YouTube is the most popular destination for user generated videos on the internet. It generates a lot of ad revenue for Google and content creators as well as gives small business owners a place to showcase their marketing videos and advertisements. YouTube has announced they will start testing "ad pods" with two ads back to back to increase ad viewership and improve the customer experience.
Paying to have an ad shown during a YouTube video watched by millions is far cheaper than paying for a television spot with equal viewership. This is good for small business owners. The problem is that the ad breaks aren't as appreciated by the audience watching the video. This leads to a lot of viewers skipping ads when possible, especially when it interrupts the middle of a video they're watching. By showing two ads back to back at the start of the video, viewers have the options to watch their video with fewer breaks or uninterrupted.
As Google explained in a post about the YouTube ad test, "Our recent user experience research suggests that in addition to factors such as the length of ads, viewers are quite sensitive to the frequency of ad breaks, especially during longer viewing sessions. Through this research, we also learned that fewer interruptions is correlated with better user metrics, including less abandonment of content and higher rates of ad viewing."
YouTube users would still be able to skip either of the ads in the ad pod, but watching the ads reduces the likelihood of seeing more ads during the video they watch. In theory, the system creates an incentive for viewers to watch the two ads at the beginning of the video so they can get it out of the way. This is better for the content creators, who gain more revenue from ad views and it benefits advertisers since viewers have a reason to watch the ads at the beginning rather than instinctively skip every ad at the start of a video.
The test of the new experience will start on the desktop version of YouTube this year, with a follow up on mobile devices and TV screens in 2019. Everything makes sense in theory, but there's the possibility that it could affect YouTube viewership rates if people don't like the change. This is especially true for mobile devices, where users may need to get to the content they want to see quickly.
YouTube isn't making this change based on theory alone. Google has done a large amount of research into the issue. Their early research suggests that the ad pod system will have significant benefits. Early experiment results show an 8-11 percent increase in unique reach for ads (which is good for Google and content creators) and a 5-10 percent increase in frequency for advertisers (which is good for small business owners). There were also no impacts to Brand Lift metrics which suggests there are no negative ill effects for the ads that are shown during the ad pods.
Viewing both ads in an ad pod doesn't mean there won't be any ads later in the video, but it does significantly reduce the likelihood of more ad breaks in the video. According to the tests, users who watch both ads in the pod will experience up to 40 percent fewer interruptions by ads in their viewing session.
It will take some more large-scale testing before it's clear how the YouTube audience will respond to these changes. Once these tests are complete, Google will have better data on how the ad pods affect viewership. By the time the product launches officially, they will probably have some success stories from specific businesses that saw increases in ad viewership from being placed in ad pods.
For more recent news about online advertising, read this article about the new ad formats being introduced to Instagram.