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Advertising Strategies

http://www.nytimes.com/2011/10/30/business/on-hulu-and-youtube-commercials-by-multiple-choice.html?_r=1&ref=onlineadvertising

Recently in class, we have been learning about online advertisements from companies and how each search engine or other website makes revenue off of these ads. Just out of curiosity, though, I was wondering about how ads on YouTube or Hulu or other video-oriented sites generate revenue: is this process just like regular television where commercials are paid just to air, or is there another process similar to that of putting different prices onto each advertisement according to when in airs on the show and how many viewers actually watch it, especially when there is an option to skip over the advertisement (I know that YouTube does this) or when an “ad swap” is offered, like on Hulu, where the user can choose which commercial that he prefers to watch out of a choice of three.

When observing such options, many questions arise about the topic. In Youtube’s case, what happens when the commercial is skipped? According to the cited New York Times article, the company sponsoring the commercial is only charged when the viewer chooses to watch the advertisement, raising the question of how each company can get viewers to watch their ads. We mentioned in class that certain search engines become familiarized with each user and some algorithm that matches certain search results that may be compatible to a specific user base on previous searches. A similar algorithm is probably used to run the ad only for potentially relevant viewers ultimately saving the company money (since the company pays money to run the ad).

We can also analyze the “ad swap” option offered by Hulu. This creates a more ideal setup for both the viewer and the company that owns the commercial because the viewer can now pick a commercial that he is the most interested in without having to watch through a commercial that he does not want to: i.e. a vegetarian would probably not be interested in seeing a commercial advertising Outback Steakhouse. This creates a situation that is analogous to the algorithm used for YouTube’s ads, where each company pays less air their advertisements only to those who are interested. In fact, this strategy employed by Hulu is probably better because the viewers themselves can pick the ads that they want to see instead of getting an ad chosen for them that they possibly would want to watch. It is interesting to see how the advancement of advertising strategies on the internet.

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