Possibly the Best Way to Make Money With CGM

Everyone’s asking how social media sites like YouTube, Grouper, Revver, Break.com, and many others will evolve their business and advertising models.

Each site has a different philosophy or strategy, but the song remains the same: the user experience got them to where they are, but ad revenue will get them to where they need to be. How can these sites generate sufficient ad revenue without crossing audiences’ tolerance threshold for advertising?

For the last 50 years or so, we advertisers have been forced to think in :15 and :30 sales pitches. These are a function of necessity for TV advertisers, and even they are realizing they’re just not working like they used to. The bar’s been raised in the quest for consumer mindshare, and TV advertisers that have seen a decline in their spots’ performance are trying to get more creative. The result of that creative thinking has primarily materialized in the form of product or brand integration and placement.

The problem? The stakes are so high that the effectiveness gained in subtlety is lost in overtness, oftentimes crossing audience tolerance thresholds above and beyond exposing them to traditional ads. Case in point: “The Apprentice” is like watching a commercial surrounded by commercials.

Lately, I’ve overheard more people talking about the fake commercials that appear after segments of ABC’s “Lost” than about real advertising.

What does this mean for online video advertisers and the publishers that serve them?

Maybe, just maybe, the long-term future of online video advertising isn’t in pre- or post-roll.

Audiences are willing to pay a price for free entertainment. As we figure out what that price is in various media, it’s important to experiment with every format to see what consumers will accept.

There’s certainly ad revenue to be generated from premium placement, À la the YouTube Participatory Video Ad (PVA), jumpstarting what could become a viral effect so long as the audience is there. But how do you monetize consumer-generated media (CGM)? How do you monetize video ad revenue if you’re not a site as big as YouTube? Those are multimillion dollar questions.

The answers may well lie in the creation of ad content that entertains while it informs and in extending invitations to participate in an experience.

Many of the aforementioned sites are well on their way to those answers. Grouper and YouTube are tagging or categorizing videos. As those classifications get better, advertisers should be able to steer audiences toward their entertaining or informative advertising around relevant content. The call to action would be the invitation. Should the consumer accept, the ad would follow. The more convincing the invitation, the more likely the consumer will accept. The better the ad, the more likely the consumer will respond (and accept future invitations).

Delivery of these invitations would be a key factor in a CGM-focused campaign’s effectiveness. It will be up to the sites to figure out the best way to integrate ad invitations into the existing user interface.

One of the great side effects of this invitation-based video is it has the potential to turn the experience of spending time on social video sites from a lateral, video-hopping one into an in-depth one, allowing a video to draw consumers in to a brand-driven experience.

YouTube has a head start. Content subscriptions have been available for quite some time, and now there are brand channels. This deepens the experience, creates community around the content, and creates value for the advertiser by galvanizing audiences around the brand.

We advertisers must do our best to work within social media to appeal to consumers, especially valuable young ones. It’s where they spend lots of their time not only watching but also creating content. Social media sites need to work hard and fast to provide advertisers with the opportunities to experiment efficiently.

Until I’m proven wrong, we can operate under the assumption that this is the way to go. Let’s see who’ll be first to use online video as a medium to properly and logically invite, engage, and inform audiences about brands and products.