Millions of AOL subscribers with broadband connections will get free access under the plan announced by Time Warner and AOL executives on Wednesday. But what’s in it for advertisers and agencies?
Look for a wider use of video advertising, which is already in use at AOL, but is expected to greatly accelerate with a larger broadband audience.
“The amazing growth of broadband penetration is attractive to advertisers,” Mike Kelly, president of AOL Media Networks, said in an interview with SHOOT after the announcement was made. “As users watch more video, and there’s more video available online, advertisers will want to take advantage of that opportunity.”
Kelly expects broadband users to pursue AOL rich media content, including movies and music, which can be integrated with advertising. Kelly notes that AOL offers all rich media advertising formats, including ones they created, such as the synchronized ad curtain, in which a video ad plays before the video content is viewed and then a curtain opens to show a static ad. “We anticipate that agencies will move strongly in the direction of producing full-motion video for the new AOL audience,” Kelly said. “The more comfortable AOL users become with rich media environments, the more agencies will respond creatively and technically to these challenges and opportunities.”
It’s actually a combination of user broadband capabilities and AOL content that will promote video advertising, as Emily Riley, a Jupiter Research analyst said. “Video advertising will be easier to do because people have better connection speeds with AOL. And video advertising will also grow with the free video content AOL offers,” she told SHOOT.
The synchronized ad curtain is only one new form of video advertising at use on AOL. Another is what Jeff Lanctot, VP/general manager of Avenue A/Razorfish, a large interactive agency, calls “consumer control ads.” “The consumers choose not only the content they see, but the actual ads they watch,” he said, using a Ford campaign as an example in which viewers are shown a lineup of cars and can choose which one they want to see in an ad.
This new form of online video advertising isn’t simply repurposed from existing TV ads. “We shoot Web only footage as opposed to TV,” Lanctot said. “We book an additional one or two days with the talent from the TV shoot, which can be done because the Web is brought in earlier in the process now and they shoot TV and Web at the same time.”
Another benefit for advertisers with the new AOL is a younger and more affluent audience that could attract new advertisers. “The subscriber-based AOL isn’t as young or dynamic as it could be,” said Scott Symonds, VP/executive media director of Agency.com. “Now instead of an older middle-American audience, they’ll get a more tech savvy one, which is a definite opportunity.” Riley agrees that “by dropping the paid service and adopting free access, they might get higher income and a younger demographic. The demographic will skew younger and the advertisers may be different.”
Yet another benefit will be the increased ad inventory that will arise with the larger audience. The subscriber-based AOL’s “walled garden” was only available to a limited number of people, so the ad inventory was limited, too. “Unhooking that barrier opens the floodgates on ad inventory,” Mike Griffin, VP of business development at Eye Wonder, a rich media production company, said. This will help solve a growing problem of limited inventory on the Web, which is occurring because “marketers are buying all the space because they value online impressions more than they used to.”
AOL’s free access offer follows a number of other moves that have improved the site for advertisers, including the acquisition of Ad.com and Lightningcast. The acquisition of Ad.com helped AOL overcome the use of its proprietary Rainman technology that made it difficult to run campaigns, according to Lanctot. Ad.com’s ability to manage inventory and ad placement is far more efficient and “leads to sales,” he said. “It brought some parity with other portals and signaled to media buyers they were serious about results.” Meanwhile, Lightningcast is a leading broadband video advertising developer that will help AOL offer the latest streaming formats to advertisers.
It’s difficult to say how much larger AOL’s audience will be with free access. Comscore says AOL already enjoys 51 percent of the online population, with 87.9 million unique users in June. But it lost nearly a million subscribers during the past quarter, which is the reason for AOL’s move. Its goal is to attract new users and bring back the old ones they lost via the churn.
Despite the continued loss of subscribers, AOL has managed to increase its ad revenue, by 40 percent in the last quarter, which demonstrates the impetus for the free access move, in which subscription revenue will be replaced by ad dollars. Emarketer reports online video advertising spending will triple next year to $640 million, providing AOL with a lucrative opportunity. “There’s a digital advertising explosion, and we are at the forefront of it,” Kelly said.
By Ken Liebeskind
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