Internet TV has become a viable business with clear economics. 

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YouTube announced its decision to implement video overlay ads.  These semi-transparent banners cover the bottom fifth of the video screens and then disappear after 10 seconds.  If a user clicks an ad, a video ad will play in the same player, though slightly smaller, and when its done, or when the user closes the ad, the original clip will resume.  According to YouTube’s product manager, Shiva Rajaraman,

more than 70 percent of people give up when they see a pre-roll advertisement. By contrast, less than 10 percent decide to close an overlay, which they can exit by clicking on an “X” in a corner.

VideoEgg responded by pointing out that they “invented” the video overlay “about a year ago.”  Video ad services like Brightroll and PoDaddies

have also been toying with various ad formats, including post-roll and video overlay.

Meanwhile, Next New Networks found a sponsor in Lionsgate’s new movie WAR which, according to VP of Network Development, Tim Shey, gave them “a chance to demonstrate a number of the advertising models [they] think can be effective for [their] networks, besides standard banner advertising placements.”

Fast Lane Daily had a 15-second spot in “first position” — somewhere between pre-roll and mid-roll.  Bleacher Bloggers showed a brief sponsor bumper at the top of the show and a 15 second spot at the end.

IndyMogul and JetSet gave advertisers the best bang for their buck by actually integrating the sponsor within the show.  Indy Mogul tried to recreate one of the special effects from the movie and JetSet challenged users to upload their kung-fu moves to its mico social network, Mix.  Pre and mid-roll advertisements turn users away, post-roll ads are less intrusive, but these tactics actually engage viewers.  Advertisers should pay close attention. 

JetSet’s producer Steve Woolf  solicited viewers’ thoughts on the ad integration on a discussion thread.  One viewer pointedly remarked, “I don’t really like ads inless their really creative.”  Why turn viewers like that guy off?  Producers should collaborate with advertisers on integrated, engaging segments related to their products.

Video advertising seems to have come into its own in the past few weeks, but talented producers have been monetizing creative work online for years.  HomeStarrunner earns enough through merchandising to eschew an offer from Adult Swim. Rocketboom episodes strut a subtle post-roll sponsor in addition to its merchandising efforts. Thirty thousand impressions on AskANinja.com earns an impressive $600 from each banner ad.  Want a ninja star? It’ll cost you.  And LonelyGirl15 recently introduced a Neutrogena scientist into its character lineup.  
Wallstrip sports a website banner, a pre-roll bumper, a small overlay and a post roll video for a single sponsor; the post-roll was recently injected with a bit of Wallstrip humor.  Check it out… (This is a great episode, by the way.)

      

Ah, there’s no business like show business. 

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