With Election Day less than two weeks away, there still remains a large contingency of undecided voters. Many marketing channels are available to reach them, but what channel is going to be the most effective for candidates in terms of getting votes? Traditionally, television gets most of the budget during the entire election cycle. No doubt, TV is a powerful medium because of its reach and its ability to engage at an emotional level with pictures and sound. But are political media buyers missing a big opportunity by not utilizing the full resources of online video advertising? I think that presidential, gubernatorial, and ballot initiative campaigns can reach and engage swing voters in these final days at an even greater level via online video advertising because it allows for not only localized reach, but most importantly, it allows personalized reach.

Personalized messaging. The old adage is that all politics are local. The thinking here is that people in the same locale usually have the same concerns and issues. In some respects, this logic really isn’t flawed. However, in a world that grows smaller with ever increasing forms of communication, locale becomes less relevant.

Collectively, Americans want the best for our country. But, individually we each bring a unique perspective into the voting box. We are at different places in our lives and reside all over the country. Regardless of the fact that I live in Colorado, my concerns may be more in line with a steelworker in Pennsylvania, a mother in Idaho, or a tech executive in Silicon Valley, than with my neighbors. Therefore it may be more accurate to say that all politics are personal.

Online video advertising combines the best of TV advertising (the power of pictures and sound) with the best of interactive advertising. Video advertising enables political media buyers to combine context, locale and behavior with unique messaging. It may scare some people, but it is actually quite fascinating what can be done online from a targeting perspective. Reaching people based on their demographic profile (e.g. age, sex, education, etc.) is fairly standard. But now marketers can also target people based on intent and behavioral patterns such as what they’ve searched for, what sites they’ve visited, what they’ve done on those sites, and what they’ve purchased. It’s anonymous, but it’s powerful nonetheless.

For example, perhaps the Obama campaign knows that you’ve visited the Obama site and that you’ve checked out his plan for small businesses. He doesn’t know who you are, but he could tag you with a cookie, and retarget you on other sites with video pre-roll messages about how Obama will try to help small businesses.

From a targeting perspective the options are limitless. It’s important for political media planners to ensure that the messaging matches up with the target, though. It doesn’t have to be time consuming and costly to create variations of the ads that speak to different voters. Campaign managers can easily create ads using the same video, but change the voiceover. Or they can even just adjust the creative of the companion banner if changing the video is too cumbersome.

Damage control. Online video advertising can even be an effective tool in countering the negative and misleading messaging that has become a mainstay in today’s campaigns. News travel fast. Often campaign managers don’t have time to respond to the 24-hour news cycle with a TV ad. But online video advertising makes it possible to create and launch a campaign in minutes that combats negative news or smear tactics. A recent Veoh study concludes that video viewers are more engaged on the Internet than when watching their television sets. Campaign managers should capitalize on this, especially as the election cycle draws to a close and final assaults make their way in the news and in other forms of advertising.

Real-time feedback and real-time optimization. Campaign managers can not only launch video ad campaigns immediately, but they can also optimize ads in real-time. By taking into account video and banner click-through rates, the average viewing duration and cross-referencing those numbers with post-impression and post-click Web site activity (e.g. – donations), campaign managers can optimize each campaign to maximize effectiveness.

News spreads like wildfire with breaking news e-mails, blog posts, Twitter, social networking sites, and more. In most cases, it remains true that we have no power over how issues and candidates are presented in the news, but the power of online video advertising makes it possible for the candidates to speak one-on-one with the voters about issues that concern them.

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Just how in the world will local online video advertising become a $1.5 billion industry (according to The Kelsey Group’s US Local Video Forecast – 2007 – 2012 Report) in just a few years after only generating $11 million in 2007? Local advertisers are generally not the most sophisticated brand marketers on the planet. Most don’t know what CPM stands for, and fewer would agree to pay on a CPM basis. Therefore, one would seemingly conclude that local video advertising, largely billed as a branding medium, would not grow as quickly as projected. However this was roughly the same argument when search marketing began to reach critical mass. Local advertisers surely weren’t going to pay per click to drive visitors to their site; and yet, local search marketing has become one of the most competitive and largest segments of sponsored search. If history is any guide, local search offers some very important lessons that can be applied to all forms of video advertising – from brand to direct response campaigns.

