Tuesday, 28 August 2007

Has Adwords already ruined Youtube overlay advertising?

There was once a time in Youtube's life where industry luminaries questioned how a startup that burnt millions each month in bandwidth costs could be financially viable. This was before Google jumped in with their $1.65bil life raft and set the company on the its current path of world domination. The questions went away after this happened and since then very few have given much thought to the problem but undoubtedly it was consistently appearing on agendas in the Googleplex boardroom meetings. Last week google announced they will be offering overlay ads on Youtube videos and more than a few in the advertising world started to wonder if this could be the next Adwords, the next great revolution in online advertising.

There is no doubt that Youtube gets a lot of traffic. This time last year Youtube were serving up 100mil videos each day but taking a closer look at the figures, overlay ads may not be the great white hope they would like it to be. In fact Adwords may just be the reason this never takes off.

The new system charges advertisers $20 per 1000 views and Youtube say they are likely to get between 2.5% and 5% click though on the overlay ad. In the old world of pre-Adwords advertising that would have been fine but thanks to Googles pay-per-click system of advertising advertisers have become accustom to only paying for what they can measure. They like it this way. They can now finally justify their marketing spend.

Of course the 95% of viewers that don't click though are still registering an impression and from a branding point of view that might be all well and good. The problem is advertisers are being asked to go back to the old model of "pay for something you don't see a tangible result from" and this will undoubtedly be a tough pill to swallow.

If you had spent the last few years only paying a spruker per person that enters your store then all of a sudden they said "but I deserve to be paid for the people that will come back another time" would you do it?

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