much higher than
standard advertising click-through rates on the Web," says Ian
Schafer, chief executive of interactive ad agency Deep Focus Inc.,
which worked on the campaign for New Line.

Deep Focus is working with other clients and Web sites on similar ads,
and Break.com says it's close to selling out its bug inventory. "This
has been the most effective ad unit attracting advertisers and users,"
says Keith Richman, the CEO of NextPoint Inc., the parent of Break
Media. "Users who frequently complain when they don't like things
haven't complained at all."

VideoEgg Inc., a San Francisco-based company that runs an online-video
network and develops interactive-video ad technology, started
experimenting with ads that went beyond the preroll format last fall.
These include video spots that roll at the end of clips, tickers that
resemble the headlines that stream underneath TV news programs,
picture-in-picture ads and animated bugs. Right now, the
picture-in-picture ads are performing the best, with click-through
rates averaging 4% to 5%, says Troy Young, VideoEgg chief marketing
officer.

Discovery Communications, which advertises with VideoEgg, says its
online-video advertising results exceeded the company's expectations
compared with other forms of online ad placements. Discovery recently
ran a campaign with VideoEgg for its TLC network's "LA Ink" show,
including ticker and video-in-video ads. A spokeswoman said the ads
"performed incredibly well, garnering a click-through rate four times
higher than the standard."

Internet heavyweight Google has been experimenting with various
video-ad formats on YouTube and partner sites for months, including
overlays and TV-commercial-like ads of different lengths and
placement. Mr. Rajaram says the best format will vary by site and
content. But he says the overlay ads, which insert text or graphics
like a ticker tape at the bottom of the video, are one format that is
a candidate for the industry to create standards around.

Mr. Rajaram says Google is experimenting with using
contextual-targeting -- making the subject of the ad match the content
it appears alongside -- for video-related ads, though he declined to
specify how that worked at Google. But some start-ups have developed
technology that analyzes the audio track of clips for key words that
help select ads that might be more relevant to the user, such as by
showing a car ad when someone in the clip is speaking the name of a
specific auto maker.

Allstate is one of the advertisers who tested different ad formats and
placement on the Google Video site over the past year. One test
involved running 15-second commercials in the middle of music videos,
but no users clicked on the ads or dialed the 1-800 telephone number
they listed. The insurance giant says music videos weren't the right
place for such ad content and vows to keep experimenting.

"We didn't see overwhelming success," says Lisa Cochrane, Allstate's
vice president of integrated marketing, who says the company is
looking to test shorter length ads of seven or eight seconds.

Are Skins, Bugs or Tickers The Holy Grail of Web Advertising?

By KEVIN J. DELANEY and EMILY STEEL
August 13, 2007; Page B1

Video Web sites have spent the past year searching for the Holy Grail
of online advertising: ads that don't annoy consumers and still fetch
high prices from advertisers. Now some believe they're beginning to
figure out what works and are starting to cash in.

Sites ranging from Google Inc. to Break.com1 have been experimenting
intensively with replacements for the preroll, the video ads that
users are forced to watch before viewing a clip. Advertisers liked
prerolls because they could use commercials already produced for TV in
the spots, and Web publishers loved the high prices they commanded.
But users grew annoyed by the intrusion, and Google's YouTube and
other video-sharing newcomers rose to popularity partly by ditching
the format.

A BETTER SOLUTION?

That left a big question mark hanging over the online-video industry,
which saw huge growth in consumer usage but couldn't point with
certainty to ad formats that would pump up long-term revenue. Now,
with early results from their experiments with other formats, some
video sites say they're more confident they have an answer, and some
advertisers say they're seeing good results.

The sites and advertisers are now citing success with such things as
graphics that slide over the bottom of the video-viewing screen that
allow them to market to users without interrupting the clip. A user
can usually click on the graphic -- sometimes known as overlays, bugs
or tickers -- to pause the video and see more information from the
advertiser. Other marketers are seeing results with ad graphics that
surround the video player screen, often known as player skins,
especially when used in concert with video ads dropped into clips like
TV commercials. And the preroll itself has been reinvented, now
limited to as little as five seconds and sometimes including timers
that count down the length of the commercial in order to grab
consumers' attention without turning them off.

"Two-thousand-eight is going to be the year when we'll see video
advertising grow because a lot of the experimentation will have
happened this year," says Gokul Rajaram, a Google director of product
management. "People are going to start acting on the data." Research
firm eMarketer Inc. projects that U.S. spending on Internet video
advertising will rise to $4.3 billion in 2011 from $410 million last
year. And Google Video announced Friday that it would stop charging
fees for any of its videos, planning to rely solely on ad revenue.