First Lesson: Engage Everyone, Measure Everything

Small to medium-sized businesses (SMBs) typically use marketing companies, like Dex Media and Reach Local, for online and sometimes offline promotions. These companies employ sophisticated campaign management practices and technologies that allow them to arbitrage traffic from large search players like Google and Yahoo. These players can often justify the cost of paying per click by providing every means possible to engage the consumer and to measure such engagement. It’s not about brand recall, although that is a major benefit. It’s about interactions, whether it’s a phone call, an email, a filled out form, a coupon or a visit to a dynamic Web site. It’s foolish to assume all consumers want only one way to engage with a business. I hate talking on the phone, so I order online. My mom hates to order online, so she calls a live person. And my dad prefers to go to the store. Knowing that, local advertisers provide every opportunity to interact with the consumer. In addition to typical impression and post click behavioral tracking, online video advertisers might also want to consider the following tactics:

• Unique Phone Tracking Numbers – We have found that overlaying the video ads and companion banner units with unique phone tracking numbers is a remarkably effective way to not only generate call volume, but also to track the quality of your traffic sources. You can obtain call tracking numbers from companies like Ingenio, Marchex, and Telmetrics. Most of the time, these providers will report the caller’s name, address, phone number, time of call, length of call, and some even record the call for you so you can measure lead quality.

• Push to Talk – This nifty feature allows consumers to request that the business contact them. The consumer types in their phone number in a form and they hit the ‘push to talk’ button. The business is then notified to contact the interested customer. As always, the push to talk lead is tracked back to the traffic source.

• Dynamic Sites – Many local advertisers have dynamic Web sites that change elements of the site, like phone numbers and tracking ID, based on who is sending the traffic to their site, once again allowing them to track the lead source. For instance, the unique call tracking number found on the video ad and banners will match with the phone number on the dynamic site.

• Request for More Information Forms – Many local advertisers’ Web sites encourage consumers to fill out a form to receive more information. Again, all is tracked back to the traffic source.

• Coupons – To drive foot traffic and orders, local advertisers are masters at offering up an incentive. For video advertisers, it can be as simple as saying in your ad, “mention this ad and you’ll get…” or having your companion banner direct people to a printable discount coupon.

Second Lesson: Optimize, Re-optimize, Then Re-optimize Again

Local search advertisers employ a constant cycle of measurement and optimization. Better performing sources of traffic get prioritized, while wasteful sources are automatically pruned from the plan.

While video advertising isn’t as automated as some would hope, some networks and exchanges will allow you to optimize your campaign on the fly as you measure conversions. For instance, one company did a campaign for an auto parts store in a small suburb of Minneapolis. After targeting the Minneapolis DMA coupled with contextual targets of local news, sports, and automobiles, the campaign did OK, but the performance would not justify a sustained campaign. The advertiser optimized the campaign to target only automotive content and to target the neighborhood where the auto parts store was located. This dramatically lowered the number of video impressions served to just 1,000 in one month. However the campaign drove a significantly higher percentage of Web site visits, filled-out forms, and calls to the store at a lower cost to the advertiser.

Third Lesson: It’s the eCPM, Stupid!

The arbitrageurs of local advertising are remarkable in that they will work with any traffic source regardless of the payment model-CPM, CPA or CPC. By understanding and attributing a value to certain interactions with their consumers, whether they are phone calls or filled-out forms, they can always assess the value of a traffic source to quickly determine if it’s worth it to them. If a cost per click campaign doesn’t offset the cost to generate their desired engagement metrics, then they will shift ad budget somewhere else that can, even if it means paying on a CPM basis.

We’ve found that local video ads can even outperform branded campaigns paying on a CPM basis when these campaigns are properly targeted, measured and optimized. For instance, in the above auto parts store example, those 1,000 impressions generated 40 visitors to the site and four phone calls, thereby generating traffic worth over $50 eCPM to them.

So what can brands learn from local video advertising? No, not to move to performance-based advertising. I don’t think anyone is going to buy a box of mac and cheese online. However inviting consumers to interact on multiple fronts can help easily quantify which traffic sources are most engaging and cost effective. For mac and cheese, potential measurable interactions could be downloading a recipe, printing a coupon, or participating in a survey.

Perhaps if the industry were to more widely adopt the sophisticated tactics found in local search advertising, one could actually argue that local online video advertising could be much larger than the Kelsey Group has projected!

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Back in the day, video game consoles were hooked up to television sets, or played via floppy disks in school computer lounges (Oregon Trail anyone?). What if Super Mario and Luigi stopped mid-game and let products be schlepped to us en route to finding the princess? If it meant playing for free, of course we would have watched. Think about how addicting it was to make it to the next level. Today, marketers can leverage that engagement by taking their message to the casual gaming space.

Over 200 million people play casual games online every month around the world, according to the Casual Games Association. The rapid growth and the engaging environment of casual games present a gigantic and rare opportunity to marketers. However, because of its newness, many marketers are still learning how to effectively leverage it. Since my online video ad network has partnered with many of the largest gaming publishers, I wanted to share some tips on the space. To start, I will focus on the different ad units and the marketing opportunities associated with them.

