Pre-roll Ads Will Continue To Dominate Video, As Long As They Get 'Smarter,' Innovid Says

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Zvika Netter, CEO Innovid 2013When Innovid CEO Zvika Netter co-founded the interactive video ad-serving company in 2006, he and his partners thought they would be the advance guard that would witness the demise of the pre-roll format.

Innovid would replace that model with its customizable, targeted iRoll product, which allows viewers to hit a button within a digital video spot and pull up and/or share information about themselves and the product being advertised.

Fast-forward seven years and the often-maligned pre-roll has proven its staying power. Whether five, 15 or even 30 seconds, the pre-roll is still the preferred method of video advertising. And Innovid, which sees its business fairly evenly divided between its standard pre-roll products and its interactive ones, has made peace with the idea that pre-roll is here to stay, though there is an evolution taking place.

"We definitely see interactive ad formats becoming more popular, more standardized," Netter said. "A few years ago, interactive formats were just 7% of the total marketplace and now it's around 15%. That's significant progress. The vision and the hope is that any pre-roll will have to carry something with more brains and personalization than mimicking the flat, mass 30-second TV spot that is broadcast to everybody. Right now, interactive video ads are 50% of our business, but we see it occupying at least 75% of video advertising in the next few years."

In part, the continued endurance of pre-roll is based on the increased focus on digital by broadcast and cable media buyers looking to extend branding campaigns to the Web and mobile devices, as Jordan Bitterman, MindShare's chief content strategy officer, noted this week. In a wider sign of changing attitudes, a survey of 149 media agency executives by Rocket Fuel also found that 42% expect to shift some portion of their budgets from TV to online video this year.

In part, pre-roll -- or mid-roll or post-roll, for that matter -- is very familiar to TV buyers as a close cousin to the TV spot. That makes it naturally more appealing than, say, an overlay ad that runs at the bottom of the screen as the video plays.

Matthew Kramer, director of TV and video products for Omnicom Media Group trading desk Accuen, outlined a few other trends that are pushing online video to become less of a direct-response tool and more of a branding medium. In particular, he said he sees the maturing of the digital video marketplace through advances in common measurement and retargeting of TV audiences as the main drivers. In turn, that has opened up a much broader range of premium video-ad inventory than has existed recently.

Kramer echoed Netter's view about video's gains being propelled by pre-roll getting "smarter" in both ability to target and measure audiences' behavior more accurately.

"Interactive pre-roll units enhance our ability to increase both awareness and engagement, which aids in brand building," Kramer said.  "As the online video marketplace progresses, we consider high-impact, interactive creative a very important tool in forging stronger relationships between our advertisers and their customers."

Innovid is benefiting from that demand for more interactive video and is now close to reaching profitability, Netter said, adding that the company has no IPO ambitions or plans to make any acquisitions in the near term. In addition, the idea of TV and online video convergence is also providing a boost to the company's fortunes, as Innovid has secured deals with Sony PlayStation and over-the-top video content distributor Roku to power interactive ads on their respective boxes.

"Innovid has emerged as a critical partner because of tools that drive delivery, engagement and conversion," said Gregg Colvin, chief operating officer, US, of IPG's Universal-McCann. "Their unique interactive pre-roll has enabled us to achieve the twin objectives of driving awareness and conversions simultaneously. And their innovative solutions finally empower us to distribute content across multiple platforms at once."

The power of matching interactivity and TV-style branding allows buyers to move beyond basic lean-back viewing while being able to demonstrate clear engagement, Colvin added.  "In this way, Innovid is helping to extend the viability of the pre-roll video unit," he said.

Putting Innovid squarely on the border between TV and online is also pushing the company, which is based in New York and Tel Aviv, to develop new products that meet the advertising challenges of real-time advertising within live-steaming video and through video-on-demand systems generally.

Competing for that business will also involve ramping up its analytics tools. In February, Innovid received accreditation from the Media Ratings Council certifying that its digital-video and display-ad impression statistics comply with the industry group's basic measurement standards. More recently, Innovid teamed up with video-ad technology companies TubeMogul, BrightRoll, LiveRail and SpotXchange to support OpenVV (or Open VideoView), a viewability solution for in-stream video ads.

Other major video-ad players like Tremor Video, Adap.tv and YuMe have resisted joining the consortium. For now, they'll each continue to develop their "proprietary" viewability metrics and otherwise leave it to the MRC to say what's acceptable and what's not. Netter doesn't see a reason to go it alone.

"A lot of these companies want to control 100% of an agency's media plan when it comes to video," Netter said. "They want the agencies to rely on them solely. But that's just not going to happen. Video-ad services will be portioned out as a line item among many partners. No agency is going to put all their data, all their planning with just one company. And, in that sense, having your own viewability solution will only make it harder, not easier, for agencies to work with you because they want a metric that offers an apples-to-apples comparison across all the vendors they use."

Tim Avila, BrightRoll's VP of product marketing, agreed with Netter, saying there's no sustainable competitive advantage in which a video company can claim to "do viewability best."

BrightRoll, a video-ad platform often discussed as following Tremor Video and YuMe into the IPO race, is already a close partner with Innovid, as Avila said the company is its single largest provider of interactive video ads and analytics.

In explaining Innovid's value, Avila noted that most brand advertisers' budgets are spent on TV, where the production costs are already well over a million dollars. And they don't want to pay a good deal more to make those ads more targetable and interactive when repurposing them online.

As Netter said, Innovid charges strictly on a CPM basis -- not on performance and clicks -- which also is the way TV ads are priced. As such, Innovid's layers of interactivity don't increase a marketers' costs much more than if they were doing a static pre-roll ad.

Innovid's ads have been especially useful for movie trailer ads, Avila said. Innovid can take an ad for a theatrical film in current release and display showtimes for clickable ticket sales within a trailer based on the viewer either typing in their zip code or using geo-targeting created from that ad impression. The same tools can be used to deliver a slightly different ad to someone at various stages in the purchasing process for a new car.

"We can get all that information from the video ads that people watch and then segment those viewers into interest levels," Avila said. "That provides us with an opportunity to have more conversations with advertisers about targeting consumers in real time."

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