Will Hulu-like Video Ads Work on YouTube?

Apparently spurred on by the success of Hulu’s Ad Selector unit, YouTube (s goog) has decided to roll out similar units that will enable users to choose which ads they watch, and will even allow them to skip ads if they don’t find them relevant. But will YouTube viewers actually watch more ads if they have the choice not to?

YouTube’s new TrueView ad unit, which the company will roll out over the coming weeks, according to AdAge, will give users more control over the advertisements they view. The unit will serve up three different ads the user can either choose from, or choose to skip them altogether. With the new unit, the advertiser is only charged for those ads that YouTube viewers choose to watch. For advertisers, that means a more engaged audience, and for YouTube, that means it can charge higher CPMs for ads that users opt-in to watching.

Hulu pioneered this format with its Ad Selector unit, which it filed a patent for way back in 2007. Clearly, Hulu is aided by the fact that it has a good deal of professional, long-form content its viewers will sit through ads to watch. A viewer is much less likely to abandon a viewing session if a mid-roll ad pops up while watching a full-length episode of Modern Family than if he were served up a pre-roll ad before a three-minute promotional clip on YouTube. As a result, Hulu is able to deliver about 38 video ads per month per user, compared to the just four ads a month that YouTube delivers, even though YouTube viewers watch more videos in total.

Despite having more than 2 billion viewing sessions in the month of October, according to comScore (s scor), YouTube and other Google video sites only served about 170 million video ads during the month. Compare that with Hulu, which had a modest 182 million viewing sessions but served 1.1 billion video ads during the same period. That ad growth has enabled Hulu to expect to reach $240 million in sales this year, compared to $109 million last year.

YouTube is obviously trying to boost its own sales and profitability. Some analysts have forecast that the Google-owned site could reach profitability this year, on nearly $1 billion in ad sales, but it’s clear much of that revenue comes from display ads and home page takeovers rather than from in-stream video ads. As a way to boost CPMs, rolling out a selectable ad unit makes sense.

Will YouTube’s viewers opt-in to watching ads against its videos, particularly videos that might not be professionally produced content? If YouTube can’t find a way to crack that nut — getting advertisers comfortable with serving ads against non-pro content, and getting users interested in watching those ads — it’s going to continue to have a difficult time reaching profitability.

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