In general, there are two forms of casual games. Browser-based games are played from the Web browser, while the other format is downloaded to and played from the desktop. Keep in mind, ads in downloaded games are dynamically served – just like browser-based games. Ad units found in both of these forms of casual games are as follows:

- Pre-game & Inter-level - a video ad that is 15 to 30 seconds plays while the game is loading or in-between game levels. The video ad can be accompanied by a companion banner, usually 300×250. Both the video ad and the banner can be clickable.

- During-game - these are video or static ads that are on the screen while the gamer is playing. In addition to pre- and inter-level, It is important to distinguish between the two, especially if engagement is an important metric to the advertiser. Generally, during-game ads have lower CTRs than pre- or inter-level ads since gamers are focused on play. Pre- and inter-level ads are more captivating, and can generate CTRs of 1% to 5%, because play is on hold. Consequently the engagement factor affects CPMs.

“One thing advertisers should consider is that gamers who have taken the time to download a game to their desktop are ultimately more invested in the games than those who play Web site to Web site,” said Craig Holland, marketing director for the Casual Games Association. “When you are playing a game on a Web site it is easier to leave the page, or not play as long. Naturally a more invested audience yields a higher CPM and higher worth to advertisers.”

Casual gaming’s popularity is growing so fast that marketers cannot ignore the space. A Parks Associates report found that U.S. consumers play online games more often than they watch online videos or visit social networking sites. In response to this, new games are popping up like crazy. The Casual Games 2007 Report found that the number of games being submitted to major online portals has doubled over the past two years. And that doesn’t even consider the popularity of casual games on social networks like Facebook. The rapid growth of the market has prompted companies to create more games for more audiences. The report further explains that the non-paying audience includes both women and men – each comprising about half of this large non-paying player universe.

So how can advertisers leverage the growth of the categories and the expanding demographics? One tactic is targeting ad campaigns based on the game’s content and demographic composition.

Craig Holland brought up a tactic in our conversation that I found very compelling and noteworthy. Casual game publisher Real Arcade streamed an ad on its home page for the movie “Made of Honor.” The ad offered a free download of the game Wedding Dash (the game was promised as commercial-free). Gamers had to click to watch a lengthy video ad. One can assume the CMPs were high, as essentially that ad was the only money-maker for the game. Did it work? I don’t know, but If anyone has run an ad campaign on casual games, then please share the results in this forum.

Casual gaming is definitely a marketing force to be studied and tested. With a captive audience and exciting ad opportunities to be explored, we are only at level one…in the first version of “Super Mario Bros.” C’mon, Luigi. Let’s find the princess!

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Direct response in online video advertising is fast becoming a reality. Whether advertisers are looking to generate sales, sign-ups, coupon downloads, or any action, online video advertising is a new and effective way to enhance off and online DR efforts.

Online video is still a nascent medium for most advertisers and agencies. Today most spots consumers view are a branded effort, a repurposed TV commercial, and bought on a CPM basis. Video is a powerful branding tool, but imagine taking that branded message and adding a strong call to action along with a CPC or CPA payout structure; well, this is the new frontier for online video.

As the Interactive Advertising Bureau and other boards are setting the standards for online video reporting metrics, it is important for advertisers and agencies to understand the various options they have for their online video budgets. Clearly, to generate significant reach and get a big bang for the brand, a CPM buy is the way to go. However, some things must be considered:

- How is that impression recorded and billed?

- Is that impression counted on the first frame of the video -or is there an engagement mark that qualifies the impression? Other common options to consider include cost per engagement, cost per click and cost per action.

Engagement in online video can be measured in many ways, with the defining factor the campaign goals. Some questions:

- Do you want consumers to watch a particular amount of your online video ad spot?

- Do you want them to click and just see your new micro-site?

- Do you want them to click on your video spot and then download a coupon or make a purchase?

This model is also a great vehicle for online retailers. ICongo just released a survey that found that one-third of polled adults said the high price of gasoline is making them more likely to shop online rather than at a retail store location. Further, according to a recent Online Publishers Association report, 80% of U.S. online video users have watched an advertisement in an online video. Of those people, 52% took action after watching that video; 28% looked for more information; 19% clicked a banner ad that accompanied the video; and 16% t bought something as a result of the ad. All signs suggest that this trend will continue well into 2009.

In addition to running a DR-focused spot in a standard 15 or 30 second in-stream (pre-, mid-, or post-roll) format, there are some new and exciting ways advertisers can take advantage of streaming video for DR campaigns. Particularly interesting are the many uses advertisers have for an overlay ad unit. These ad units, often called tickers or takeovers, are usually rich media units that show up on the bottom of the screen of the streaming video content. Viewers can either click on the unit and be directed right to the advertiser’s site, or they can click on the rich media unit and the advertiser will have a “takeover” video spot that the consumer can watch, click or exit.

