The Answer to YouTube's Ad Strategy? A Skateboarding Dog

People can't seem to get enough of skateboarding dogs or cats that play the piano, and American Apparel is capitalizing on the fascination.

American Apparel overlay ad in Puppy vs. Mirror video
American Apparel overlay ad in Puppy vs. Mirror video

To plug its canine clothing line, the retailer has placed pop-up advertisements in more than 100 pet videos — including this clip of a skateboarding bulldog named Tillman — on Internet site YouTube.

It's a marketing strategy that could dispel critics' claims that Google-owned YouTube , which started allowing advertisers to target specific videos earlier this month, would have trouble reigning in ad revenue for a large amount of its content.

It's also a more finely tuned tool for retailers, who are trying to get their message out on new platforms.

"Many people like dance, but only a small percentage of them would read Web sites solely dedicated to the topic," said Ryan Holiday, an American Apparel Web marketing executive.

Companies such as Pepsi , L'Oreal and Target have invested in overlay ads — messages that temporarily pop up on a bottom fraction of the video screen — since YouTube started offering the service in 2007, said YouTube spokesperson Aaron Zamost. But American Apparel is one of the first companies to take advantage of the site's more targeted approach.

The retailer, known for its basic-style clothing, has placed ads in at least 1,000 employee-chosen videos since it began advertising in clips on the video-sharing site six months ago, Holiday said. Along with pet videos, the company has used cheerleading and sports clips to advertise athletic socks, and nail polish tutorials to promote its nail polish line, which launched last week.

It has marketed its children's line during clips such as "Charlie Bit My Finger," a video in which baby Charlie repeatedly chomps down his older brother's right index finger, to the tune of more than 140 million page views.

"We think there's an advertiser for every video, and a video for every advertiser," Zamost said.

Karsten Weide, head of advertising research at IDC technology research firm, said video overlay ads are an effective way to get consumers' attention without causing too much annoyance — a not-so-easy feat on a medium where viewers are used to no interruptions.

Companies track the ads' click-through rates — the percentage of readers who click on a respective advertisement — but are reluctant to share the results, citing a desire to maintain a competetive edge.

But Weide said he suspects they garner more success than traditional display ads, which have an average click-through rate of less than 0.2 percent, because of their ability to engage consumers.

It also helps that YouTube allows advertisers to target specific videos, because companies often view this marketing technique as a risk to brand safety — for example, if an SUV ad ran during a video about global warming, Weide said.

"The more you can target your ads and the more you can control against which content an ad runs, the better it is," he said.

But unlike the targeted ads people see while searching Google, viewers who enter the YouTube site do so for entertainment purposes — not because they're looking for information, said Jack Trout, president of Trout & Partners, a marketing consultant. Often times, that means they're less receptive to advertisements.

"I don't know whether or not while I'm watching a cat skateboard, whether that's really going to get me excited enough to buy cat clothing," Trout said. "The Internet is a work in progress from a marketing point of view … I don't think anybody really knows exactly how well any of this stuff is going to work over a period of time."

Google would not disclose how much revenue it generates from YouTube ads, but Citigroup analyst Mark Mahaney estimates they will account for $500 million — or less than 5 percent — of the company's total revenue in 2010.

Premium content competitor Hulu also allows advertisers to run overlay messages, and many consider the site a more credible advertising medium than YouTube, Weide said. But analysts agreed that it's a step in the right direction for the amateur video site.

"A criticism that we've heard for some time is that advertisers don't want to be on videos of dogs on skateboards," Zamost said. "I'm not saying that this is the monetization solution…[but] obviously we smiled when we saw this campaign run on the site."

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