In Depth

YouTube Readies New Ad Units That Users Can Skip--New Units Will Give Consumers Choice, Even if That Choice Is to Opt Out

By Irina Slutsky
Advertising Age

Whether it's walking out of the room, fast-forwarding on a DVR or paying for premium cable, consumers are used to having choice with ads on TV. Soon, they'll have a different kind of choice on YouTube.

YouTube is expected to pull the wraps off several new ad units designed to give users the choice of which ad they watch -- even if that choice is to watch none at all.

The ads, which YouTube calls TrueView, give viewers a choice of three different ads to watch. Users can also skip the ad altogether and the advertiser isn't charged.

For short-form content, a user may get a TrueView in-stream ad, which she can skip if she wishes. For longer-form videos, YouTube is planning to give users the choice of watching a video with ad breaks or ad-free after watching one of three video ads first. Users choosing the long-form video with ad breaks may or may not get a "skippable" ad.

All of these formats are expected to roll out in the next few weeks. YouTube wouldn't say which advertisers had tested the format, but did say at least two political candidates had tried the new service.

The notion of choosing from a selection of ads isn't a new one. Hulu filed a patent for its "Ad Selector" service back in 2007 and has reported it's seen a high success rate in allowing viewers to pick their own ad. Hulu limits the choose-your-own ad inventory to about 10% of its videos.

But Hulu does not allow users to skip ads, nor do any of the other sites distributing full-length TV on the web. In an interview, Phil Farhi, a Google senior product manager, said it was initially a tough sell to advertisers struggling to find ways to find enough online inventory to match their TV buys.

"Some advertisers had initial gut reaction of, 'Wait, you're gonna let users skip my ad?'" Mr. Farhi said. "But the thing that tips them over from that gut reaction is you're not paying for those skipped ads, and it's a system that allows you to reach that opted-in engaged audience at scale."

Right now, YouTube has by far the most viewers, but not a lot of long-form premium content, meaning comparatively few videos on which to place TV-style video ads.

ComScore's October numbers show that Hulu served more than 1 billion video ad impressions. All Google sites -- including YouTube -- combined? A mere 170 million. Hulu's long-form content allows for many more video ads, and people spend a lot more time on Hulu watching shows such as "Project Runway" and "Lost."

Tubemogul reports that on an average, only of 4.48% of YouTube's daily top 100 videos carried a pre-roll ad, 52.4% have no ads and 42.5% have only lower-third banner ads.

Hulu announced it is expected to earn $240 million in revenue this year. YouTube's revenue is expected at about twice that amount, but includes big homepage display buys, a crutch that YouTube reluctantly relies on in its pursuit of profitability.

The choose-your-own-ad format itself has received a big endorsement from Vivaki, the research and planning arm for Publicis Groupe. "We found that people wanted more choice," said Tracey Scheppach, senior VP of innovation at Vivaki, whose researchers spent 1 million hours with 47 million consumers across 60 video publishers -- including AOL, Yahoo, and Hulu -- to get its research done, and estimated that this type of add could pump $100 million into the online video ad industry.

Online video ad spending is expected to jump from $1.5 billion in 2010 to $2.1 billion in 2011, according to eMarketer.

Ms. Sheppach believes there's enough premium content on YouTube to make it work. "I have a 2-year-old, so this morning it was, 'Mommy, giraffe!' so I searched for 'giraffe' on YouTube and what came up was an Animal Planet video," Ms Sheppach said. "Now that's premium content owned by Discovery Channel. Advertisers would pay for that."

YouTube plans to start off TrueView with advertisers who have a managed account at Google -- those marketers with dedicated channels. But eventually, as with everything at Google, the platform is meant to scale and automate and be available to everyone.

Eventually, Mr. Farhi said, YouTube's promoted videos can potentially become a TrueView ad if they're short enough in length. There are tens of thousands of promoted videos, which are paid for by marketers, that come up on the side bar of YouTube next to a viewers' watched video. And because YouTube is the second biggest search engine online, promoted videos are also part of the search ads that come up on YouTube.

Mr. Farhi said that advertisers can use YouTube as a focus group, testing out an ad to see how it does before they make it into a TV campaign. With TrueView, they'll be able to immediately see how well the ad is doing with the public and if they need to tweak it.

"You can imagine getting to the point where someone comes to us and says here's a video, here's how much I'm willing to pay for an opted-in engaged view and we go and find the audience," Mr. Farhi said.