Many advertisers don’t have, or else are in the midst of creating, online video assets – but you don’t need them to reap the rewards of this powerful medium. Consider testing first with a rich media overlay ad unit that drives traffic to a specific site or landing page. Back that up with a CPC or CPA based pricing model and incur little to no risk.

Here are some keys to establishing a strong DR online video ad spot:

- Engage the consumer with a call to action in your video’s message. Whether that is in the voice-over or as an overlay within the video creative, take the consumer to the most relevant landing page on your site.

- Make the action that you want consumers to take on your site easy, fun, and seamless. Soon enough, you will see consumers not only watching your branded online video ad spot, but they will click to your site and then buy your jeans or sign up to be a member of your DVD rental service.

So, whether you are considering online video advertising for the first time or have tried it and have already seen a strong ROI, it might be time to consider testing a different pricing and reporting model that best fits your particular goals.

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For those of us selling in-stream video advertising to advertisers and agencies the good news about budgets moving into our space keeps coming. According to an Accustream iMedia Research report $420 million was spent in pre-roll ads in 2007. Based on conversations that I have had with both advertisers and agencies, in-stream will see a substantial increase in budgets in 2008 as well.

Compared to the $65.3 billion spent in 2006 on television advertising, pre-roll is still a blip on the screen. Over the years numerous companies have discussed the need for establishing standards that will make planning and buying online video advertising easier for everyone. In late 2007 the Interactive Advertising Bureau (IAB) did just that. Led by Jeremy Fain, Senior Director of Industry Services, 120 companies have come together to form the IAB’s Digital Video (DV) Committee.

Participating companies represent the entire online video advertising ecosystem, including publishers, networks, research firms, technology providers, and agencies. The DV Committee’s goal is to identify essential standardization initiatives for online video advertising and then educate stakeholders on the steps being taken to ensure accountability within the medium.

The DV Committee’s first white paper, “A Digital Video Advertising Overview”, was released on Jan. 24. DV Committee representatives presented findings at an IAB seminar on Feb. 13 in New York City. Mike Hurt from Microsoft and co-chair of The DV Committee summed up the collective feeling when he said, “I am amazed to be on a committee that has me actively engaged with Google, Yahoo and a number of competitors to establish best practices for our industry.”

The DV Committee’s work mirrors what the cable industry did back in the early ’80s to establish industry standards so agencies could compare apples to apples on a network by network basis. Since the Internet has thousands of video sites compared to the less than one hundred cable networks in the ’80s, the task of the DV Committee is much more complex. One of the goals of the initial white paper was to eliminate industry confusion pertaining to online video. Key items were defined as follows,

Video advertising units:

• In-stream ad units (pre/mid/post roll, takeovers, overlays, bugs) – generally played or viewed from a video player like a client browser.
• In-banner – generally displayed in IAB Interactive Marketing Unit (IMU) standard sizes.
• In-text – generally user-initiated and triggered by relevant highlighted words within content.

Online video content (three primary types):

• Premier Programming – gives users professionally produced content, generally re-purposed from broadcast video and cable networks. There is a large amount of professionally produced video that has not been digitized but is quickly working its way online.
• Professionally-Generated Specialty Programming – video content professionally produced but generally created for a specific subset of online video consumers. Consumers are searching for and consuming video content relevant to their micro interests – whether it is original content for the Web or content from traditional media like local news or community events,
• User-Generated Video – consists of clips created and uploaded by everyday people and make up the largest volume of videos available online. Generally, the majority of these clips are watched by a small group of users but due to viral word-of-mouth messaging some become extremely popular and are viewed by millions.

The Feb. 13 seminar centered on key industry challenges:

• ad format standards
• creative assets availability
• lack of standard data being reported to buyers
• audience scale needed to bring budgets of billions versus hundreds of millions into our space
• the need to make the medium’s planning and buying process more efficient

In regards to establishing standards and best practices, which will give media buyers a solid footing when evaluating video advertising in the cross media landscape, the IAB has formed two working groups within the DV Committee: the Ad Format Standards Working Group and the Core Metrics Working Group. Specifically, the working groups aim to:

• define standards around video ad formats and best practices,
• create a public document defining all the metrics beyond impressions for online video advertising (e.g. midpoints completes, etc),
• create a public document describing methods for third party ad serving into video players using lowest-common denominator XML.

The DV Committee, along with its working groups, will release their thoughts for industry adoption upon completion.

On the creative front, more 15-second and shorter ads are becoming available. The data on reporting click-through rates, ad playrates and interaction with the ads is already in place but needs to be standardized.

