Microsoft, Yahoo Get Inventive - Analyst Blog

Tying advertisements to Internet users’ online behavior has so far remained restricted to text searches, but the trend is changing. There is a growing belief that consumers prefer to view ads of their choice when they go online, which is driving some big technology names such as Microsoft (MSFT) and Yahoo (YHOO) to rewrite the rules of online video advertising, the fastest growing form of online advertising.

So what exactly is changing?

A recent study conducted by France-based Publicis Group’s digital arm Vivaki shows the likelihood of users clicking on an online ad grows twofold if it suits their taste than when one is selected for them. The new initiative that Microsoft, Yahoo and video-on-demand site Hulu are working on will let users do exactly that when they watch an online video – view ads of their choice, and not just what is there on a Web page.

While choices increase the feeling of independence and allow users to avoid annoying video ads, it also enables the online ad providers to determine which ads work and which ones do not. So, as soon as next month, the pesky weight-loss commercials could be en passé.

Headroom for growth

The potential headroom for growth is what is catching eyeballs. New York-based research group eMarketer estimates online video advertising to surge more than 48% this year to $1.5 billion. ASq, the new ad selecting tool that these firms are trying to integrate, would help online ad providers make ads that are more in sync with users’ taste and more interactive. Tailoring ads to consumers’ preferences could give them an individual tone – something that television ads, for example, find difficult to achieve. ASq, to be available only in the United States initially, would let those watching an online video select from three or more sponsoring advertisements.

Others eyeing the bandwagon

Firms such as CBS.com (CBS), AOL.com (AOL) and Discovery.com (DISCA) say they would start using the format in September.

Although ASq could prove to be a guiding force in the online video ad field, Google (GOOG) remains a force to reckon with in the $3.1 billion global video ads market. Google, which says it is studying the ASq format, had the most unique video viewers and the most video viewing sessions in June, according to ComScore.

Market intelligence firm IDC estimates global online video ad spending to jump to $11.3 billion in 2014 from $2.2 billion in 2009. YouTube, which gets more than 1 billion views a day, says it is working on plans to get more viewers for its video ads.  

 

 
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