Give Consumers Choice: Ads vs. No Ads

Online video consumption continues to grow rapidly. Depending on which research you believe, online video is either stealing viewers from primetime television or driving more viewers to TV. Whatever the case, there’s tremendous pressure on the business models for practically the entire ecosystem. Growth in online video ad spend continues but is largely the result of adapting the TV model and reducing the ratio of ads to content — a model that likely cannot, on its own, fund quality content like “24” or “CSI.” And TV ad spend has held its own despite the challenging economy. But increasing DVR penetration, digital distribution, and an increasingly fragmented audience would seem to indicate that current TV ad budgets can’t hold up forever.

NBC Universal CEO Jeff Zucker has said that the rise of TiVos and other digital recording devices as well as online video snacking have forced broadcasters to change their business models, yet “their replacements…are not necessarily ready for primetime.”

Debate and experimentation with different ad and business models will continue for some time. I don’t have the answer or a prediction for where we’ll wind up, but I do have a suggestion: choice.

Digital media have put consumers in the driver’s seat. Consumers control when, where, and how they watch video, including the interruptive advertising embedded in the video. In addition, barriers to entry in terms of video production and distribution costs have become much lower, creating an absolute explosion in content volume. Quality varies widely, of course, but the simple fact is that people are now presented with nearly unlimited viewing options.

In this world of infinite choice and full control, advertisers can buy eyeballs (reach) but can’t buy attention (engagement). You’ve got to earn attention.

Fortunately, some of the same things driving this shift are also creating opportunities to earn that attention. Precise targeting and dynamic assembly of video assets can be used to make video advertising so relevant that it doesn’t feel like advertising anymore. Brands can produce entertaining video content that is sought out rather than avoided. Video itself can be used as a social medium, enabling brands to earn attention by talking with, rather than shouting at, their audiences. And so on.

In this swirling mass of experimental efforts to earn attention, choice has been overlooked. If consumers are in control, why not embrace it? They expect it. We’ve trained them to, with instant access to a massive wealth of content online and the ability to time shift and fast-forward content on TV. It’s hard to put that genie back in the bottle, so maybe we should stop trying.

What if we gave people even more choice instead? The ultimate expression of this idea would be a simple choice at the beginning of any on-demand content experience. Would you like to: A.) Pay $1.99 (or whatever) to watch this content with no advertising, or B.) Watch free with ads embedded? And maybe take it a step further by presenting the viewer with a menu of ads they’d like to watch. This could be at a brand level or even a category level; I’m interested in ads about cars, running shoes, and technology, but not laundry detergent.

For me as a consumer, it’s the ultimate way to watch. I’ve got a DVR and fast-forward through ads. It works, but it isn’t the best experience. I’ve also got an Apple TV that I use occasionally to download primetime TV content. It also works, but it’s not always worth paying $2.99 for HD episodes that I can get for free elsewhere. If I could get that stuff on-demand for free with relevant ads that I’ve chosen, then my viewing would suddenly switch to nearly 100 percent Apple TV.

Consider the accountability as well. The data that marketers would get back in terms of viewer preferences would be incredibly valuable. This raging debate over show ratings, ad ratings, and C3 (define) would end abruptly; or at least would fall back to a discussion about whether people leave the room when the ads come on. One could argue that when a consumer chooses to view an ad, she is by default engaged in the view. So the nebulous idea of engagement might finally have a clear quantitative corollary — time viewed. And if brands are built by creating relationships, and relationships are built through conversations and time spent together, how valuable is that kind of grounded engagement metric?

Choice may well be the ultimately business model. What do you think?

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