Mitchell Reichgut: Brand safety with us is really easy because we are 100 percent transparent. A lot of video distributors use the "T" word. When I mean transparent, I mean, "site by site reporting." In other words, I will show you where every view came from in a spreadsheet. Very few companies can do that. The reason we can do it is because all of our relationships are one-on-one and we don't necessarily buy and sell views from exchanges. That makes the solution pretty simple.
There is a lot of pressure on pre-roll companies because of lack of inventory. In the opt-in space, where we are, we don't have that problem because we are running on social networks and on mobile devices. We have access to 300 million people. That gives us the leverage to resist those normal pressures.
Is this a situation where scale makes the difference?
Exactly. And frankly, people line up to incentivize offers. They love it. It is one of the reasons that the model works so well is because we literally can't find enough videos to put in front of all the people that want to see them.
It is a quick, fun, and easy way to advance in a game to get an ad impression. In other words, I watch one video on a music and entertainment site, and now I have a 24-hour day pass. That is one of the futures that we see for incentivized videos or "content unlocking." If I agree to watch one video, I can read several articles that I would normally have to pay a subscription to see. It is so popular and it is so effective that it makes it very easy for us to get inventory. It is very, very rewarding for publishers as well which is one of the reasons why it is growing so fast.
Incentivizing consumers to accept advertising is one thing. But does that necessarily mean that they are engaged with the advertising? For example, we always hear media buyers complain about a lack of premium video inventory. Does incentivization and opting-in address that issue?
Let me answer that in two parts. Part one is premium inventory, so let's look at sites that would be considered premium. Forbes, Epicurious, Vanity Fair – things of that nature – are chronically sold-out of display inventory. All the good stuff is gone at a very, very high price.
Ad networks typically sell remnant stuff, and in display, which is really not my business, that might be a perfectly good model. For video, it is very, very tough because what happens is, if you are, say, a Forbes or an Epicurious, you are going to be way below the fold on an interior page and very few people are even going to see the video.
Typically, any one of these publishers will sell that space on a CPM basis. I'm paying for impressions that I am not necessarily monetizing because people in my business charge for views. Yes premium inventory is very, very difficult, and it frankly doesn't work for long-form video and that's the second part of my answer. And it all depends on what you consider premium.
Okay, how do you determine “premium inventory?”
First, I don't consider any of those sites I just listed in my world "premium." We don't run on any of them for the simple reason that it is inefficient for me to do that. It's not going to drive great results for my clients. Now, you hear a lot in the industry about "native video" and "contextually relevant placement" and it is a great story. But our business is all about results. To us, premium inventory are the sites that will deliver the correct audience to the brand and will get people to watch videos and engage and take actions afterwards. Have you ever seen the movie Moneyball?
Sure. Brad Pitt was pretty good as Oakland A's General Manager Billy Beane, who analyzed new players according to a strict set of performance indicators. Go on.
Okay. Jun Group is Moneyball for online video. Throw away all of the mythology of these high-priced free agents – AKA, premium sites – and look at the numbers. What we do is put science to placements. For example, look at a social game publisher like King.com, which is one of our partners, and its 30 million users. It's a great way to reach moms, it's a great way to reach teens – it’s completely brand safe. That will drive a 92 percent completion rate for a 60-second video, compared to one of those “premium publishers” I mentioned before, which are going to drive less than 20 percent probably.
That is just completion rate. More important to most of our clients is what happens after, particularly social media shares. The clients want people going to my Facebook page or taking part in their contest or visiting their website. We average about 4 percent of people that watch our videos taking an action afterwards. Most of our competitors can’t match that because very few people are going to watch an ad that they didn’t request all the way through to the end. You can't aggregate large audiences with click to play units. You can call them "native" or you can say they are "contextually relevant," the fact of the matter is they are there to look good and they are kind of window dressing. The interesting thing about most of the marketers who run on "premium sites" is that they are using incentivized placements to drive the vast majority of their views – and by vast majority I mean like 99 percent. They are just not selling it that way.
Do you think incentivized views as an ad model will be adopted more widely?
I see two things happening. First of all, incentivized viewing is the way to drive long-form video views. It is the only thing that is driving any value in a long-form video space. It's going to be adopted more and more simply because it delivers results. You see Google starting to do it. You are seeing lots of publishers adopt it because the model is great for them. You are seeing a spread in what that reward is, what the incentive is.
As I've mentioned, it is ad suppression. It is content on block. When you start to be more general about that and most of the incentives that we have are virtual game points and things of that nature. As it spreads out and becomes more mainstream, it is going to be recognized as the only reliable way to drive long-form video views on the internet.
What specifically is the incentive – pun sort of intended – for publishers to accept incentive-based ad impressions? Can it deliver higher yield?
There is no doubt about it. It provides much, much better returns and much more reliable returns for advertisers can display. The publishers we work for will have very high net effective CPM's. They are getting paid on a cost per view so effective that they can actually have one view cancel all their display ads for a particular user for 24 hours and still make much more money.
In discussing the list of major publishers earlier, you essentially defined premium is also a moving target and that you tended not to work with them. What kind of clients work best for Jun Group? Is there a certain size of publisher? Does it depend on the kind of content and category they operate in?
We are only interested in the brand safe publishers, so that is the cut off. Within “brand safe environments,” you have all kinds of things we can work with, because a good 50 percent of our business now is mobile. Next year we see it becoming 70- or 80 percent of our business.
We are working with lots of different mobile applications of every stripe. It's everything from texting apps to map apps, recipe apps, certainly social games are a big part of our future. We are working currently with a lot of entertainment sites, content sites, editorial sites. Lots of different publishers are getting involved in this. We are happy to use smaller ones. A lot of our traffic comes from the biggest and the best. I think that is pretty much going to be the story in terms of size. You will always get a large portion of your traffic from the big players and then the quote unquote "long tail" will fill that in. To us, that is totally fine as long as they are brand safe and above board.