YouTube Pre-Roll and Cost-Per Engagement

The other day I was surprised to see a Geico car insurance commercial (couldn’t find today) as pre-roll on YouTube. But now I understand it’s part of a test program that allows users to skip the ads to see which ones are working. In most pre-roll video ads you cannot bypass the commercial (think Hulu) and are compelled to sit through the entire thing. But Google is testing a new approach that may yield a video “cost per engagement” model. MediaPost explains:

Google will begin testing “skippable” pre-roll ads in videos on YouTube Wednesday that could lead the Mountain View, Calif. search engine toward a new advertising model. The small sampling, which runs indefinitely, will allow people who find the videos to click on the link and skip the ad, which takes them directly to the content. The ads will run on videos from content partners, which have already opted into the test.

The goal to move the industry toward more engaging high-quality ads requires a lesson in human behavior. The test that determines if and when people watch the video clips will provide Google with insight into the type of person who may skip an ad, what type of ad they might skip, and what piece of content does better than another. Google also will look at whether some ads are skipped in a specific portion of the session. Does the person skip the ad in the first video versus the third during a 30-minute time slot while on YouTube? . . .

[Product manager Phil] Farhi says Google eventually sees a model where the advertiser only pays for a completed view of the ad. Quality and user signals would determine the correct place in the video to serve up the ad.

The idea of letting users freely skip pre-roll is fairly radical. Most users won’t watch most pre-roll video ads. Most TV advertising is built on the premise that people must be compelled to watch ads, which partly gave rise to TiVo and the DVR. But if the ads are interesting enough people will watch them and even virally promote them (online). 

This move coincides with one toward “addressable advertising” at Google, having just added Nielsen (former Claritas) “Prizm” segmentation to its TV Ads offering: 

This partnership brings more layers of audience data to our existing targeting tools. In addition to demographic and interest dimensions from Nielsen and Equifax already available in our targeting tools, advertisers will now be able to layer on PRIZM segments to find their audience on TV through Google TV Ads. PRIZM categorizes US households into 66 unique segments, using attributes such as lifestage, income, social group, home ownership, employment, and education . . .

How does it work? Advertisers simply select a PRIZM cluster in the Google TV Ads interface, and receive recommendations on which TV networks, dayparts, and programs are popular with that cluster. Advertisers can then add the media they’d like to target and air ads within 24 hours of building a campaign.

These movements portend not only the “convergence” between TV and online video advertising (which parallels audience user behavior) but a dramatic shift in how “TV advertising” is bought, measured and billed.

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