No one claims to have totally cracked the video-advertising code, and
many sites and advertisers remain in the throes of experimentation,
with mixed or disappointing results to date. Some say the industry
hasn't yet figured out how to make video ads as interactive and
effective as they can be. Most big advertisers are still uncomfortable
having their ads appear alongside the unfiltered videos created by
amateurs on user-generated sites like YouTube. And there's a consensus
that video sites need to reach common standards for formats and how to
measure ads' effectiveness before marketers can adopt them without the
endless hassles of customization.

A skin, one of a few new Web advertising formats, wraps a movie ad
around a video.

Still, the early results are encouraging. Ogilvy Interactive, the
digital arm of WPP Group's Ogilvy & Mather, has found that ads
connected with online videos perform about three times as well as
online sponsorship ads and banner ads when it comes to a consumer's
brand recall. The branded skins on video players are one format that
has worked well for Ogilvy clients including Foster's Lager and
International Business Machines Corp.

"It's not intrusive, and it allows you to sponsor and create an
association with good content," says Maria Mandel, executive director
of digital innovations at Ogilvy Interactive.

The best results have come when the agency has used skins in
combination with placing 30-second spots within the clips. Ogilvy is
readying an ad effort for IBM that includes a specially designed video
player that has IBM skins and plays technology or business content
along with IBM ads. The agency is working on placing the player on
magazine and newspaper publishing sites. Brand recall and consumers'
intention to buy a product, another key measurement, are high with
such ads, says Ms. Mandel. For those reasons, Ms. Mandel says many of
her clients are shifting money out of traditional media into
online-video ads.

Video site Heavy.com4 says skins are the ad format consumers have most
consistently responded to, clicking on them for more information
between 1% and 2% of the time they're displayed. (Industry-wide, the
rate is generally just a fraction of a percent with many other kinds
of ads.) Heavy's video site, which NetRatings Inc. says had 720,000
users in June, this month is starting an online-video ad network
called Husky where it will sell ad skins to appear alongside videos on
other publishers' sites, such as Newgrounds.com5, which offers content
such as games and cartoons.

"We have a very good format," says Simon Assaad, Heavy Inc.'s co-chief
executive. He says a single skin usually generates less ad revenue per
viewer than a preroll ad, but a site can show multiple skins during
each video of several minutes. As a result, the total ad revenue per
video clip -- in the rough range of $30 per 1,000 times it's viewed --
can be equivalent.

Meanwhile, Break.com has offered TV-commercial-like ads within videos,
but another format it introduced a few months ago, which it calls a
"bug," has been generating more excitement among advertisers.
Break.com had 3.8 million U.S. visitors in June, according to
NetRatings.

Time Warner Inc.'s New Line Home Entertainment used bugs last month to
promote the DVD release of "The Number 23" on Break.com. Using the ad
format, a graphic on the film slid onto the bottom of a video as it
played; the graphic offered viewers who clicked on it more
information. About 2.5% of everyone who saw the ad clicked through to
learn more about the DVD release. "That's certainly much higher than
standard advertising click-through rates on the Web," says Ian
Schafer, chief executive of interactive ad agency Deep Focus Inc.,
which worked on the campaign for New Line.

Deep Focus is working with other clients and Web sites on similar ads,
and Break.com says it's close to selling out its bug inventory. "This
has been the most effective ad unit attracting advertisers and users,"
says Keith Richman, the CEO of NextPoint Inc., the parent of Break
Media. "Users who frequently complain when they don't like things
haven't complained at all."

VideoEgg Inc., a San Francisco-based company that runs an online-video
network and develops interactive-video ad technology, started
experimenting with ads that went beyond the preroll format last fall.
These include video spots that roll at the end of clips, tickers that
resemble the headlines that stream underneath TV news programs,
picture-in-picture ads and animated bugs. Right now, the
picture-in-picture ads are performing the best, with click-through
rates averaging 4% to 5%, says Troy Young, VideoEgg chief marketing
officer.

Discovery Communications, which advertises with VideoEgg, says its
online-video advertising results exceeded the company's expectations
compared with other forms of online ad placements. Discovery recently
ran a campaign with VideoEgg for its TLC network's "LA Ink" show,
including ticker and video-in-video ads. A spokeswoman said the ads
"performed incredibly well, garnering a click-through rate four times
higher than the standard."

