Blog & Insights
Posted by SpotXchange on April 2, 2012
An open letter from the CEO to our marketplace of advertisers and publishers
For the past 5 weeks, I’ve been crisscrossing the country meeting with anyone that would sign an NDA to talk about a secret project that SpotXchange has been working on for just about a year. I met with almost 100 companies in 4 different cities in that time. I’ve briefed CEOs, ad ops people, sales teams, media planners, ad agency thought leaders, industry analysts,RTB partners and more. It’s like I’ve been on an IPO road show, but without the limos or private jets.
It’s an idea that always gets a strange look when I first tell people that SpotXchange, one of the largest global marketplaces for video ad inventory, is launching a video ad skipping service! Promoting a service that allows consumers to skip video ads all across the web seems counterintuitive to what we do everyday, which is to auction off tens of millions of in-stream video ad placements to hundreds of advertisers.
The service is called SkipIt, and throughout my 5 years running SpotXchange, one common theme continued to resonate in discussions. Without fail, when I tell people outside of our industry (neighbors, friends, relatives) what I do (play video ads before video and/or gaming content), I always get the same uniform reaction:
Don’t get me wrong. The TV ad model is fantastic. There is no better way to convey an emotional attachment to a product or service than through the sight and sound of a TV commercial. If that wasn’t true, we’d watch banner ads during commercial breaks. However when you think about it, the online video ad industry really hasn’t innovated beyond copying the TV model of advertising. Yes, there have been some innovations – ad selector, interactive video ads among other things. But for the most part,publishers and advertisers force consumers to watch ads in exchange for access to the desired content. Consequently, consumers don’t have a choice either.
So enter our idea. What happens if we allowed consumers to skip ads? But instead of letting them skip for free, which we think is bad (more on that in later posts), why don’t we charge them a small amount for each skip? And if the person skips the ad, the publisher still gets paid, and the advertiser doesn’t pay, even if some of the ad was viewed. And thus SkipIt was born.
We didn’t develop this idea in a vacuum. We had feedback from the market – consumers, publishers
and advertisers. But as we rolled it out to a larger group over the past 5 weeks, the response has been fantastic. In fact, better than we could have ever hoped for.
Advertisers, the ones that most likely would have a problem with this, have been incredibly open-minded, gracious and full of ideas. Turns out, they don’t like forcing people to watch ads either. If someone is a good match and they are willing to watch the ad, then great. That’s an impression they are willing to pay handsomely for.
But if the consumer is so annoyed that they are willing to pay to skip, then they don’t want to risk the negative brand equity associated with forcing the user to watch the ad. It helps that the advertiser doesn’t pay for any of those impressions even if the consumer views some of the ad. Interestingly enough though, as we introduced SkipIt to these advertisers, they started brainstorming ideas about how they could engage with SkipIt consumers in different ways.
So later this year, we’ll be launching a new service for advertisers that allow them to engage with SkipIt members on the website in exchange for free skips. Ideas such as surveys, coupon downloads, Facebook likes, and purchasing the advertiser’s product or service have been tossed out there by our advertisers.
For publishers, this has been a relative lay-up. We’re offering choice to consumers and therefore a better experience. And because we’re offering a service that essentially pre-empts all video ads, then we also have to pay the higher than average industry CPMs. Some of the quotes over the past 5 weeks have been pretty sweet, and have confirmed we have a winner on our hands from the
Now comes the hard part. Consumers. Will consumers pay to skip? How much are they willing to pay per skip? Will they hate the service? Love the service? Be more inclined to use the service if they didn’t have to pay, but rather earn free skips? These are all good questions. And we don’t have all the answers.
But that’s OK. We’re going to launch and turn the keys over to the consumers to drive the bus. The one thing that I do know is that the service today will not look like the service tomorrow. The point in the first place was to give consumers a choice, and allow them to provide some type of feedback mechanism. We’ve built the platform to do just that, and we can twist, bend and change the platform not only to consumers’ needs, but also to the needs of advertisers and publishers. As long as there is some cost to the consumer that we can then relay back to the publishers and advertisers, the SkipIt ecosystem will remain intact and we can scale this puppy.
So back to the question, why did we invent this? I’m sure there will be many critics out there thinking we’re just cannibalizing our own business. “If people can skip ads, then won’t you sell less advertising?” We think quite the opposite. SpotXchange’s mission is to maximize the value and liquidity of our publishers’ video inventory. We do that by introducing as many advertisers as possible on the buy side of the marketplace. We go to great lengths to ensure those advertisers are happy with their buys and see the greatest possible return from their marketing investments. SkipIt just represents an extension of our mission to both publishers and advertisers.
At this point, I’d remind critics that the concern regarding cannibalization is the same argument presented to Apple when they launched the iPad. The thought at the time was that if the iPad was successful, then their laptop and desktop sales would plummet. Obviously, that didn’t happen. In fact, they created a new multi-billion dollar revenue stream and created yet one more hook into their digital ecosystem of apps, games, music, movies, and books. When launching the iPad, in responding to that criticism, Apple said that if someone was going to cannibalize their business, it might as well be them. Applying that same logic, if we didn’t invent SkipIt, someone else would have. And if someone else did, then they may not be a company that keeps in mind the needs of advertisers and publishers.
We’re excited to launch after so much hard work by so many people at SpotXchange. However we understand that we’re going to continue to get those strange looks for some time to come until the market gets used to the fact that consumers should have a say in their online video advertising experience.