Pre-rolls and the future of video advertising

Cisco, the people who manage the pipes of the Net, is just one of the groups that are betting on the future of online video. 70% of the growth of Web content between now and 2014, they say, will be video. Other research shows that, too, and I have to agree that it sure looks like our lives are about to be much more video-centric.

You’d think this would be a good thing for broadcasters. After all, video is our world, and yet newspapers have been winning the online video race for a number of years. YouTube is THE repository of all that is video, and many other streaming portals are out there, too. The infrastructure is in place — or mostly in place — for this video-centric Web. Search is next, and search will include sophisticated image recognition software. It promises to be a fun world.

There’s a big “but” standing in the way, however, and where it goes will determine the winners and losers of tomorrow. I’m talking about how to make money with all that video.

Early Saturday I was perusing my RSS reader and came across an E! News video clip of Charlie Sheen making a fool of himself on the radio. I hit the play button, and up popped a 30-second Banana Republic made-for-TV ad. Nice ad, but it had no business running ahead of the Sheen video — for reasons I have discussed for many years — but its placement there is evidence that those who “should” own the video niche tomorrow won’t. Like bundled advertising was to newspapers, video pre-roll ads are a strategic blunder of trying to bolt the new onto the old instead of exploring options that better fit the Web. There’s a lot of money in pre-rolls, however, because that’s what Madison Avenue wants, and in this way, both Madison Avenue and legacy media are bedfellows in their own destruction. I don’t know how to state it more clearly than to ask you to consider the viability of a 30-second brand advertisement, one that’s made for a passive TV viewing experience, being slapped in front of a piece of video on the participatory, real time Web. Why do we shoot ourselves in the foot this way?

Banana Republic Ad via ENews

After the Sheen video, I clicked on another one that I wanted to watch, and wouldn’t you know it, there was the same Banana Republic 30 second ad. By this time, I was not only pissed at E!News, I was also pissed at Banana Republic. Somebody at E! gets a check from Banana Republic and deposits it into an account, and people go about living their lives. But they do so foolishly thinking “no problem.” Big problem.

Commoditized pre-rolls are simply not what’s going to drive Web video into the future. There’s lots of evidence that advertisers like pre-rolls and are willing to pay for them, but there’s an equal amount of research to suggest that users hate them. I’ve actually made the decision not to watch a video, because of a pre-roll, and I know I’m not alone. Long ago, MSN did research about the optimal length for a pre-roll. 7–10 seconds is it. Period. And yet, we’re running 30s knowing that we’re simply pissing people off. Why do we do that? Because it’s easy, and we need the money.

In so doing, we’re unwittingly handing over the keys to the online video niche to others — smart people who understand that the Web is not TV and that it must be served differently. They will discover other solutions, because it’s very unlikely those solutions will come from traditional television.

First of all, the Web is in real time and time is the new currency. Even though I can select what I want to watch and when I want to watch it, to the Web, I’m doing that in real time. There are opportunities for advertising relevance there. Putting a meaningless 30-second Banana Republic ad in my face when I’m looking to hear from Charlie Sheen disrespects me by wasting my time, and it misses the opportunity to do something meaningful with the here-and-now attention I’ve just given it. A 10-second topical promo for something coming up on TV that hour would be more relevant than a branding spot for Banana Republic. That’s perhaps a bad example, but you get the idea. If it’s late morning, how about a 10-second “McDonald’s for lunch” spot? Give me something relevant!

“But, Terry, Banana Republic wants to give us a wad of cash for those spots. Are you saying turn that down?” God forbid, but as we’re taking that cash, let’s make sure we understand the ramifications of so doing. The temperature of the water that our frog sits in goes up a little each time.

