Wednesday, August 20, 2008

The vCPM (viewing CPM)

Video is an awesome format that happens over time, and the online video industry has been sorely missing this obvious benefit by building business models around video views as impressions on a one-to one basis: "see a video, see a pre/post-roll". That kind of model leaves a lot of value on the table and it doesn't scale - can you imagine a pre-roll, a mid-roll and a post-roll jammed into a 2-3 minute online video? Ouch. No matter how many pre-roll studies you throw at the problem ("people really do love commercials") the model will not make real money.

The same is true with overlay. Are you going to add significantly more overlays to each video to increase yield? Some might, but I'd be willing to bet that they risk losing their audience.

Okay, now that I got that off my chest - so what?

The industry needs a model that offers a scale-able vCPM (the "v" stands for "viewing"). A vCPM is the aggregated dollar amount of advertisements per 1000 video views. But the industry can't have one without formats that use time as a way to manage yield and effectiveness. The format needs to be effective for advertisers (gets RESULTS and is PRICED RIGHT) and effective for the audience (i.e makes it easy to watch more video - doesn't kill the experience).

The Husky video-skin is one of those formats. It doesn't interrupt the video experience, it gets massive engagement, it's priced right, and can be optimized based on time.

Example: 3 minute video wrapped in husky skins that refresh every minute will get anywhere from $15-45 vCPM. Compare that to running a pre-roll in front of every video, or an overlay. The vCPM is higher.

Now imagine being able to add formats to your vCPM with a mix that works for your audience. Maybe pre-roll is okay, as long as it's not every video - maybe it's okay to have a commercial placed as the 4th video in a sequence - which means you add 1/3rd of the pre-roll cpm (let's say $7 for a $21cpm) to your new vCPM. Maybe you want to add overlay to your mix - add that to the vCPM - you get the idea. The vCPM is additive and adjustable by format and driven by having choices. That's powerful for a publisher.

Television is an awesome model because it's able to sell 16 commercials against one half-hour show. They wouldn't dream of selling just one "impression" for that length of time and neither should you - of course, don't get me started on the commercial format on television - we all know we're skipping them when we can anyway, but that's an argument from 2005.

Our goal is to make video more valuable which is why we're committed to the vCPM idea as a model for Husky moving forward. At the right price, it's valuable for advertisers - and with the additive vCPM model it's more valuable to publishers and content owners. We'll be developing all of our video advertising product with this in mind and will encourage and evangelize others to do the same. It will move our industry forward.

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