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YouTube Shuns Pre-Roll Ads

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NEW YORK Google, fond of its image as an unconventional company, is bucking standard pre-roll video spots in its introduction of ads to YouTube.

Instead, Google is casting its lot with "overlay" ads: transparent, Flash-animated placements that appear on the bottom of the screen while videos play. Users can click on the ads to pause the clips and watch commercials without leaving YouTube.

While 15- and 30-second pre-roll spots, most often repurposed TV commercials, make up the overwhelming majority of video ads, YouTube said consumers find them irritating and distracting. A 15-second spot placed before YouTube videos resulted in a 75 percent abandonment rate, said Shashi Seth, a YouTube group product manager. The overlay style generated just a 10 percent drop-off, he said.

"We found that with pre-roll and any video advertising that interrupts the viewing experience itself, the abandonment rate was so high we didn't feel comfortable launching with it," he said.

Now, on selected YouTube clips, animation will fill the bottom fifth of the screen with 10-second advertiser messages. Users can close the ad; clicking on the spot brings up a smaller window with a longer video or other advertiser message. In its test, Google said the ads got click rates of 1-2 percent, with 75 percent of clickers watching the message all the way through.

In shunning pre-rolls for targeted ad invitations, Google is borrowing a page from several startups, including VideoEgg and ScanScout, which have tried overlay video ad features.

Google has signed up 3,000 professional content providers (such as CBS) and 70 independent YouTube creators for the overlays; it will split revenue with those producers, Seth said. Google has no plans to place advertising on user-generate clips, he added.

It is launching with six advertisers, including New Line Cinema and Warner Music, at a cost-per-thousand viewer rate of $20. In one execution running in a music clip, 20th Century Fox promotes The Simpsons Movie with an animation of Homer chasing a doughnut across the screen. Clicking on the spot brings up the movie's trailer in a small video player.

"It's not just handing your 15 or 30 to a publisher," said Ian Schafer, CEO of Deep Focus, a New York digital agency. "It's actually creating an ad unit, which shouldn't be that big of an issue, but it is. It requires a little bit of creativity."

The program envisions using Google's expertise in ad targeting to tackle another common complaint of pre-roll spots: users often view the same ads several times per visit. Now, Google will allow advertisers to target ads on four criteria: sex and age; geography; time of day; and video genre.

In fact, thanks to YouTube's high volume of video views per day, users will rarely see ads, Seth said. "We're hoping it will be infrequent enough they won't notice," he said.

Nate Elliott, a research analyst at Jupiter Research, criticized the approach, saying Google would do better mixing overlays with pre-roll clips, while adding frequency and time limits.

"These don't necessarily improve the user experience at all, and they take away a lot of value for the advertisers," he said. "That's not a good trade-off."