Secondly, the Web is incredibly efficient at delivering real time messages to highly specific targets. Direct marketing is its specialty. As long as we think of ourselves as video content providers and care nothing about connecting with individual browsers within our reach, we will continue to abdicate opportunity to others. We need the data to know who’s watching our videos, so that we can deliver specific messages tailored to them. At least it will increase the relevance when we interrupt them with pre-rolls. This also allows us to raise rates on advertising, because we’re not using the scattergun, mass-media approach that Banana Republic apparently likes so much.

Or how about getting into the post-roll business with a pre-roll banner? That way, people who want more information about who/what’s sponsoring the video can stick around without destroying the experience of the user who doesn’t. This is a YouTube model that I like very much, and I find myself sticking around for more ads than you might think.

The point is that video is still in its infancy, and now is the time to decide how we’re going to monetize that which we provide. I sincerely hope we don’t let Madison Avenue make the rules, because they don’t really give a crap about us. Sitting back and waiting to see what sells — as we’ve done with every other stage of digital development — will keep us from ever establishing for ourselves the value of our content. That’s going to require ingenuity and the courage to maybe even say “no” once in awhile when the Banana Republics of the world come calling.

Keep your long-term glasses on

Keep your long term glasses onWhen I was a news director, I was often hired in turn-around situations, where a company was dissatisfied with something involving the news department, usually the news ratings. Not every one of my appointments fell into this category, but I always enjoyed the challenge of competing with entrenched winners. I had a few rules that I’m sure the talented people who worked for me remember. Rule number one: there are no rules. We wouldn’t let ANYTHING hold us back from disrupting the status quo. Another rule was: keep your long-term glasses on. We needed to know that taking the mountain was a process that wouldn’t happen overnight.

This rule about long-term focus applies to traditional media, I think, in these times of change, because we’re on a path illuminated not by short-term fads but by long-term trends. It’s vitally more important, therefore, that we always act on behalf of those trends but always question the short term whirligigs that come along every day. I learned in the Coast Guard that the way to avoid sea sickness in rough weather is to keep your focus on the horizon, not on the waves or the view that keeps rising and falling. That’s good advice in any time of change.

But the problem is that many can’t see the horizon. We’ve either got our heads down, buried in day-to-day operations, or we’re trying to make ends meet. The horizon, however — our destination point — is what we need most, because if we can see the goal, we can create the processes needed to get us there. This does require, however, fixating our gaze forward instead of down or to the side.

Take, for example, Twitter. To properly view this wonderful notification system, we must begin with AOL. In fact, you’ll always be safe if AOL sits in the back of your mind as a red flag. AOL was training wheels for the Web, but it was its walled garden approach — building a web within the Web — that eventually spelled trouble, the same kind of trouble that Twitter, Facebook and other proprietary, closed systems provide today. What are the broader strokes that Twitter is providing? This is the important question.

This is why AR&D is writing a new book, 2015: The Future of Local Media. Nobody who reads this newsletter regularly will be surprised by anything in the book, because the book merely advances our vision. In the interim — and in the name of our long-term glasses — I thought I’d publish a list of five of the broad trends that we’re following. We’re all just overwhelmed with options these days, so use this list as a filter to keep yourself focused on what’s really important for tomorrow.