The various IAB committees will be reviewing findings with industry-wide stakeholders in one-to-one meetings and will be releasing a series of white papers on the standards that are being approved along with numerous case studies. The recent white paper and IAB workshop are just starting points for the powerful work that is making online video advertising a major marketing channel.

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I recently flipped through an issue of Time magazine and noticed that pharmaceutical companies not only push their latest sleep aids, cholesterol suppressors and erectile dysfunction meds, but they also compete for market share amongst themselves.

The issue I looked at had ads for Actonel, AdVair, Ambien, Cymbalta, Cypher Stent, Medco, Rozerem and Zetia. My first thought was, There is an awful lot of money used to advertise these well-known drug brands. At the same time, I thought about the value proposition of online video advertising:

• touches millions of consumers each month.
• has sophisticated consumer targeting and tracking with each ad served.

Out of curiosity I looked at Time’s online rate card, and with simple math I calculated the combined monthly ad-spend of all the pharmaceutical companies to be in the neighborhood of $3 million – just one issue. I looked deeper into what Time offers advertisers and found that the magazine guarantees 19.5 million impressions per month, charges a hefty $48 CPM for black-and-white full-page ads and a whopping $74 CPM for full-page color ads. I also noticed that each pharmaceutical ad was two full pages:

• Page one – the actual full-color ad.
• Page two – the full-page disclosure that generally appears on the back of the page of the color ad

This suggests each drug company buys two pages per month for an average cost per thousand of $61. WOW.

With my background primarily in radio and television advertising, I was initially shocked by these prices, but then I considered that Time is printed weekly and has great pass-along rate – think about those old magazines you see in your dentist’s office. So, I can possibly justify that CPMs for ad space in a prestigious magazine such as Time far outweight national television CPMs (range is generally $5 to $60 including cable and broadcast).

According to Time’s online media kit, about the audience,

• Median age is 48.
• It skews 54 percent male.
• Median household income is $68,500.

Time also offers advertisers the opportunity to appear adjacent to or wrapped around contextually relevant articles. I believe this is a pretty good place for the pharmaceutical companies to reach potential or existing customers.

Now let’s take a look at how the pharmaceutical companies can take advantage of online video advertising. Assuming most of the pharmaceutical ads in Time have corresponding television creative:

• The initial hurdle of no video assets is eclipsed.
• Television ads can be repurposed.
• In most cases, videos and banners are clickable.
• In most cases, consumers can go directly from an ad to a landing page of the advertiser’s choice (in this case the pharma companies can link directly to their product pages).  

Online video advertising is as easy to buy as television, yet more accountable in terms of metrics, costs less per thousand impressions, and has the ability to link a consumer directly to an advertiser via ad click-thru capabilities. So what else? Different types of inventory fit a variety of advertiser and marketer needs, including in-game, in-stream, overlay and custom options.

Consider online casual gaming for a moment. Often video ads run while the game player loads and during natural breaks in game play, i.e. when the cards are shuffled or between game levels. According to an eMarketer study, 80 percent of online casual gamers are female, with a median age of 47, 33% have children under 18 in the home, and the worldwide casual gaming audience is estimated to be over 200 million unique players. Median age of 47 – that sounds familiar, maybe because Time’s median age is 48. So, if I am P&G Pharmaceuticals and marketing Actonel to women suffering from osteoporosis, this is a prime place to target the demographic. Casual games are time wasters, and while traffic is highest from 8 a.m. to 2 p.m. during the week, there are lots of people logged on to play late at night because they are up and cannot sleep; this creates a natural environment for this brand to reach the night owls.

Overall the Internet is a vast space of content. While many advertisers are weary of going from traditional media outlets to the cyber world, online video advertising offers access to the Web’s hottest ad space while keeping advertisers in their comfort zone by executing media buys like television buys. Add in the engaged audience factor and the clickable videos, and the potential is astounding.

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Once again, SpotXchange CEO Michael Shehan talks to Denuo Group, Publicis’ Senior Vice President Tim Hanlon.

The first article explored the state of the emerging space, reviewing adoption issues and what is coming up for the new medium to hit its stride. This discussion covers video ad networks, exchanges, auctions, pricing and video ad units.

Michael Shehan: Do you think that traditional TV buyers should look at video ad networks, auctions, and/or exchanges? Or, can they bring their broadcast best practices to negotiate individual buys on long-tail inventory?

Tim Hanlon: There are two dimensions that are occurring with video. First, there is the sheer explosion of choice, so whether it’s the fragmentation of networks and traditional media providers, a TV station now has four or five digital channels to program versus just one linear analog channel.