Internet heavyweight Google has been experimenting with various
video-ad formats on YouTube and partner sites for months, including
overlays and TV-commercial-like ads of different lengths and
placement. Mr. Rajaram says the best format will vary by site and
content. But he says the overlay ads, which insert text or graphics
like a ticker tape at the bottom of the video, are one format that is
a candidate for the industry to create standards around.

Mr. Rajaram says Google is experimenting with using
contextual-targeting -- making the subject of the ad match the content
it appears alongside -- for video-related ads, though he declined to
specify how that worked at Google. But some start-ups have developed
technology that analyzes the audio track of clips for key words that
help select ads that might be more relevant to the user, such as by
showing a car ad when someone in the clip is speaking the name of a
specific auto maker.

Allstate is one of the advertisers who tested different ad formats and
placement on the Google Video site over the past year. One test
involved running 15-second commercials in the middle of music videos,
but no users clicked on the ads or dialed the 1-800 telephone number
they listed. The insurance giant says music videos weren't the right
place for such ad content and vows to keep experimenting.

"We didn't see overwhelming success," says Lisa Cochrane, Allstate's
vice president of integrated marketing, who says the company is
looking to test shorter length ads of seven or eight seconds.

Tonight We Pull the Plug on the 30-Second Ad

from NPR's blog:

I'm sure you wouldn't dare miss Friday Night Smackdown on the CW
tonight, but be careful not to rush to the bathroom during the breaks.
Tonight, we bid farewell and good riddance to the 30-second ad.

The video game company Electronic Arts will debut 10-second ads in the
program. Which matches up with the attention span of the teenage
audience they hope to reach.

But there's something serious going on here. The CW network calls them
"cwickies" and hopes to sneak these ads in before you can reach for
the remote. And just to totally throw you off your fast-forwarding
rhythm, the company will have a 90-second ad at the end of the
program. Ad Age points out how revolutionary this is:

Model-busting ad ideas, such as the cwickies and "content wraps"
-- CW's series of long ads placed over the course of a single night --
do something that gives network executives the willies. They make one
marketer's commercials more memorable than others airing in the same
program, threatening to ruin a decades-old ad system. In the past, one
TV ad had as good a chance as any to get noticed. Now, as the old
saying goes, some ads are becoming more equal than others.

Thank God. It's hard to believe that the 30-second spot has gone
unchallenged this long in a revolutionary media environment. And who
knows what's next? Advertisers have already floated some other ideas:
company logos dancing on the bottom of your CSI episode, split-screen
ads during Grey's Anatomy. In order to save TV, sounds like they are
willing to destroy it.

- Robert Smith

Monday, August 6

EBaum’s World Is Acquired

Adding to the video sharing site battle, viral video and content web
site eBaum's World has been acquired by HandHeld Entertainment as part
of its ZVUE network. This signifies another partnership being created
in an effort to compete with video sharing sites including MySpace
Video, YouTube and AOL Video. The company was purchased for $17.5
million.

President and CEO of HandHeld Entertainment, Jeff Oscodar assessed the
acquisition by saying, "eBaum's is certainly mid-tier and top ten,
they were bigger than our network was before we acquired them, and
together we are up there with the largest sites on the Web. Our
network gets a tremendous amount of traffic with this site and the
quality of the traffic is outstanding."

eBaum's World, which was founded in 1998 has served over 2.5 billion
unique page views over the past year alone and has an average time of
over 10 minutes per user visit. The site will be incorporated into the
ZVUE Network of sites that target 18-35 year olds.

Oscodar concluded by describing why this site will be appealing to
advertisers, "We have lots of premium commercial content that should
be very attractive to the same demographic that is coming to eBaum's
as well as other sites on our network. This puts us up in the upper
echelon of highly trafficked UGC Web sites. That should be attractive
to advertisers because of the serious reach that our network can
provide."

Thursday, August 2

Video Sites Give Everyone Piece Of Ad Pie

Straight from reality into my laptop. The world of text based Internet
communications is quickly dissolving into video feeds of human faces,
dancing dogs, pasta covered babies, and natural disasters – with a few
ads thrown in to cover bandwidth. As consumers, we're constantly
looking for new entertainment, but the lines between fun and function
blur as new companies discover profit lies in bridging the gap between
our laptop screens and ip addresses to the families with a video
camera next door. My favorite dotcoms of the month are Bitmunk,
Cozingo, with a nod to MetaCafe's new channel initiative. Their
revenue models are divergent and creative, and not simply
ad-supported, but advertising, nonetheless, is part of their nature.