  1. The shift to real time news and information. Dave Winer wrote recently that Twitter is a dress rehearsal for what’s coming, and I think that’s true. During my interview with Kevin Kelly for the book, he noted that THE most important trend to follow is the move from a static Web to “the real time flows and streams” inherent in the living or “Live” Web. Let’s not think of real time as necessarily replacing that which is “finished, vetted and complete,” but rather as a new entity that is evolving before our eyes. Journalists must consider a commitment to real time as a part of doing their jobs, because the stream is the process of gathering news itself. It’s also important to understand that the stream is bigger than anything we put into it. Monetizing the stream, we believe, will come from curating the fire hose for individual consumption and from organizing separate streams from merchants wishing to get messages out to existing or potential customers.
  2. Portability. This is the year that analysts project more portable computing devices will be sold than those that are hard-wired to an Internet connection. 2011 is a tipping point, because portability brings proximity into the media equation, and that brings opportunity in the form of hyperlocal relevance, not only for news and information but also for making money. But don’t be fooled into thinking that portability is something other than just the good old Web. It’s not. Magazine apps for the iPad, for example, have been a bust, because the iPad is just a presentation layer on top of the Web. If it didn’t work on the Web, it won’t work via a portable device. Portability/proximity also brings a heightened sense of “local” into the information equation, almost a redefinition of the term and one with which we will have to contend in the years ahead.
  3. Unbundled content. In 2004, then FCC Chairman Michael Powell noted that “application separation is the most important paradigm change in the history of communications, and it will change things forever.” Media hasn’t fully caught on yet, because the act of “application separation” means, in large part, the unbolting of media content from the original source in which it was presented. Just as it was with the music industry, so it will be with media, because people not only object to our packaging as inefficient and time-wasting but also as self-serving despite claims of the opposite. There’s an old adage among successful bloggers that “if you send people away, they’ll come back,” which influences many strategic decisions about content, including full-feed RSS and outbound linking. Legacy media doesn’t get this, because it’s counterintuitive to its fundamental need to corral and maintain large audiences. Make no mistake, though, content distribution in the future will be unbundled, and the sooner we get there, the better.
  4. Consumers rule. This is perhaps the most overlooked and underestimated new reality for business in the 21st Century. The industrial age was all about a Mad Men sort of “warfare” in which brilliant marketers attacked the minds of people to move them to buy products. How heroic! The problem is nobody asked people if they could play with them this way, and now we have a problem. Consumers can not only talk back, but they can talk to each other, and this is a serious issue for those who need a one-way mechanism to change our minds. How have we responded? I just read in Online Media Dialy of “new video pre-roll units” that will leverage a “variety of targeting methods to deliver high-quality audiences more efficiently than the typical online video campaign.” People as “targets” aren’t really people, so we can put 15–30 second pre-rolls in front of 90-second videos and think that’s tolerable. Everybody knows that the optimum for pre-rolls is 7–10 seconds, but Madison Avenue refuses to believe that it no longer has carte blanche in messing with the lives of consumers. Starcomm’s Rishad Tobaccowala said many years ago that “we’ve entered an empowered era in which humans are God, because technology allows them to be godlike. He asks, “How will you engage God?” It’s a question we should be asking.
  5. Video, video, video. By 2014, Cisco projects that the average downbound bandwidth of the Web will be 14.4 megs and that nearly all of the growth in traffic will be video. Much, if not most of that video will be advertising of one form or the other (if you don’t believe this, spend a little time on YouTube), and this is something local media companies are ideally suited to provide. At many local TV stations, we have whole production departments sitting around twirling their thumbs while waiting for the next commercial shoot when they could be on-the-street making YouTube and other videos for online consumption. We don’t see this, because we’re too busy waiting for the next ad agency to come along with a new pre-roll. We’re so stuck on attaching ads to OUR content as the only source of revenue, but a whole new world is opening for us to pursue. Newspapers could (and are) easily steal this right out from under the noses of TV stations. The online video world has just begun, and we’re stuck waiting for somebody to show us the way rather than attacking it head-on today.

What, Terry, no “deals” application? Perhaps. There are many other trends we’ll be examining in the book, in addition to putting it all together for you in a “here’s what it’ll look like” view of local media, circa 2015. Meanwhile, though, if we’ll run anything that’s presented to us through these filters, we’ll be on solid ground for tomorrow. Is it video-centric? Is it pro-consumer? Is it unbundled and free to be passed around? Is it meant for portable Web consumption? Is it a part of the real time flows and streams? If that which is before you provides a “yes” to those, then take it to the bank that you’re on solid ground. If not, you might want to proceed cautiously.

And keep your long-term glasses on.

“Hulu Handcuff:” a signal to broadcasting and cable?