Next, there is the maturation of avails, as the technology allows traditional programmers and ad sellers to offer advertising in a more sophisticated manner. This unbundling has historically been a tightly wrapped packaged of availability, buttressed by a less than elegant measurement system (example, Nielson) that has given us a relatively crude measurement device called ratings, and demographically oriented at that. We are now able to measure more granularly. That brings an increased sophistication of audience definition that goes far beyond a generic grouping. Add to that the sheer explosion of avails and the ability to slice and dice.

It’s fair to say that marketers and their agencies are moving towards a sophisticated targeting environment where they’re going to want to cherry-pick an audience or multiple audiences in a granular fashion to advertise multiple messages — perhaps even simultaneously.

Shehan: Where do you see online video advertising headed?

Hanlon: Online video or video in general is the next logical place for that marketplace exchange behavior to happen. Simply because so much money is tied up in it, and there are so many new ways to serve video today. The marketplace exchange dynamic is absolutely crucial to the future of video, regardless of which touch point. Whether it be by itself, or probably more wisely as something bigger, this phenomenon to the uninitiated is already underway.

Shehan: What thoughts do you have on more effective ways to reach consumers via online video?

Hanlon: Targeting and addressability are of the utmost interest to the marketing community. We all want to be very deferential to people’s privacy. But I’m a big believer that increased relevance of ad delivery in any form — not just video or online video — is what the world is moving towards. That will ultimately be helpful for not only the marketer, but the consumers themselves.

So, anything that helps us better deliver with an intelligent, appropriate ad message that is relevant is of interest. I am very interested in Visible World’s ability to componentize creative on the fly as audiences are presented in a broadband video setting. I’m very interested in the privacy constraints of behavioral targeting-like what Revenue Science can do in online advertising. I am very interested in what I call the dimensionalization of online video – a company like adap.tv and its graphical overlay structure that allows people to go further if they are interested in the ad message.

To me those dynamics are pretty compelling opportunities, really less about mass and scale and more about targeting and quality. I think marketers — especially mass marketers, brands and agencies — need to get used to the notion that quality is going to trump quantity and the only way to achieve the scale that marketers need to be successful is for agencies and marketers to aggregate numerous audiences on their own. You’re going to have to go at those audiences in individual ways. I’m not saying one-to-one marketing. I’m saying one-to-some marketing.

Shehan: Do you think that will translate into a different pricing model? We have run into traditional media buyers who have bought TV programming at an effective CPM rate of, say, $20. Do you think they will go past that?

Hanlon: In the short term you’re still going to get the money that is going to be found by TV buyers who continue to impose TV buying dynamics on online video. Longer term — maybe a year or two — you will see an increased sophistication of purchasing that is done in a much more targeted and quality oriented way with multiple buys aggregating to scale.

The irony is that it’s not just simply a function of media. I would argue most television buying or video buying has been a media agency exercise. What we are really talking about with technologies like Visible World, for example, or even some of the behavioral targeting companies, is actually a co-activity of media and creative. The creative agency and the media agency are separate entities, which makes going back to them a challenge. But that which is media and that which is creative is getting harder to distinguish when you talk about Visible World being able to deliver a componentized stream of video on the fly as audiences are presented.

You absolutely have to have a handshake between the creative and the media process. My argument is that audiences are better targeted and more relevant, so we have to get more granular in the way we address audiences. That not only means carving out smaller and more concentrated media environments in audiences, but literally creating numerous ad messages for each of them.

Michael Shehan is the CEO and President of SpotXchange, an online video marketplace. In 2001 he founded parent company Booyah Networks, which is comprised of a paid search network and an interactive marketing agency.

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With 2008 approaching and the WGA writers’ strike continuing to weigh heavily on advertisers’ minds, SpotXchange CEO Michael Shehan sat down with Denuo Group, Publicis’ Senior Vice President Tim Hanlon to discuss the future of video – on and offline.

Michael Shehan (MS): What needs to happen for media planners/buyers to increase interest and usage in online video advertising?

Tim Hanlon (TH): It may not be things that are directly controllable by the purveyors of video or the agencies. It may be just bigger pieces finally coming together. First is the evolution of thinking, from “TV buyers” into more video buyers. Increasingly, television people are starting to recognize that it’s not just about linear television and 30- or 15-second ads. Increasingly, even from the TV side of things people are watching programming in a pronounced way in on-demand settings, and certainly in digital video recording or time-shifted environments, like Time Warner Cable’s Start Over. The mass marketization of time-shifted television viewing is finally upon us and it is begrudgingly dragging a bunch of TV experts and buyers into this idea that it’s not just about 8 p.m./7 p.m. central. Add to that a slow but steady growth in broadband or online video availability, especially of a quality nature.

