A Ford dealer in Smithfield, N.C., surveys his lot. It's pretty full these days, and a decrease in sales due to the economy has slashed his marketing budget. He needs a cost-effective way to reach not just the local buyers, but the ones from the surrounding larger cities as well. What about online video?
According to eMarketer, by 2013, online video ad spending will reach more than $4 billion. Although the market for online video is growing, spending online is dwarfed by traditional TV advertising. Even though U.S. consumers spend more time online than watching TV, web video spending will account for only 1.6 percent of television ad dollars this year.
Why? For starters, TV is a known and trusted way to engage consumers with advertising messages. Picture that potential in-market car buyer whom our dealer is trying to reach. He's sitting on the couch watching TV. He's had a long day, and he is enjoying the brief window of time in the day when he can relax. When a commercial comes on, the assumption is that he'll watch, listen, and absorb the advertising message. That relaxed, receptive state of mind is what TV advertisers bank on to get their messages across, and though inexact at best, existing TV audience tracking methodologies are trusted to measure the success of that message delivery.
Online video advertising is a completely different experience that is held to a much higher tracking and ROI standard. Consumers online often have less time, more distractions, and usually a specific reason for being online. In order to catch their eyes and make an impact, online video ads must be highly relevant and customized to the individual viewing the ad -- all the while illustrating a highly measurable ROI.
If eMarketer's predictions are accurate and advertisers are going to continue to pump money into the online video channel, they must overcome challenges to make the most of their investment. In our example, online video advertising can make use of the hours of stock video footage the local dealer has from Ford, but he has to go about it in the right way for it to not only be efficient, but effective.
The first challenge is scalability. The 30-second TV spot is designed to be one-size-fits-all, and it needs to be widely applicable and somewhat general to appeal to the large number of individuals that will make up the audience. But the one-size-fits-all mentality simply does not perform in the online world. Behavioral targeting, geographic and demographic considerations, etc., make it possible to specifically target individual viewer preference, yet creating all the ad variations necessary to reach each online audience segment would be costly, time consuming, and impractical.
Measurability is also a challenge. Video advertising is all about engagement, but what defines engagement is a matter of great debate. Clicks and conversions are a good start but don't make up the whole picture. In truth, it's difficult to know what parts of your video are actually being viewed, which parts are resonating, and which parts are resulting in the final conversion.
For example, a viewer may watch the entire video and, instead of clicking on the ad, may simply go directly to the website the ad references. Or they may convert offline via phone. Or perhaps you catch their attention with the opening 10 seconds of video, but lose them on the call to action. Even if you are ahead of the curve and can intelligently measure the above, it's not easy to optimize for what's working and what isn't without creating completely new video ads.
Finally, we come to the biggest challenge of them all: relevance. Reaching the right person with the right message at the right time is what marketers must pursue in order to achieve the highest ROI within their online channels.
The good news is that all these challenges can be overcome. The key is leveraging all of the data available to reach out to consumers on an individual basis, without breaking the bank on video creative production. The rise of dynamic creative optimization platforms is making this a reality.
Online video advertising can now follow the path forged by display and move toward a more data-driven, intelligent approach. By treating video just like any other dynamic element in rich media advertising, it's possible to bring real-time customization and localization to video ads, thereby significantly improving relevance and performance. Because dynamic display platforms assemble and optimize ads based on many anonymous data streams, rules set by the advertiser, and hundreds of creative assets (or more), there is never a need to limit yourself to a one-size-fits-all approach.
Let's say, for example, the video footage available to the Ford dealer is of a truck driving down the highway in the midday sun. The relevance of this image decreases when it's raining or when the viewer happens to see the ad at night. With dynamic ad optimization, the dealer could optimize that one video clip based on weather, ZIP code, and time of day with a series of creative overlays that reflect different climate conditions or dark starry skies, significantly extending the value of the segment and creating a more relevant ad experience for the viewer. Similarly, the call to action at the end of the video may be to learn about the truck's fuel efficiency or its towing capability, depending on the audience segment. The possibilities are nearly endless.
If you are looking to leverage online video advertising for the first time or if you have existing video assets, a dynamic, data-driven approach will maximize your investment and use of the channel. As an added bonus, dynamically optimized video can also deliver deep insights into your audience behaviors and preferences. Optimized video advertising acts like mini focus group, allowing advertisers to use online video to inform other online campaigns as well as traditional TV buys.
Whether you have a limited budget for online video like our local Ford dealer or you have all the funding you could ask for, taking a data-driven and optimized approach to online video is an ideal strategy for engaging more personally with your diverse online audience segments.
Chip Hall is SVP of marketing and sales at Teracent Corp.
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