Even as the economy sputters, marketers continue to spend on video advertising. With analyst and research firms like eMarketer and Forrester projecting tremendous growth in online video advertising, it's no wonder businesses small and large see video ads as the next wave of online marketing.

But do video ads work to turn viewers into buyers and passionate brand advocates?

Online advertising, compared with its offline cousins radio, TV, and newspapers, is attractive because it's directly measurable. And though online video advertising is more measurable than TV advertising, it still poses unique challenges to marketers who want to know whether their video ads worked.

For starters, measurement of the effectiveness of video ads gets bogged down by syndication, viral distribution, viewing via social networks, and many other factors. So how can you find out if your video ad "worked"—an even more important question in tough economic times when marketing budgets are tight?

First, let's take a step back and consider why you advertise in the first place. Businesses tend to advertise for three reasons: brand building, engagement, and lead generation—and often a mixture of all three in each campaign.

  • Brand-building ads are notoriously tough to measure, but there are metrics to figure out whether a campaign has boosted your brand awareness—and video ads have proven to have a very positive impact on brand image.
  • Engagement is easier to measure, because you can tell when someone sees your ad or clicks through to your site after watching it.
  • Finally, lead-generation advertising is also getting easier to measure, because you can tell when someone sees your ad, then clicks through to make a purchase or fills out an online form.

When any new advertising format emerges, marketers are tempted to use tried-and-tested metrics for measurement. However, applying old methods to new models doesn't deliver very accurate metrics.

For example, early forms of search and display advertising focused on measuring impressions, which was borrowed from the TV world. But impressions were not a very effective way to measure ads online, because, as advertisers soon found out, the fact that an ad is displayed on a Web page doesn't mean someone saw it.

That's why search and display advertisers moved to focus on measuring clicks rather than impressions. But even clickthrough is becoming outmoded: Clicks don't measure engagement, reach, and frequency. So, often a campaign with good clickthrough rates ends up not delivering conversion results, because the clicks are too frequently an attempt by users to get rid of the ad rather than engage with it.

Video Builds Brand AND Generates Leads

Unlike other forms of online adverting, video is unique in its ability to both be a powerful branding tool, much like TV advertising, and serve as an effective lead-generation platform.

Video is a whole new world and presents some interesting opportunities, and also some challenges, in measuring effectiveness. First, it's important to remember that video is not an alternative to search and display ads. In fact, video ads can be delivered via search or via a display ad format, in addition to more traditional pre-roll, mid-roll, or overlay formats.

Measuring the success of online video ads should therefore measure both brand and lead-generation metrics: How many people saw my video ad; and what was the quality and relevance of the audience that saw it; and after they saw it, did they click on my Web site to complete a purchase or print out an online coupon that they brought into my store?

Studies have shown that on a Web page that shows both banner ads and video ads, video ads command 2-5 times higher engagement and clickthrough rates than banner ads that have the same size and placement. The reason for this is simple, and it's the same reason YouTube is so popular as a destination: People love video and will watch it even if it is an advertisement. (People may also be trained to watch video ads, after having watched TV ads all their lives.)

Like most brand-based marketing techniques, online video advertising today is sold on a CPM basis (cost per thousand impressions). But some media sites are beginning to sell video ad placements based on CPA (cost per action), based on online video's lead-generation capabilities.

Branding Metrics

Unlike search advertising, which serves up only a small text box in search results, video advertising has the ability to communicate a lot more than just the name of the business and what it does.

Branding metrics tend to measure the frequency, reach, and impact of the ad on its audience:

  1. Ad impressions: This metric borrowed from the world of display ads is useful for knowing how many people were exposed to the video ad, but often it is an inaccurate measure of how many people saw the ad. Ad views, described below, is a more appropriate metric for video ads.
  2. Ad views: An ad view is a sufficiently long view of a video ad to ensure the message was delivered. Ad views should ideally be measured as entire ad views, though many publishers report anything more than 50% as an ad view. Unlike a banner ad that communicates a brief message the moment it is viewed, video ads often deliver the message during a 15-30 second interval, which is the length of a typical online video ad. Advertising services and publishers that report video ad views are telling you exactly how many people saw the entire ad, which is very valuable when measuring brand impact.
  3. Ad frequency: Ad frequency measures how often a person sees a particular ad within a given period. Advertisers often want to cap frequency so as not to cause overexposure. On the other hand, sufficient frequency is a necessary element of brand recall and therefore needs to be an important measure of most campaigns.

Engagement Metrics

Video ads have a significantly higher ability to convey audience engagement compared with search or banner ads. Here are some of the audience-engagement metrics that can be tracked for online video ads:

  1. Clickthrough rate: This easy-to-measure metric is the most basic form of an engagement measurement.
  2. Ad replays: This metric reports how many views of the ad resulted in a replay. A replay usually indicates either that the user is interested in the product or service being advertised and wants to see/hear about it again, or that the ad was fun and engaging and the user wants to see it again. Both are important considerations of engagement.
  3. Ad pauses: An ad pause is reported when an ad is paused. This is an important metric because it often indicates that users are engaged and are pausing the ad to view it after their current online activity. To be truly accurate, a pause event should be recorded at the unpause, because you want to make sure the person has come back to the ad.
  4. Ad listens: Most Web sites require video ads to be played with the sound turned off so as not to distract or annoy the user, who likely came to the site for some other purpose than watching the ad. Video ads are usually set up to have the sound come back on either when a user mouses over the ad or clicks on the unmute button. Either indicates that users saw enough of the ad to want to actively listen to it.

Lead-Generation Metrics

Video ads are excellent vehicles for direct marketing and lead generation. Since many ads are now delivered via Flash, ad services are now starting to add lead-capture and other click-to-action features to video ads—such as an email link, chat button, coupon downloads, etc.—all of which either directly capture leads or indicate the likelihood of interactions' becoming leads.

Most click-to-action features require viewers to fill in their email address on a small popup window, during or after the video ad plays, so the advertiser can get in touch with them. The range of actions can vary. For example:

  1. Email, SMS, IM, and chat allow audiences and potential customers to contact a business electronically while still watching a video ad or clip.
  2. Playing a longer version of the ad (the infomercial option) allows audiences to engage at a deeper level by providing more information than is feasible for video advertising during typical Web browsing experience.
  3. Coupon redemption captures user interest at its peak by enabling consumers who see a video ad to take action on a special offer or share it with friends.

Click-to-action metrics are still challenging to measure, because this is an emerging area of video advertising and no standards have been developed yet.

Learn to Measure, Measure to Learn

Online video advertising offers a fascinating array of opportunities to deliver value to advertisers and viewers alike.

When advertisers want to find out whether their video ads are working, rather than getting caught up in a specific metric they should capture different metrics for different campaigns—whether a branding, engagement, or lead-generation campaign. Sometimes, you'll need to capture many metrics to get an accurate picture of whether a video ad is "working."

In today's economy when every penny counts, online video offers a treasure trove of measurable results.

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Diaz Nesamoney is founder, CEO, and president of Jivox (www.jivox.com), an online video advertising service for small and medium-sized businesses.