Ad Innovation: Viewers Being Given Choice of Which Commercials To Watch on Hulu, YouTube

For all the creative talent applied to the development of ads, there has been notably little innovation in terms of how viewers are encouraged to experience them.

Whether on a computer screen, mobile phone or television, the tactics of formatting and communicating the message have been relatively static since the advent of black and white TV.

Interactivity can take many forms. At the most active end are the crowd sourcing of advertising messages and designs. At the simpler end of the spectrum, simply giving consumers a choice is revolutionary in and of itself. The questions provided by data derived from these initiatives can go a long ways towards addressing current challenges faced by marketers - and are interesting to the audience they are trying to reach: to what degree are viewers even willing to make a choice? How do they choose and why? What impact will that have on customer purchasing decisions - if any?

We have been talking about innovation for a decade. Taking it outside the realm of product development and applying it to the communication of ideas is an important evolution in our understanding of why and how people act in the digital age. JL

Randall Stross reports in the New York Times:

ON a television set, 10 feet away, commercials are often irritating. On a computer monitor, just inches away, they are often something else: downright invasive.

Both Hulu.com and YouTube know that many of their viewers hate commercials, and yet their business models have depended mostly on advertising. So both have been trying to make online commercials more appealing. And both are headed in the same direction: offering online viewers the chance to choose which commercials they watch.
This month, Hulu introduced a format that gives users the option of clicking an “ad swap” button after a commercial begins and choosing to replace it with one of two or three options. Don’t want to sit through an oil company’s commercial? Then go with one from a cellphone carrier or a razor maker.

The system isn’t perfect. By the time users decide to go with an alternative, they may have already seen a good portion of the first ad. Beginning a second one means a longer commercial break.

So why not delay starting an ad to let the user choose first? Hulu has tried precisely that with an older format it still uses. It found, however, that many users were annoyed by the process of having to choose or wait for a default choice. People were also not happy with choices that consisted only of three variations on one product, like shampoos tailored for fine, thick or curly hair.

When presented with the newest ad format, Hulu users can elect not to click the button to swap commercials and instead continue to watch whatever is shown by default. “We didn’t want to make using Hulu a lot of work,” says Jean-Paul Colaco, its senior vice president for advertising. “Like Amazon.com’s 1-Click button, you don’t have to use it,” he says. (With 1-Click, users order an item immediately, without visiting a checkout page.)

Those who log in as Hulu users are more likely to see commercials that interest them. Hulu notes users’ ad selections as well as feedback about a commercial if they answer a question that may be above the frame: “Is this ad relevant to you?”

In generating revenue from advertisers, Hulu must make the most of its commercials because it typically shows only half as many minutes of ads for a given program as there would be on television. For a “half-hour” show, which actually runs 22 minutes, it shows four minutes of commercials instead of eight. But those four minutes may seem about as long as the eight because they include a commercial that plays even before the show begins, then three commercial breaks during the show — and there is no way to fast-forward as one could with a DVR.

HULU offers other formats to advertisers, too. In one of them, viewers have this choice at the beginning: endure one 2 1/2 -minute ad at the beginning and be done with commercials, or watch as usual. Another format offers the option of playing a trivia quiz or a puzzle, sponsored by an advertiser, in order to earn a commercial-free viewing.

Such trade-offs have not been enormously popular. Mr. Colaco says Hulu is concentrating on trying to match each user with the right ads and letting users fix the occasional mismatch for themselves by choosing an alternative.

YouTube is also offering formats that give users an option, including one in beta testing that provides a choice of three commercials. It is being tried only on YouTube’s long-form videos, which run at least 10 minutes. The format has not yet attracted enough advertisers to be used with a significant number of videos; I tried but had no luck seeing it in the wild.

For shorter videos, YouTube offers a “skippable” ad format. This allows a user to end the ad after five seconds — and no replacement follows. The program simply resumes. The advertiser is charged only when users have chosen to watch the ad.

Baljeet Singh, a senior product manager at YouTube, said that when it first tried skippable ads, the skip rate was low — surprisingly low. So the skip button was made more prominent and the rate rose. This assured advertisers that viewers who stuck around did so by choice.

Google acquired YouTube in 2006 and does not break out its financial performance. Hulu, which says it is profitable, is a joint venture whose owners include NBC Universal, the News Corporation and the Walt Disney Company.

It is possible that Hulu may decide that free, ad-supported television simply isn’t viable. Last year, it introduced a subscription service, Hulu Plus, that is growing rapidly. For $7.99 a month, the subscribers have access to more episodes of shows, can watch the shows on portable devices and are exposed to fewer commercials, though still some. The company says the service exceeded one million paid subscribers this summer and expects its subscription services to account for more than half its overall revenue within the next 12 months.

THEN there is another strategy: creating commercials that people actually look forward to watching. Consider last year’s Old Spice commercials, featuring Isaiah Mustafa as the Old Spice Man. In just two months, the videos of these ads set a YouTube record for shortest time for any program to reach 100 million views. (Sorry, Susan Boyle.)

Every one of those 100 million views was by choice. Now, we await an idyllic future when every other commercial seen online is viewed voluntarily, too.