NEW YORK For years, sellers of online brand advertising have resisted online direct response metrics like clicks. But marketers' drive to accountability is changing some minds.
Online ad network VideoEgg is rolling out a new video format for brand advertisers that will charge them only when a user interacts with their ads. Called AdFrames, the units appear like standard display ads with a few seconds of preview video. Users mouse over the ads to display a Flash window that shows the full clip without leaving the page. VideoEgg plans to charge advertisers between 20 cents and $1 per interaction.
"My focus is creating value for the advertiser," said Troy Young, CMO of VideoEgg. "I do it by taking risk out of the equation."
The unit is also designed to allow advertisers to use banners as invitations to view longer-form branded content such as videos, games or other interactive experiences. Microsoft is testing AdFrames to lure users to watch a four-minute humorous Web video of actress Amy Sedaris showing off new features of Office 2007. Microsoft is paying under 50 cents per vview, according to Brian Monahan, global lead for social media at Universal McCann, Microsoft's agency.
"We're always investing in more video content for our brands," he said. "The challenge is getting it seen in a scaled way."
For longer form video, standard pre- and post-roll ads aren't an option, he said. The voluntary interaction increases its value, he added.
The decision to price the ads only when users take action is meant to bring the accountability of online direct response placements, like search, to brand units. Despite more brand dollars moving from traditional media, pricing for Internet ads has remained heavily weighted toward performance metrics like cost per click. According to the Interactive Advertising Bureau, 50 percent of deals in the first half of 2007 were performance priced, part of a steady increase compared to CPM pricing.
VideoEgg boasts engagement rates for ads between 1 percent and 10 percent. Rather than use page context for ad targeting, it relies on social-media data like profile information. By placing ads where users are most likely to respond, VideoEgg can take the risk of charging only for interactions.
"We optimize better than our clients do," Young said. "It puts the pressure on me to optimize for engagement."
VideoEgg will continue to offer more standard pricing options for other ad forms, such as its Flash overlay and video banner units that are sold on a CPM basis.
VideoEgg, which reaches about 50 million users per month, is a leading ad provider to social media sites like Bebo, MySpace and Meebo. It is also one of the most popular ad providers for Facebook application pages.
Young said the new format and pricing could be key in luring brand advertisers into social network advertising. Ads in social networks have notoriously low click-through rates, according to agency executives. For that reason, widget makers will need to rely on brand advertisers to make money, Young believes.
"Widgets have no context and no intent," he said. "You have to go after the brand dollars."