VideoEgg: Rich Media Ads, Pay Only When Users Engage

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Videoegg, the one-time video startup that sort of competed with YouTube and sort of competed with BrightCove (very different companies), has basically transitioned itself into a very robust rich media advertising network. In August 2007 they started selling ad units for Facebook applications. Since then they’ve expanded to include advertising for many other sites, including Meebo, Flixster and others.

Today at an event in New York they’ll announce a business model change, moving away from charging advertisers a cost per thousand impressions (CPM) for their display ads to a new model where advertisers pay only when a users has engaged with the ad. The new product is called AdFrame Brand Response Network – quite a mouthful.

Engagement is defined as clicking on the ad, or hovering over it for a second or two. Once that happens, a new Flash overlay pops up over the content on the page and shows a video, Flash game and other content. Once the Flash overlay is triggered, the advertiser pays a fee of $.50 – $1.

VideoEgg CMO Troy Young says its a much better deal for advertisers, since they pay only when they have a verifiable action by a customer. And publishers, while they don’t get a guaranteed fee per impression, may make more money anyway. VideoEgg says they were able to charge $10 or so CPMs for their ads previously. The new ads, which have engagement rates of .5% – 9%, generate comparable CPMs of $2.5 to way above $10. Plus, Young says, advertisers are much more comfortable buying more inventory under this new model, so there is much less unsold advertising. That last sentence is key to publishers, who care about revenue per page view on average, not just small ad buys at high CPMs.

Microsoft has signed up for the new product as an advertiser, and will use it to distribute videos promoting Microsoft Office (an example ad unit is here). There are also a number of examples on the product home page.

VideoEgg is serious about this business – they’ve got 25 full time sales people out there selling ads for publishers in the network. The company has raised a total of nearly $34 million over four rounds of financing.

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