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Ads 2.0: Beyond the repurposed TV spot

With Internet video taking center stage, it's time to put those often-pesky online video advertisements in the spotlight.

If nothing else, Google's $1.65 billion acquisition of video-sharing site YouTube illustrates how hot the online video market is.

As more and more people watch video on the Internet, Web sites are increasingly placing ads with video. Often, it's their only source of revenue.

So far, the ads aren't much different from your typical television ad. But experts say that will change soon as advertisers become more Web-savvy. And change they must, some argue, unless advertisers want to drive Web surfers away and threaten the lucrative online ad market.

What types of online video ads are out there now?
The two main kinds are so-called in-stream ads and in-banner ads. With in-banner ads, the video either starts playing when a Web surfer arrives at the page (which is called host-initiated), or when the surfer moves the curser over a static ad or clicks on it, also referred to as viewer-initiated.

With in-stream advertisements the ad can play before the video clip plays, a placement known as pre-roll; after the video clip plays, called post-roll; or somewhere in the middle of the video clip, known as a mid-roll or interstitial ad. Most ads are pre-roll. Video ads are typically 15 seconds or 30 seconds in length.

Are there any online video ad guidelines?
The Interactive Advertising Bureau has guidelines, including stipulating that the content "may include streaming video, animation and gaming in an interactive environment." The trade group also recommends that pre-roll and mid-roll ads be no longer than 30 seconds and sets no limits on post-roll ads.

However, many ad experts say 30 seconds is too long, particularly for video clips that are often a minute or two in length. "When I want to access one and a half minutes of content and I'm forced to watch a 30-second ad beforehand, it's intolerable," said Tim Hanlon, senior vice president of Denuo, the consulting arm of the advertising agency Publicis Groupe. "It doesn't seem like a fair ratio."

Pam Horan, president of the Online Publishers Association, added: "The point at which a consumer has patience for an online video ad is 10 seconds."

The IAB also recommends host-initiated play, with controls to let the viewer stop and start the video ad and raise or lower the volume. The IAB guidelines recommend disabling any fast-forward option, meaning viewers have to watch the video ad in its entirety before seeing their desired video clip. That's another unpopular aspect. "The inability to skip through those ads, you feel like you're being held hostage," said Hanlon.

What do the video ads look like and do they work?
Unfortunately, they mostly look like television commercials. "Replicating television online doesn't work," Hanlon said. And the ads are repeated too often because of a limited amount of online video ad space, he said.

The video ads need to be more targeted and more interactive, experts agree. "What's out there isn't leveraging the interactivity of the medium," said Sheryl Draizen, senior vice president and general manager of the IAB. "The beauty of being online is your ability to create dimensions to your advertising, to go deeper." For example, a Web surfer could get additional information on the product advertised, communicate with the merchant or participate in a survey, all by clicking on the ad or a "hot spot" area in the ad that has a link to another Web page, experts say.

"Ad agencies should shoot for online and TV at the same time and use outtakes and funny bloopers" for the online ads, said Gokul Rajaram, a product manager at Google AdSense.

Eventually, video ads will be targeted to the behavior of the Web surfer. For instance, a consumer who searches for used cars on a classifieds Web site but then goes to read a news site can be served up video ads for cars on that latter page.

What's Google up to?
Google offers so-called click-to-play video ads where an advertiser can provide Google a static ad image and some related video and Google will create a video ad that will appear on its AdSense Web site partners who choose to host video ads, Rajaram said. "We are only going to use user-initiated video in banner ads," he said.

Google is testing post-roll and mid-roll video ads on some of its premium content on Google Video that viewers otherwise would be charged for. Viewers can see on a streaming bar where in the clip the ad will show and they can skip it, in which case the advertiser does not get charged, Rajaram said. Viewers can also post comments about the video or the ads, which tend to run 15 seconds. The ads are contextually targeted, like Google's text-based ads, so, for example, a sports ad runs with sports-related video content.

The company also is testing interactivity features in its online video ads, Rajaram said. "It's a way of getting users more engaged," he said. "We are starting to look at all kinds of things to improve the interactivity."

Google conducted a test with MTV video content in which Google packaged MTV shows with related advertising for some of its AdSense Web publisher partners. The ads played in the middle of the clip. Google will have a similar ad distribution offering widely available early next year, Rajaram said.

Meanwhile, Google is mum on exactly how it plans to make money off the viewers that go to the popular YouTube site.

Is there room for start-ups in this growing business?
What's the market potential for online video ads?
While video ad spending is predicted to reach $775 million next year, from $410 million this year, it still only represents 4.2 percent of all online ad sales in the U.S., according to eMarketer.

"Video advertising will grow faster than even paid search," said David Hallerman, a senior analyst at eMarketer. Eventually, video ads will even be accessible via search engines, he said.

"The potential for the use of video for advertising online," Hallerman added, "goes far beyond the effectiveness, if not dollars, spent on television because of all of the interactive ways it can be woven in."

CNET News.com reporter Michael Kanellos contributed to this article.