Nailing down the model for online video ads

REDWOOD CITY, Calif.--What is the best way to make money with ads tied to online video? And how can traditional advertising models benefit from new methods pioneered online?

Those were major topics of discussion during the morning keynote today at the Dow Jones Consumer Technology Innovations conference here. And while panelists--representatives from Google, Verizon and Polaris Venture Partners--made some interesting points, they also made it quite clear that there are not yet obvious answers to the questions.

To Michael Hirshland, a general partner at Polaris, one encouraging developing trend is the continued emergence of what he termed "prosumer" content like that from satirists JibJab.

"We're never going to pretend (they're) going to be HBO or MTV, but they have professional content," Hirshland said. "But what they're finding is that they're able to create shows very cheaply, and those shows end up being as popular as modestly popular cable shows, but at a fraction of the cost.

And because this type of content is likely to see increasing success online, he suggested, it offers significant opportunity for advertisers.

Moderator Russell Garland then asked Vincent Dureau, head of TV technology for Google, how he thought the search giant would be able to improve TV advertising.

"We think we can bring new money into TV advertising," said Dureau. "Look at the way advertisers are spending money...Direct advertising is big. (So) can you bring the targetability of direct marketing and the accountability of the Web to TV?"

Part of the problem with TV advertising that needs to be solved, Dureau added, is that there's little way for advertisers to measure precisely who is watching. That's unlike online ads, where it is possible to tell exactly who is consuming them.

That's why the most important thing that can happen for TV advertising, Dureau said, is to find a way to adequately measure and identify the audience. The result of that could be a good monetization model for the long tail of video content.

That has worked much better online, he said.

"As we build networks and distribution networks for content on the Web," Dureau said, "then there is a monetization model for that content to the extent that the audience can be measured."

And beyond that, if the ad measurement issue can be solved, then the huge amount of video content developed for the Web might well have a place on TV, Dureau said, if distribution can be also be solved.

Next, Garland asked how ad formats on TV might change over time.

"We believe that there is a lot of life (left) in the 15-, 30- and 60-second traditional advertising, to the extent that it's properly targeted," said Dureau. "There's focus at Google on the traditional format...but bringing it to the long tail content now available for TV."

Hirshland disagreed.

"No, our bet is that the model format for video advertisers is going to change," Hirshland said. "The big TV advertisers, the ones (with the) $70 billion ad spend, have a growing recognition that the model is broken."

One problem, he said, is that consumers are increasingly aware that they can skip through ads they don't want to see. The ad industry, he said, is finally beginning to recognize that.

And online, the formats are very likely to change going forward, he said.

The result is likely to be increasing experimentation on the Web with ads that don't fall into the traditional pre-content or post-content model. That could mean more ads that pop up or overlay the content.

"We're going to see one or two ideas start to have success," Hirshland said, "and that will start to migrate back onto the TV platform...I think (in one or two years), the ad formats on TV and the Web are going to be similar, and different than what we see on TV today."

For his part, Dureau said that he thinks the problem about ad-skipping has more to do with the creativity of the ads themselves.

"The data says, if you deliver the right ad to people, they'll watch," Dureau said.

From Verizon's perspective, the problem of determining who is watching what isn't that complex, Zoffer said.

"With set-top boxes, we know what people are watching," Zoffer said, "and we can deliver what they want."