There is no television network under the sun that isn’t aggressively trying to roll out broadband video extensions of their programming and/or additions to their programs with advertising availability. There is no shortage of other content providers, whether they be long tail bloggers or newspapers, magazines and others that have content but have not historically fancied themselves as video creators or providers – examples include The New York Times, The Wall Street Journal and Barron’s.

Another layer is this writers’ strike. You could argue that people will start to be less interested in prime-time network or dramatic or comedy shows that are in repeats. They might not only look for live programming like sports and news to fill the gap, but they might look elsewhere than the TV set to consume video.

MS: What opportunities do you see coming up for online video?

TH: I see archival material as a big opportunity. It’s not just about today’s programming and the repurposing of said programming or originating new programming. It’s literally opening the doors to a treasure trove of archival materials like classical shows. This makes video search an element. Companies like Truevo and Blinkx are trying to figure out how people can find video online. Video search is going to be a huge opportunity to unlock archival material. If you look at all these concentric circles, [they] point to more video for more people, meaning more advertising opportunities – certainly not less.

MS: I agree, a lot of the adoption lag has been due to less than desirable inventory to sponsor. What do you think of the adoption rate by media buyers? Is it too slow? Should they be more aggressive – or do you think it’s all right to see how things evolve before jumping in?

TH: I think it’s difficult to stall now. It’s hard to ignore the realities of the recent evolution of online video consumption. Look at hit programs like ‘Grey’s Anatomy.’ There is a significant amount of viewing occurring in broadband or online video environments as well as time-shifted and VOD environments. If I am a television buyer, I need to be fully cognizant, aware and honest with myself about the percentage of people who are no longer watching TV by time and date. In some cases those percentages can be greater in the aggregate than the original airing of the show.

Broadband video is clearly the easiest way to catch up or watch a show after the fact. Since you don’t need a box, you also don’t need a certain provider. Again, there is clearly a large amount of people who do have a DVR or a VOD available to them and use it. But there are far more people who have an online connection – broadband at that – that enables them to pop in. Ad support is clearly the way that it gets monetized. We’re in this evolution to where aggregate audiences are what will be valued. Advertisers and their agencies need to be smart enough to be available and around all those environments and test points.

If ABC is selling ad sponsorship of ‘Grey’s Anatomy,’ I as a media buyer need to make sure my ad messaging is available in every outlet that ‘Grey’s Anatomy’ is offered to support advertising. The types of advertising that surround the said program may differ. The online video expression offered on ABC.com has a different avail structure and different lengths than, say, the VOD offering on FOX Cable or a possible reinserted video ad environment on a DVR or a mobile showing. But advertisers and their agencies need to think holistically about the entire touch point portfolio of a video program.

Next up: a discussion of video ad networks, exchanges, auctions, pricing and video ad units.

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Navigate your clients through the fast-changing online video advertising world with some pricing advice from SpotXchange’s CEO.

Media buyers face certain challenges today when building plans for online video ad buys — challenges not seen in other areas of online advertising, such as display.

Online video advertising, while white hot, is still in its infancy. At this stage, media buyers have limited access to available inventory through ad planning tools. Further, there are wild expectations (reasonable or not) by both advertisers and publishers on what video advertising should cost, which creates challenges when pricing campaigns for clients. This article explores how media buyers can forge ahead and price out successful video ad campaigns on behalf of their clients.

Many buyers grapple with the cost of video sponsorship. Should it cost more than TV because of more granular targeting, more accountability and the ability to optimize campaigns on the fly to eliminate waste? Or, should it cost less because audience levels haven’t reached the critical mass of TV yet? The answer: yes!

There is no general rule for pricing out inventory; however the following broad ranges are starting to emerge:

• Professional content on tier one sites (e.g., NBC): $20 to $75 CPM
• Original content, smaller niche sites (e.g., LiveVideo’s LiveBands): $10 to $50 CPM
• Local video inventory (state or city): $10 to $40 CPM
• Professional content distributed on syndication networks (e.g., Voxant’s Newsroom): $10 to $25 CPM
• User-generated content (e.g., MySpace): $1 to $20 CPM

It’s difficult to say what fair market value CPMs are for video ad inventory. Pricing factors include:

• Supply and demand
• Quality of video content
• Targeting capabilities
• Frequency
• Share of voice
• Placement
• Performance (CTR, average view time of video commercial and conversions)

And while most video ad inventory is sold on a CPM basis, some publishers are open to testing new models like cost-per-click and cost-per-acquisition provided the effective CPM meets their needs, so keep that in mind if a client is more comfortable with those models.

It’s also important for media buyers to consider a few other general rules when building a media plan in order to get the price that works for their clients.