Hulu HandcuffThe “Hulu Handcuff” condition that was a part of the government’s approval of the Comcast-NBC merger this week is an important and insightful look into the mind of not only the Genachowski FCC but also what the Obama administration views as important downstream. If you thought that the status quo has defenders in the White House, you should probably think again, and that has meaning for any kind of legacy media.

The so-called Hulu Handcuff blocks Comcast from any decision-making or influence on the future of Hulu. NBC would still be allowed some participation, but the government sees Comcast as a potential threat to the viability of Hulu and wants assurances that Hulu will be protected. The Justice Department explained in court filings:

“Comcast has an incentive to prevent Hulu from becoming an even more attractive avenue for viewing video programming because Hulu would then exert increased competitive pressure on Comcast’s cable business. If the proposed transaction were to be consummated without conditions, (Comcast) would hold seats on Hulu’s board of directors and could exercise their voting and other governance rights to compromise strategic and competitive initiatives Hulu may wish to pursue.”

In an FCC press release, commissioners wrote that Comcast-NBCU will be required to take affirmative steps to foster competition in the video marketplace in addition to backing away from Hulu.

…Comcast-NBCU will increase local news coverage to viewers; expand children’s programming; enhance the diversity of programming available to Spanish-speaking viewers; offer broadband services to low-income Americans at
reduced monthly prices; and provide high-speed broadband to schools, libraries and underserved communities, among other public benefits…

…Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution…

…Protecting the Development of Online Competition…

What’s interesting to me here is the message this action telegraphs to the whole “video transmission” industry, and it’s pretty huge: “Don’t mess with unbundled video distribution via the Web.” Reading between the lines can’t make anybody in the licensed spectrum world feel all warm and fuzzy inside, because the government’s priority should be seen as online and not over-the-air, although that may seem like splitting mobile broadband hairs.

These conditions are set for at least seven years, seven crucial years in the development of the online video marketplace. Monetizing all that content on behalf of rights owners is something that’s still very mushy and in need of serious leadership. It’s the innovator’s dilemma that Clayton Christensen (keynoter at the upcoming Borrell Conference in March) talks about. Broadcasters want and need to protect their core competency while disruptive forces are demanding a different model. This week’s action by the Justice Department and the FCC sends a clear signal as to which area has Washington’s ear.

Captioning YouTube videos — a big YES!

Google announced this week that it is adding capitoning to YouTube videos, and this is a very big deal for everybody. Using its own technology, YouTube will create an English script from the audio of videos and make that available for the hearing impaired. In addition, those who have the text of the audio available can upload it in a separate file, and YouTube will add it to the video.

The play is being positioned as a way to help the hearing impaired enjoy YouTube, but there’s another huge upside to this: it will dramatically enhance search capabilities on the video giant. Already the world’s second-largest search engine, this move will only strengthen that position for YouTube. Text associated with videos on YouTube will also have the secondary benefit of boosting search engine optimization with Google (or Bing, or whatever), so it’s incumbent on those who are smart enough to already be using YouTube to start uploading text files as well.

It’s all in your perception

Jerry Gumbert at RTNDAA young woman — a college student exploring the RTNDA conference likely for the first time — asked the question of the whole convention yesterday. It came during a session in which Jerry Gumbert, president and CEO of AR&D, was discussing our new book and the details of re-engineering local TV. Grip the arm rests of your chair and get ready. Here it comes:

“Why wouldn’t anybody want to shoot their own video?”

The issue was the roles and expectations of the multimedia journalist. Jerry was talking about how veteran TV news reporters sincerely believe they’ve “earned” the right to “just” report but that the industry simply must move beyond that and embrace the necessity of putting more feet on the street. Readers here have been down this road with me many times. The industry vilification of Michael Rosenblum, the outlier “father of the VJ (video journalist) movement,” has been well-documented here, and it’s common knowledge that the pejorative term “one-man-band” is used with condescension among the rank and file in TV newsrooms.