Bitmunk is a digital media selling solution that allows consumers to
own their media purchases. Consumers can burn, swap, or even re-sell
their purchases indefinitely with royalties going back to the original
copyright owner. Recently, Bitmunk launched their video-support
feature and heralded a partnership with Filmbaby to distribute their
catalog of over 2000 indie films. The technology behind Bitmunk allows
for anyone to easily upload digital music or video content, set a
price, and control their royalties and tracking. So, if you want to
sell that video of your infant son laughing hysterically at a bowl of
spaghetti, you can. Just be sure your infant son has signed a release.
Marinara stains on paper might not hold up in court if he comes back
in 20 years and demands the proceeds from your entrepreneurial spirit.
Bitmunk clearly states to content producers they take a smaller
percentage of sales transactions than other online media stores – but
also offer consumers the option to view advertising pre-rolls to cut
down their total purchase cost.

Cozingo is like a video-based Craigslist– hosting a directory of
services, dating ads, and items for sale pitched directly from "people
near you." Launched in June, the site has seen rapid growth and not
only entertains the casual surfer, but serves an exceptional function
for people who need to buy something, date something, or have
something done for them. All video clips include a verbal pitch and
the brick & mortar contact info of the purveyor themselves. In what
seems like a smart marketing effort to get more content, Cozingo has
an affiliate program in place which rewards video uploads as well as a
generous "camera loan" program for those with a more enterprising
nature. So, if you want to advertise your family's Italian restaurant
with a video of your infant son laughing at a bowl of spaghetti,
Cozingo is the perfect place to do it – and they'll even pay you for
it. However, unlike Craigslist, Cozingo does not have plans to
introduce paid business listings into their revenue model. According
to Shoubi Rastegar, President of Cozingo, they want to remain a "…
free classifieds resource for everyone." A bidding system for featured
video and prime placement on the main page is likely to be introduced
at a later date.

MetaCafe is a long running favorite video-upload and share site with
heavy traffic and a committed community of surfers. Less than 10
months ago, MetaCafe launched a rewards program called "Producer
Awards" - in which the most popular viewed videos and their copyright
owners would receive cash compensation for their participation in the
community. These content producers would receive $100 per 20,000 views
coupled with some additional stipulations on quality. The program was
successful, but only the most popular videos would float to the top of
MetaCafe's filter and to the casual surfer's laptop. Late July,
MetaCafe introduced a new feature called "Channels" which sorts all
videos by a particular producer into a quickly browsable frame.
Suddenly, it was possible for Pasta Baby, Laughing Bowl and Marinara,
and Joey's Italian Family Restaurant to appear side by side for their
die-hard fans. Viewings exponentially increased, and so did the
infant's college fund, thanks to the integrated Producer Rewards
program. The marketing highlight of the new Channel feature is the
integrated ads that hover on the lower portion of the video during
play. MetaCafe is heavily ad-supported and with the new Channels
feature they're giving back more to the producers, thanks to the
advertisers handing out more for the new views.
Source: adotas.

CondeNet Builds Out Online Video Offerings

Conde Nast's online division CondeNet is adding content to its video
offerings on Concierge.com, reports MediaPost.

The travel site will feature video tours of cities around the world,
adding to its existing slate of digital programming. The spots, which
run 2-3 minutes a piece, are produced by TurnHere.

CondeNet also is looking for new ways to distribute video. It may take
advantage of an agreement between TurnHere and Pheedo to deliver
content via RSS fees. Other distribution agreements are in the works
as well.

CondeNet says that, on top of all this, it plans to develop ways its
advertisers spots can follow the videos, no matter where they stream.

NBCU Beefs Up VCast Offerings

NBC Universal has added nine new channels to Verizon's V CAST service,
reports MediaWeek.

Content from NBC Sports, Access Hollywood, Telemundo and others will
now be available to V CAST subscribers. Each channel will be
programmed with clips from NBC Universal broadcast or cable TV
properties.

Disney Adopts Virtual World Club Penguin for $350 Million

According to Next Gen, Disney bought all outstanding shares of site
operator New Horizons Interactive for $350 million, and plans on
doubling that amount over the next couple of years once Horizon hits
"predefined earnings targets."

British Columbia-based Club Penguin has experienced explosive growth.
Over the past year traffic rose 329 percent, making the destination
the 131st most-visited site in the US, according to Hitwise.

In total, Club Penguin serves 12 million users, 700,000 of which pay a
subscription fee for more features.

Hitwise also ranks Club Penguin as the third most popular virtual
world behind Runescape and Webkinz. Disney's Virtual Magic Kingdom
came in eighth, while World of Warcraft ranked seventh.

Second Life, meanwhile, ranked twelfth.