Since the time they first appeared in 1994, advertisements on the net have been evolving. The earliest advertisements were in the form of banner ads that appeared at the top of web pages. Charges to run banner ads used to vary from US$30 to as high as US$100 per thousand impressions. Those early rates, which were benchmarked on magazine page ad fees, became unsustainable as advertisement space exploded on the net and as advertisers became aware of the low click-through rates for banner ads. Today’s advertisement rates vary from below a dollar CPM (cost per thousand impressions) to over US$30 CPM depending on the site and the ad format. (According to rough estimates for 2013, market average CPM for video is around US$25, mobile is US$3, general display US$2, and premium display US$10).
Over the years, a variety of advertising formats have emerged yielding improvements in click-through rates and ROI. The range of display advertising include top banner, bottom banner, sidebar, side box, button, pop-up, pop-under, floating, expanding videos etc.
Web banners typically are ads displayed within a web page. They may use rich media to incorporate video, audio, and a host of interactive elements. One disadvantage of banner advertisements is they are easy to ignore, and average click-through rates are low (generally in the range of 0.05% to 0.15%).
Pop-up and pop-under ads are displayed in a new web browser window. They infuriate viewers because they clutter the desktop and take time to close. They do however generate significantly higher click-through rates than web banners, and hence command a premium.
These ads float for a few seconds superimposed over the content when the viewer enters a web page. They can be particularly annoying because they obscure the page’s content and often block mouse input as well.
They cannot be ignored because they fully interrupt the viewer’s experience much like conventional TV advertising. The ads may however provide the means to escape such as a close button.
Similar to TV commercials, online video advertising occurs before, during and/or after a video stream. The ads also take the form of display ads with videos, and they usually provide a hyperlink to the advertiser’s website.
The visual and narrative richness of video can enthral and inform audiences in a way that no other medium can. It is not surprising then that video ads achieve the highest click-through rates among all digital ad formats. Viewers are 20 to 30 times more likely to click-through online video ads than standard banners.
YouTube, which has about 1.5 billion logged-in users visiting the site every month (Jun 2017), is an ideal platform for video advertising. As of September 2017, 76 videos on the platform have exceeded one billion views, with 16 of them crossing two billion and three surpassing three billion. Top videos on YouTube include songs by pop music artists like Justin Bieber, Taylor Swift, Ed Sheeren, Katy Perry, Jennifer Lopez, Miley Cyrus, Rihanna etc. and a variety of entertainment videos.
Display ads and in-video ads are the two common formats on YouTube. The display ads appear alongside YouTube videos, or as pop-ups within YouTube videos. The in-video overlay ads appear as pop-ups within videos that are targeted by selected queries. Destination URLs within in-video ads can also go to locations outside of YouTube.
In-stream advertising that plays before or during a video is an increasingly popular format on YouTube. The advertisement plays for a few mandatory seconds, after which viewers may choose to keep watching or skip the rest of the ad.
There are a wide range of pricing models for online advertising, including the ones listed as follows:
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