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What Can Fix the Broken Digital Ad Model?

  |  April 11, 2012   |  Comments

A new service is presenting consumers with a choice to bypass pre-roll ads in a way that attempts to balance out the consumers' wants with the needs of the advertisers and publishers.

Digital advertising is still in its relative infancy, primarily fronted with 40KB ad units that consumers can choose to click or ignore, but rarely engage with. And while we continue to make them more relevant with data-backed buys such as search retargeting, consumers still see plenty of ads that are meaningless to them. The irritation reaches its peak for me with the :15 or :30 pre-roll video ad units - and my frustration is so high that when I ran an agency media team I (rightfully or wrongfully) refused to subject consumers to these pre-rolls that prevented them from getting to their content.

However, consumers' annoyance with advertising is in direct conflict with the content owner's need to generate revenue, and as cost per thousand (CPM) rates have continued to fall for standard ad units, formats like pre-roll have become more and more attractive, and therefore more common (and I have to admit, seem to work quite well for the right media plan).

A new service called SkipIt is now presenting consumers with a choice to bypass these pre-rolls, and is doing so in a way that attempts to balance out the consumers' wants with the needs of the advertisers and publishers. The concept is annoyingly simple, as many of the best ideas are - a consumer lands on a page with video content and a pre-roll video begins to play. A small icon is presented in the top left corner offering the chance to skip and move on to the good stuff immediately. If the individual is a registered user of SkipIt, the process is instant, and if not, the individual is offered the chance to learn more and register.

Currently you earn a single Skip upon registering, and four more for confirming your email address, but after that they currently cost $0.10 each (or the equivalent of $12 an hour). My initial reaction was that it seemed a steep price to pay for 30 seconds of my time, but as I think about the things I happily spend money on to make my life more efficient, it doesn't actually feel so bad.

With so much activity in the U.S. to provide "notice and choice" to consumers through the AboutAds self-regulation movement and the European directives related to cookie usage, it could be expected that SkipIt was developed by a regulatory body on a mission to fight against advertising. In fact, it was actually developed by SpotXchange, a video ad marketplace that makes its living through the pre-rolls it now accepts you don't want to watch.

On the SpotXchange blog, CEO and founder Mike Shehan says:

"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."

Clearly the ad model is broken and who better to fix it than the publishers? They don't really want to force consumers to watch something they have no interest in and so SkipIt provides an alternative; still paying the publisher as though the ad ran, thus providing a solution where publishers and consumers benefit.

The advertiser seems to win too. SkipIt is saying it will offer insights about the consumers that choose to skip; it won't pay for the skipped impressions (even if several seconds of the ad have played); and it knows that those who do play it through are more likely to be interested. This model has already been proven out by companies like Say Media (formerly VideoEgg), which charges for video campaigns on a cost per engagement (CPE) basis and can demand a premium from its advertisers because the content is only viewed by an audience that theoretically wants to watch it.

SkipIt will have to overcome several barriers though. Firstly, it needs publishers willing to sign up, and my guess is to do that it will need to prove consumers are buying into the idea. And to get consumers it will need a critical mass of publishers to get the message out. Further, it will need to overcome the competition of icons being overlaid onto display ads today (AboutAds, AdKeeper, etc.) so that consumers understand it instantly.

And then there is the price - we can argue back and forth about the "right" price and whether consumers will stump up for the credits at $0.10 a time, but it will ultimately be dictated by the market and how much they value a way to bypass an inconvenience. In addition, Mike Shehan reports that there are further payment methods in the works, including an option for consumers to earn Skips by taking surveys, etc.

It seems the real point is not price, but value - the potential value to the ad ecosystem. SkipIt is an attempt to create a currency system for advertising by which everyone can get what they want and has potential to provide a positive impact beyond the walls of video advertising. And I get the feeling that if it were easy, Mike and team wouldn't have fun doing it.

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ABOUT THE AUTHOR

Dax Hamman

Dax Hamman is chief revenue officer at Chango, the innovators of search retargeting, and is based in Chicago and Toronto. Prior, Dax founded and led the global iCrossing media group, developing the concept of "performance display," an innovative planning strategy that drove significant ROI from display advertising for some of the world's largest and coolest brands.

Dax has 12+ years in the digital space with experience in just about everything online, including media, usability, creative, technical management, and affiliate marketing. He writes and speaks extensively, particularly on new and emerging techniques within the digital media space.

The blood flows in pixels!

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