Special Report: In Mid-Stream

NEW YORK As online video ads become ubiquitous, interactive marketers find themselves reevaluating their strategies, wondering: Do I need to develop content specifically for the Web? Should I go with 15- or 30-second spots? Are intrusive pre-rolls damaging my brand? Is contextual targeting the wave of the future?

Until recently, very little information had been unearthed to put to the test theories about what works—and what doesn’t—in the realm of online video ads. But as marketers funnel more dollars into a category expected to surge to $4.3 billion by 2011 from $775 million this year, per eMarketer, they and their agencies are refining their approaches, using lessons from industry research now beginning to emerge, as well as real-world lessons they’ve learned.

Some conclusions are surprising, and counter to conventional wisdom. To wit: the success rate of repurposed TV spots. Marketers have always assumed they need to deliver original content to discriminating Internet users. Yet evidence has emerged supporting the value of repurposed work. “Just because an ad was created for other purposes does not mean it won’t fare well online,” says James Hering, director of integrated marketing at TM Advertising in Irving, Texas.

In recent weeks, Carat recycled 15- and 30-second TV spots from the latest Hyundai campaign, “Smart Thinking,” creating an online placement that, the agency reports, is achieving its objectives. “Record-breaking traffic to Hyundai Web sites shows us that the overarching objective to change consideration and perception is occurring,” says Brian Mathena, group media director at Carat in Santa Monica, Calif. Search queries related to the “Smart Thinking” campaign more than tripled in the first four days of the online video ad’s run, according to Carat.

Results like those may have something to do with the notion that Web surfers are intrigued by a form of ad delivery that’s still relatively new. But in time, insiders say, the coolness factor will wear off, making it more difficult for marketers to elicit the same positive response from online video ads, be they original or repurposed.

“If you stick a person in front of a video ad, it will have a deeper branding impact than a display ad. But I don’t know how long that will last,” says Sarah Fay, CEO of Carat and Isobar U.S.

Despite the rosy results of the repurposed Hyundai spots online, it’s widely assumed that Internet users respond better to original online video. Recently, OgilvyInteractive has put that to the test on behalf of clients including TD Ameritrade, finding that, in fact, consumers prefer Web-specific content.

In one such trial, Ogilvy compared the performance of an existing Ameritrade TV spot against an ad shot exclusively for the Web. The executions, which ran simultaneously on the same finance-related Web sites across two months, were quite different. The Web-only ad (“Mr. Active”) featured a lighthearted testimonial from a busy guy named Phil who uses the company’s automated trading tool to conduct business remotely, freeing him up to play squash, go snorkeling, teach physics and take an aerobics class. The TV spot was a more subdued exposition on how to put trading “on autopilot” in today’s automated society.

The Web-specific spot generated twice the number of replays and outperformed the repurposed TV unit by more than 150 percent in terms of account generation, according to Maria Mandel, the agency’s executive director of digital innovation.

Creative director Witold Riedel adds that the “Mr. Active” shoot was tailored to Web viewing. In general, Riedel recommends tactics like having actors speak directly into the camera and using tighter close-up shots and fewer panoramics for online ads. “When you’re eight inches away versus eight feet, it’s a different screen experience,” he says.

Another Ameritrade spot, created especially for the Web during a TV campaign shoot last year, is a case study for employing interactivity in online video ads.

In that spot, a group of motorcycle-riding investors offers a glimpse at disparate parts of their personalities, depending on which buttons the user presses. “Hey you, how about a rollover?” demands Will, whose biker side tells us he doesn’t “know the meaning of fear,” while his investing persona says he “wants to open a B&B.” That ad generated 350 percent more accounts than the average Ameritrade banner, reports Mandel. Allowing users to customize their experience, she adds, “We are seeing nearly 20 percent greater interaction rates with these types of units.”

While some have declared the death of the 30-second video spot online, others question that assumption. The debate has been stirred, in part, by a recent study from the Online Publishers Association, which found that 30-second spots were significantly more effective than 15-second placements in driving brand consideration. (The study also contained positive findings on repurposed spots.)

Some caution that the OPA used highly entertaining ads in its sample. Those spots featured warm-and-fuzzy phone messages to pets (American Airlines) and funny moments like a woman getting her car repeatedly slammed by an out-of-control garage door (Nationwide).