But the reality is that a whole new generation of multimedia journalist is coming up through our institutions of higher learning, and they feel like this young woman in that room at the RTNDA yesterday. When she made that statement, the other students in the room announced their agreement. Wake up, you intransigent old-timers.

I wish Michael could have been there to hear this young lady make that unsolicited statement. I’m sure he hears it elsewhere, but in this context, in this place, in that room, it was very special.

Borrell: TV stations still losing, in of all places, video!

comScore chairman and CEO, Gian FulgoniGian Fulgoni is a major player in the world of web advertising. As chairman and co-founder of comScore, he has played a leadership role in the commodification of online display advertising (not necessarily a good thing, of course) and is a keeper of the metrics used to drive the advertising business. When he speaks, it’s important to listen, and what he’s saying these days is that video is the bomb!

In a Monday speech to the OMMA Hollywood conference in Los Angeles, Fulgoni admitted that clicks aren’t what they used to be. According to, Fulgoni said, “We have to get off the idea that a click is a valid metric. There are many other ways of measuring the effectiveness of ads.” The new biggie, he said, is video.

ComScore can track the impact of online video ads by measuring whether Internet users who saw an online video ad then went on to visit a site or buy a product, for instance, he said. Brands using online video ads have seen lifts of anywhere from 20 percent to 40 percent or higher in terms of incremental buying with online video and rich media over other ad forms, he said. “The reason advertising works well on TV is it has sight, sound and motion, and you have that in online video. It’s easier to communicate a message and easier to persuade people,” he said.

The growth in viewing of long-form content online is also a boon for the growing online video ad market, he said. The longer people watch, the more advertising opportunities there are. The average online Internet user is watching 3.5 minutes at a time, and that keeps increasing. “That’s a really important metric because if we just stick with three-minute video clips that limits the number of ads,” he said. “You want these longer-running shows so you can maximize ad dollars. This is one of the key components of the future of online advertising.”

Borrell projects growth in videoFulgoni didn’t say whether the ideal format was pre-roll, post-roll or something else, only that video was the place to be for growth. This syncs with data from Borrell Associates that projects video, email and local search as the three growth vehicles for online advertising over the next five years.

For television stations, video advertising should be a logical extension of existing knowledge, but newspapers continue to dominate in the local online video advertising category. Gordon Borrell told me this morning that new 2008 numbers (due out in a couple of weeks) reveal that newspapers made about $165 million last year from streaming video advertising, while TV stations made $105 million. Interestingly, streaming video was just 5% of newspaper website revenues, but 10% of TV website revenues.

Meanwhile, and even more amazingly, yellow pages companies made between $85–100 million last year from streaming video. Think about that for a second. Online, yellow pages companies are making nearly as much local money with video as television stations. This is insane, and, as my partner Steve Safran so famously said a few years ago, “You’d think that the one place video companies could win in is, well, video!”

Gordon BorrellFor Gordon Borrell, this issue has been a real sore spot for a very long time.

The online video-advertising story reads like a page out of “The Innovator’s Dilemma.” It’s another situation where being an expert can actually work against you. The vast majority of video advertising isn’t what TV managers know — high-quality, slickly produced, 10- or 15-second commercials. It’s good-enough quality, and its more of an infomercial. Unfortunately, broadcasters are still relying on TV managers to understand this wildly innovative environment. It takes a separate staff, with divergent ideas.

TV stations are locked into thinking that monetizing THEIR videos is where it’s at, but the truth is that small and medium-size local businesses are making their own videos, and that’s what they want their potential customers to see. Advertising is content in the Media 2.0 world. If they can’t make their own videos, there are plenty of companies out there that will make them for them. And I hate to keep beating an old drum, but this an essential clue to “enabling commerce” in the future, the new role for local media companies today and tomorrow.

For broadcasters, this ought to be a no-brainer, but the evidence, once again, suggests it is not.