When discussing the potential buy with sellers, be as specific as possible in identifying the desired type of inventory. This greatly reduces the iterations required to get an accurately priced proposal, allows fairly comparative pricing from several sellers and ultimately allows for the set up of a successful campaign with fewer surprises. Specifics to share with sellers include:

• Video inventory type. Video advertising inventory includes video banner ads, in-stream video ads (pre/mid/post with companion) or overlay banner ads (popularized by YouTube).
• Targeting criteria. Targeting generally includes demographic, psychographic, geographic (country, possibly state and city), contextual (on ad networks), behavioral, keyword/tag or targeting of specific videos.
• Target volume. Identify key metrics that are important, like CTR and impressions.

Additionally, let them propose the CPMs. If it sounds too high, counter. They may come back with a lower than expected CPM.

Once all of the proposals are gathered, determine if the target CPMs and impression volume for the desired inventory can be hit. Once a buyer’s expectations have been set, it’s best to allow sellers a reasonable amount of flexibility in campaign optimization.

This brings us to the next part of the conversation. Media buyers like predictability, but online video advertising can be anything but predictable. Just like broadcast, sellers can come up short on delivered impressions. Unlike broadcast, it’s not necessary to settle for a “make good.” Buys should be spread across several networks and properties; they should be smaller than the overall budget, and then dollars should be applied during the campaign to the targets that perform best. Rep firms and ad networks typically do a better job at this for their clients given the networks’ breadth.

Over time this process will get easier and more transparent as video ad networks and exchanges tie themselves to inventory sources. But in the interim, dive in now to get the needed experience to navigate clients through the fast changing and growing online video advertising world.

Michael Shehan is president/CEO of SpotXchange.

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Sponsored search is arguably the most revolutionary and successful ad medium. And it just might represent how future media budgets are managed across other segments such as television, radio, and of course, online video advertising. Granted, sponsored search is mostly about direct response, not branding; however, it is hard to argue against the merits of real-time optimization methods that maximize reach and limit waste. So, what practices utilized by successful search and interactive advertisers can be applied to other forms of advertising, such as managing online video ad campaigns?

First, consider the media planning process itself; it differs greatly between online and traditional buys. Interactive marketers benefit from the rapid (near-immediate) data feedback of their campaigns. Buy some keyword clicks, track the results, and optimize. For many interactive marketers, a campaign can be created, tested, and evaluated in as little as a week or two. As such, buyers of sponsored search don’t think in terms of the upfront buy or quarterly budgets. Instead, they look at goals like ROAS and net contribution, and then adjust spending on the fly.

Regrettably and understandably, traditional agencies have been applying broadcast media buying practices to their online video ad buys. However, an online video ad buy occurs one impression at a time, just like with search and not by millions of viewers at a time. As such, these media buyers should use the same strategy as their interactive counterparts when planning an online video advertising buy. A media plan for an online video ad buy actually doesn’t need to look much different than a traditional plan; it should answer some of the following questions:

· What is the target audience?

· What traffic sources (ad networks, individual sites, etc.) attract the desired audience?

· What is the desired CTR?

· What minimum average of the commercial needs to be viewed (25 percent, 50 percent, 75 percent)?

· What are the target geographic region(s)?

· What is the target CPM?

· Over what period of time should the goal impressions be achieved?

· If direct response is important, what kinds of conversion rates are desired?

Once the model is built, a small campaign can be launched on some or all of the sources. Many sites will require larger buys. In that case, first test it on the sources that will allow smaller buys, including video ad networks and exchanges.

Once interactive agencies have collected sample data (which can take between a day and a week), they typically analyze and measure it against the campaign goals. They analyze their targets including keyword spend, conversion rates, etc. Then they leverage the data to optimize and expand the campaign. Utilizing real-time performance data and constantly optimizing the campaign is an ongoing process for interactive marketers, and it should become standard practice for media buyers at traditional agencies as well.

Surely that brought a collective groan from media buyers everywhere, as they are already resource constrained. As the industry and the audience continues to fragment, it takes significantly more time and resources for traditional agencies to reach their target audience, as compared to 20 years ago when the audience was found on only a few networks. Naturally, the last thing needed is extra work.

But consider: interactive agencies spend about 10% of their time buying media, and about 90% managing and optimizing campaigns based on real-time performance data. Conversely, traditional agencies spend about 90% of their time planning and buying media. Of course, interactive marketers have the tools to manage campaigns in such a manner, but traditional agencies do not. However, those types of tools are beginning to emerge for online video advertising, especially from video ad networks and exchanges. By using them, traditional media buyers can shift their time from media buying to media optimizing.

Traditional agencies are re-inventing themselves. That was a common theme at the OMMA and IAB shows during Ad Week in New York. At a time when traditional agencies want to “go digital,” and when their clients are requiring more accountability, adopting some of the above suggestions is a great and easy place to start.

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