Times are good for ad-supported online content. YouTube has put transparent ads on the bottom one-fifth of videos from its content partners. And The Wall Street Journal, one of the few paid-content success stories, is considering making its online version free.

Most consumers think that viewing ads in exchange for quality content is fair, according to IBM‘s "The End of Advertising" report, published in August 2007. More than six in 10 consumers IBM surveyed said they preferred ad-supported online content, while 28% preferred paying for ad-free media.

However, "don’t expect consumers to spend incrementally on different devices," said Bill Battino, study co-author and communications sector managing partner at IBM Global Business Services, in a Brandweek interview. "People want to pay for content once and then move it" to whatever device they like.

An Associated PressAmerica Online study conducted with Ipsos Public Affairs noted that 71% of US online video viewers polled would rather watch online videos free in exchange for pre-roll ads.

Preference for Free Online Video with Ads vs. Paid Online Video without Ads among US Online Video Viewers, July-August 2006 (% of respondents)

As for YouTube in particular, a December 2006 Wired magazine reader poll estimated that 63% of US Internet users would tolerate banner ads there, and only 14% would stomach a short pre-roll ad before each video clip.

Type of YouTube Revenue Model that US Internet Users Would Tolerate, October 2006 (% of respondents)

Pre-roll ads were not favored by most users. YouTube may also have felt that banners were not the way to go, with viewer attention on the videos themselves and not necessarily on other parts of the page. The transparent ad overlay at the bottom of the video is likely a good compromise. It doesn’t delay video playback like a pre-roll, and it’s directly on the video, not dependent on viewers looking to other parts of the page.

Further, these ads appear on videos only those of partners, since YouTube does not own the copyright to many user-posted pieces. Given the limited scope, size and intrusiveness of the ads, YouTube viewers may well accept the ads.

Don’t count on the transparent ad being the final form, however.

"Let’s put YouTube’s new video ad format into context—while it’s likely a good experiment, it’s still an experiment," said eMarketer senior analyst David Hallerman. "At this stage, what sorts of advertising the audience will accept and what formats appeal most to advertisers remains an open question. However, the more experiments the better."

Via eMarketer