Researchers, meanwhile, have discovered a significant rate of viewer drop-off in online video ads after about 20 seconds.

“We generally try to run 15-second pre-rolls instead of :30s,” says Ogilvy’s Mandel. “We have also seen consumer research that shows that viewers don’t want to see long pre-rolls against short-form content—e.g., a 30-second ad for a two- to three-minute [clip]. There has been talk about looking into developing a 10-second format, but it is questionable if you can get a brand’s message across [in such a short time].”

“I’d usually go with :15s over :30s,” concurs Carat’s Fay. “Inventory is sold as 15 or 30 seconds, not in between. Why should I pay for something I’m not getting?”

Christine Peterson, the agency’s New York media director, adds: “Our research has been historically focused on [repurposed TV spots]. I’m not confident we would see that same drop-off if we tested content created specifically for the Web. I’d venture to say we may see audiences are willing to spend much more time with targeted, compelling content that truly takes advantage of the capabilities of the interactive space.”

To accomplish this on a limited budget, marketers must weigh the pros and cons of the different formats. For starters, there’s a much greater available inventory of banner-based video ads as compared with “in-stream” ads that encompass pre-, mid- and post-roll spots. On the flip side, banners tend to blend in with the Web-page environment. In-banner videos allow for greater creativity (through Flash and other rich media) and deliver more measurement data, which is why marketers often run “companion” display ads along with streaming video. Marketers also like the self-initiated aspect of in-banner videos, as opposed to the captive audience of a pre-roll spot.

Pre-rolls are double-edged swords. Con-sumers are often willing to sit through the advertising to get to the content they selected prior to the ad. But by force-feeding these spots to get the desired reach, some say, advertisers risk backlash against their brands over the long haul.

Post-rolls cost less, but that’s because they generate fewer impressions among viewers who have less incentive to stick with the ads once they’ve received their content. Still, marketers can be sure that consumers who view post-rolls are genuinely interested in the ad.

Thus, advertisers tend to draw on a combination of formats. Take the National Geographic Channel, which recently ran promotional teasers as in-banner video ads along with a 15-second pre-roll in a week-long campaign to promote its new fall series Taboo.

“Pre-rolls are a viable place to spend [our clients’] money,” says Matt Van Dalsem, associate media director at Mediasmith in San Francisco. “But we also want the data that we get on the banner side.”

For example, he notes, 65 percent of the videos in banner ads were watched to completion, with remaining drop-off rates evenly split among the early, middle and latter portions of the 1:20 video.

Marketers like National Geographic may have a more natural footprint in the pre-roll environment, as Internet users could tolerate a TV-series promo or movie trailer more than, say, an ad for Ritz crackers. But even packaged goods marketers are turning to online video to stretch their brands in entertaining ways.

Perrier, for one, has been getting in touch with its “crazier” side. This summer, the brand launched a series of Flash video banner ads in sponsored e-mail links and on sites like Salon.com and Pandora.com, as part a campaign to reach younger consumers that used user-generated content.

The ads—whose kitschy scenarios included a family of “cat ladies” drinking Perrier out of a watering bowl—sent interested users to the microsite Showmecrazier.com. There, users could share videos in various categories related to the “ier” premise—”crazier,” “healthier.” The “sexier” category featured a racy video in which bunny characters reenacted Brokeback Mountain.

“Perrier has a way of electrifying situations and getting a reaction,” says Bob Davino, vp of marketing at Nestlé Waters North America. “We want 20- and 30-something consumers who don’t have much history with the brand to discover Perrier on their own terms.” Which, he adds, they’re doing: “Online, we’ve seen tremendous interaction with our ads. Click-throughs are 70 percent above the CPG average and interaction rates are 180 percent above CPG average.’

Going forward, all marketers will be looking at creating more user-initiated ads. Many agencies are urging publishers to increase capabilities for contextual targeting, a presumably less intrusive strategy in which an advertiser “overlays” a spot during a streaming video clip that relates to a particular aspect of the clip (e.g., a travel marketer offering a discounted vacation package to a user who selected a news item featuring that same destination). In the meantime, marketers continue to experiment with other formats like expandable tickers and new types of branded online video content.

“The more relevancy you can create as an online advertiser,” says Geoff Coco, product manager for emerging media at Seattle-based Atlas Solutions, “the better you will fare.”