Consumers More Accepting of Ads in Online Video

FreeWheel study suggests TV model can work in digital

After years of resistance, consumers are coming around to the notion that advertising is a reasonable enough tradeoff for free online video content.

According to a new report from the video monetization firm FreeWheel, the online video environment is increasingly adopting the look and feel of the 70-year-old TV ad model, as the pre-roll standard gives way to a more comprehensive break structure.

After analyzing 11.3 billion online video views and 6 billion ad views, FreeWheel concluded that consumers appear willing to sit through more commercials when those sponsor messages are surrounded by long-form programming. When users view full episodic content (i.e., a 22-minute sitcom or standard scripted drama), 94 percent will watch a standard ad break.

Long-form content typically can support as many as three ad views, whereas video of five minutes or fewer is a less sustainable environment for commercial messaging. According to FreeWheel data, users will watch 81 percent of the ads placed in online sitcoms and dramas, whereas viewers of clips (sports highlights, music videos, etc.) will sit through just 59 percent of the ads.

As long as consumers continue to tolerate commercial interruptions—a few ads are the price of admission for what would otherwise be offered as premium content—content providers are more than happy to simulate standard TV loads in the digital realm.

“The content with the largest ad loads have the highest completion rate, so it’s fairly clear that consumers are willing to make that compromise,” said JoAnna Abel, the vice president of marketing at FreeWheel. “If you want to watch professionally created, rights-managed content without having to pay a subscription fee, you’re going to have to watch a few ads.”

The FreeWheel report aggregates usage data for its clients, a clutch of content providers that includes broadcast networks (CBS, Fox), cable groups (Turner Entertainment, Discovery Communications, ESPN), and multimedia monoliths (Martha Stewart Living Omnimedia).

If nothing else, the FreeWheel findings should light a fire under content owners who continue to employ the tired 30-seconds-of-pre-roll approach to online ad placement. Given that a quarter of viewers will opt out of a video stream upon being confronted by pre-roll, these lessons cannot be learned quickly enough.

“It’s a cultural thing. You have people with digital DNA over here with spending on online video, and then you have TV buyers and TV strategists with their GRPs and Nielsen currencies over there,” Abel said. “It will take time for all the artificial barriers to come down, but the [two sides] are definitely learning to cooperate.”

Along with videos streamed on PC platforms, FreeWheel also monitors usage patterns on mobile devices. And while mobile represents a tiny portion (2 percent) of the overall digital video universe, Apple clearly dominates the emerging market.

In the second quarter, more than four-fifths (82 percent) of wireless video views were accessed via an Apple device. The iPad led the way (31 percent, up from 20 percent in Q1 2011), followed by the iPhone (27 percent), and iPod (24 percent). According to FreeWheel's data, the remaining 18 percent of wireless video streamed on Android devices.  

iPad viewing spikes during the weekend, corresponding with lower TV household usage levels. Tuesdays represent the nadir of iPad video streaming (12 percent).

Abel said that the iPad’s early dominance has much to do with how TV networks have embraced the new platform. In April, ABC and HBO announced they had developed on-demand apps for the iPad, as have MSOs such as Comcast, Time Warner Cable, and Cablevision.

Apple reported that it moved 9.25 million iPads during the quarter, far exceeding Wall Street’s expectations of 7.8 million units sold. “Given the consumer enthusiasm for the platform and the fact that the TV industry is coalescing around it, the iPad is going to be the next third screen,” Abel said.

The FreeWheel report does not assess usage patterns for subscription services such as Netflix.