These days, everyone seems to be doing video advertising — and for good reason. Video ads are a great way to get people to pay attention to your business and attract new customers. In fact, Outbrain reports that up to 87 percent of online marketers are using video!
However, amid all of this enthusiasm for video advertising, marketers have yet to answer a simple question: What sort of video quality do you need to make video advertising work?
For decades, video advertising has been the nearly exclusive realm of gigantic businesses. Generally speaking, these companies have spent tens of thousands to millions of dollars on each ad. For many businesses looking to get into (or get more out of) video advertising, dropping that kind of money on one ad simply isn’t an option.
Until now, no one has really taken a hard look at how much time and money you need to put into a video to drive profitable results. This is unfortunate, because for most marketers, it’s becoming increasingly important to understand the relationship between the effort you put into a video ad and the performance of that ad.
At Disruptive Advertising, my employer, we’ve spent the last six months trying to define the connection between video ad quality and campaign performance on Facebook. Here is what we found out:
Effort vs. results
In our study, our primary goal was to determine what types of ads would deliver the best return on investment (ROI). To ensure the validity of our results, we simultaneously tested them on the same audiences and sent traffic to the same landing pages.
Image ads
Since, from a certain point of view (yes, I’m pulling an Obi-Wan Kenobi, but indulge me for a moment), video ads are just image ads with lots of extra bells and whistles, let’s start with image ads. Image ads are — by far — the easiest visual advertising media to create. Give a decent designer a bit of direction, and they can pump out some high-quality image ads in a matter of minutes to hours. Or you can just buy a stock photo image, upload it to Facebook, and you’ve got an ad.
Image ads were the original online ad, and they continue to be a staple of online advertising. In our test, we used fairly basic image ads like this one to establish a baseline ROI for our study:
Just to get a good feel for things, we ran image ads that pointed to a landing page on our site and Facebook lead ads. At first, it looked like lead ads were our hands-down winner. The cost per lead with our lead ads was about one tenth of the cost of our regular image ads. In fact, the leads from our lead ads came in so fast and at such a low price that it almost overwhelmed our sales team.
The only problem was, while lead ads drove tons of cheap leads, those leads were very poor quality. Even after trying to contact each lead over a dozen times, we only ever managed to get hold of about 10 percent of the leads. As a result, our effective ROI for lead ads was about the same as our ROI for regular image ads.
Slideshow video ads
For our next click up in effort and ad quality, we created what we call “slideshow video ads.” Essentially, we found relevant stock photos and used Adobe After Effects to create videos that were far more visually engaging than our static image ads:
We tested these ads on the same audience as our image ads and sent them to the same landing page. To our surprise, these slideshow video ads outperformed our image ads by a huge margin. We were getting leads for less than one-sixth of our normal cost per lead.
And, to make things even better, our video leads were higher quality than our image ad leads.
Although the cost per click (CPC) of our slideshow ads was about 2x higher than the CPC of our lead ads and the click-through rate (CTR) was one-fifth of the CTR of our leads ads, our conversion rate was 10x higher with our video ads. As a result, even accounting for the additional time and expense of creating these video ads, our ROI for slideshow ads was 40 percent higher than our ROI for image ads during our testing period (the difference has continued to increase since we finished our test).
Short live-action commercial
Of course, no matter how much you doll it up, people still know a stock photo when they see one, so we also tested live action versions of our slideshow scripts. For example, here is the live action version of the previous commercial… starring yours truly!
As simple as these ads were, they took considerably more time and money to script, film and produce than our slideshow video ads. But they also delivered high-quality leads at about the same cost per lead as our lead ads.
Unfortunately, due to the increased costs of production, while these short live action commercials did have a 30 percent higher ROI than our image ads, their overall ROI was lower than our slideshow ads during our testing period.
Live-action slideshow ads
Looking at the title, you’re probably a bit confused. In an effort to have the best of both worlds, we combined live action footage with stock photos and created rather involved, hybrid video ads like this one:
I’ll admit, while making these hybrid monstrosities, I half expected Jeff Goldblum to pop out in a leather jacket and start preaching chaos theory, but it never happened.
Instead, these videos outperformed both their live action and slideshow counterparts. Since the footage was fairly simple, our production costs were lower than the production cost of a short live action commercial, which meant our ROI was around 41 percent higher than we were getting with our image ads.
Long live-action commercial
Finally, we made a set of live action, one-minute-ish ads. We put together engaging scripts, spent days filming in the office, and hired a composer to write some music. Here’s an example of what those ads looked like:
In most metrics, these videos outperformed all of our other videos by a huge margin. The cost per lead for these videos was half that of a slideshow ad and one-14th the cost per lead of our lead ads. However, the production cost for these ads was also much higher, so our ROI was only 43.5 percent better with these ads during our testing period than with our image ads.
Accounting for lifetime value
In this particular study, we were very specific about which ad spend and revenue we would account for in our ROI calculations. However, since our test, the lifetime value of the clients and leads we acquired during our test has continued to increase.
In the months since we finished our test, we shifted most of our advertising spend to our long live action commercials. Over time, they’ve become a major moneymaker for us and are currently producing over 3x better ROI than our image ads.
Measuring video ad quality
So, what did we learn after investing tens of thousands of dollars into making, marketing and testing video ad quality? Well, at a minimum, we proved that video ads really do outperform image ads.
Once you’ve decided to make video ads, however, the type of video ad that you choose to make depends on your business needs. As a general rule, the longer you want to run an ad, the more you need to be willing to invest up front.
Although this wasn’t an official part of our test, while evaluating these different ad types, we found that our slideshow ads started to become less effective after three or four months. However, our long live action commercials continue to drive great results after well over six months of use.
So, if you only want to run your video ads for a few months at a time, investing in a cheaper ad is the way to go. The upfront cost is lower and the ROI is about the same, so why risk more money on a more expensive ad?
On the other hand, if your plan is to run the same video ads for the foreseeable future, it may be worth your while to make a bigger upfront investment in higher-quality ads.
Conclusion
In summary, when it comes to video advertising, we’ve discovered two basic truths:
Despite the increased upfront cost, video ads greatly outperform image ads.
Video ads deliver approximately the same ROI at first, but higher-quality ads outperform lower-quality ads in the long run.
Obviously, there were several limitations to our test, but hopefully, this study will encourage other marketers and advertisers to further define the relationship between video ad quality and return on investment. We will be testing this ourselves with our own clients, so stay tuned!
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