Borrowing a page from IPTV company Joost, YouTube is embracing interactive overlay advertising as a way to monetize their popular video portal.
Beginning today, Google will display the semi transparent, interactive ads on the bottom of select user-generated videos hosted on the YouTube site. The ads will reportedly occupy no more than the bottom 20 percent of the screen. They will appear after a fifteen second delay and disappear after a ten second presentation (unless the viewer engages the ad with a mouse click).
Unlike pre-roll ads, a competing ad format which holds a viewer hostage before the desired content is played, overlays are a relatively unobtrusive solution aimed at minimizing the negative impact on the user experience.
The move comes about a year after Google paid $1.65b for the video site and amidst active debate about the best way to sell advertising for this kind of video content.
An ad for the Simpson’s movie has been a popular demonstration. While watching your Lonely Girl 15 episode on YouTube, Homer Simpson will chase a runaway donut across the bottom of the screen. If you click on Homer, or the donut, Lonely Girl 15 will pause and the player will launch a video trailer for the movie.
Non-interactive forms of overlay are widely used in traditional broadcast television, especially to show the logo of the channel. The idea to add interactivity and port it to Internet video advertisement is not unique to Google. IPTV company Joost has employed a similar concept in their beta test for months. YuMe Networks, a well funded advertising technology company, also sells a competing overlay technology.
Google has been quietly testing the service for the past few weeks. They report more than 75% of viewers allow the overlays to run in their entirety.
The ads will be sold based on traditional display advertising pricing models with advertisers paying for impressions (or page views) rather than for actions. The rate being tossed around the grapevine is currently $20 per thousand views (e.g. CPM).
With more than 3 billion videos viewed on YouTube per month, the revenue opportunity is potentially large if it is rolled out on a wide scale (though the cost of serving the ads will likely keep margins relatively low).
To give color to the math: assuming YouTube’s usage pattern remains stuck at three billion, and they show just one ad per video roll, than ads displayed on 10 percent of YouTube videos would get the equivalent of 300million page views. At $20 per thousand views, that would means $6m in a single month. (300m/1,000 and multiplied by $20). Spread that out to 25% of content on the site, and it’s about $15m/month or $180m/year. If the ads remain on YouTube videos embedded in blogs or other sites, and Google administers that as well, the total grows again.
Google will not keep that booty all to themselves. The company plans to share revenue with selected video content providers. How much hasn’t been disclosed.