Video Platforms Are Inventing New Ad Slots Faster Than Ever, and Leaving Ad Agencies and Viewers Behind

Ads you can't skip even after paying for a VIP membership — shot by the show's own crew rather than an ad agency, acted by "characters" from the show, with the idea usually tied to the plot.

What made The Truman Show (1998) so memorable wasn't only its famous dystopian premise. It was also its satire of home shopping.

"Look, honey, the supermarket has a free gift — it's called the Chef's Pal. It chops, grinds and peels, does it all, never dulls, and it's dishwasher safe!" Meryl, the actress playing "Truman's wife," would turn to the camera without warning and read out a sponsor's ad.

Home shopping was at its peak in 1990s America; hardly anyone pays attention to it now. But one thing hasn't changed: if you want to watch anything, the ads keep getting harder to escape.

From last year's The Mystic Nine to this summer's Candle in the Tomb, Princess Agents and Lost Love in Times, viewers on video sites could hardly miss it — even after paying for a VIP membership, those 30-to-45-second segments in every episode, performed by characters from the show and labeled "light moments," "brainstorm time" or "mini-theater," were everywhere.

Where Did the "Mini-Theater" You Can't Skip Come From?

On May 10, the temperature at Hengdian World Studios passed 30 degrees Celsius for the first time that year. More than 30 crew members from The Advisors Alliance started work there at 6 a.m. — but that day they weren't shooting the show. They were shooting ads.

Filming on The Advisors Alliance had already wrapped, and the premiere was still more than a month away. Now the crew had to shoot, all at once, the ads the industry calls "creative mid-rolls."

What sets a "creative mid-roll" apart from an ordinary video pre-roll is that the show's own crew shoots it, not an ad agency. The actors are "characters" from the show, and the idea is usually tied in some way to the plot.

Feng Jian and Xu Mo were two new faces on the Hengdian set that day. Feng Jian represented Youku and supervised production of every "creative mid-roll" for The Advisors Alliance; Xu Mo came from the ad agency Isobar, and represented the interests of its client, Coca-Cola.

The historical drama, made on a 400-million-yuan budget, went on to earn strong word of mouth: an 8.1 rating on Douban, a finale that broke 1% in the TV ratings, and more than 6 billion views on Youku, its exclusive streaming platform. It had also pulled in plenty of advertisers early on — well-known brands like Audi, Procter & Gamble and Coca-Cola, along with internet companies like Renrendai and Meiyou.

Eight brands in all bought "creative mid-roll" slots on The Advisors Alliance. Coca-Cola was probably the most famous of them, and the first to start shooting.

Summer is Coca-Cola's peak marketing season and the busiest stretch for the brand and its agency. From the "Name Bottles" and "Lyrics Bottles" to this year's "Secret Word Bottles," Coca-Cola tries a new trick every year to win over young people. Xu Mo's job was to help the brand find the right places to run the "Secret Word Bottles."

"Video sites keep getting bigger and are basically eating TV's share. We're gradually realizing that there are a lot of people we simply can't reach anymore. Some don't watch TV at all, and some buy a VIP membership online so they can skip the ads," Xu Mo told QDaily. Most young people, he said, can't sit through a 90-second or even 120-second ad. "So we're looking at new ad formats."

So this year, Coca-Cola tried "creative mid-rolls" for the first time.

On shoot day, the crew brought in a commercial director who knew ad production. The leads were Sima Shi and Sima Zhao, characters Coca-Cola had asked for by name, paired with the "costumes, makeup and props" and the "multi-camera setup" that The Advisors Alliance's publicity often boasted about. Feng Jian said the client was "blown away" on set.

"[Coca-Cola's] two spots were shot over two separate days, about six hours each," Feng Jian said. In four days they shot 11 creative mid-rolls for the eight clients, finishing in the small hours every night.

The Sima brothers turn up halfway through The Advisors Alliance, and Coca-Cola's creative mid-rolls went out alongside them. In the "Bullet Comments" spot, Sima Shi and Sima Zhao square off holding "Secret Word Bottles"; in the "Letter Delivery" spot, Sima Shi, away on campaign, flirts from a distance with his wife Xiahou Hui using the slang printed on the bottles.

Playing off the plot is what makes these ads work. Renrendai's "Birthday" spot throws a seventh birthday party for the strategist Guo Jia — a joke about the character dying in episode seven. Wukong Financial's "Chicken Ribs" spot comes out of episode 21, where the brilliant, arrogant Yang Xiu is executed on Cao Cao's orders over a remark about "chicken ribs."

Creative mid-rolls first showed up in Death Notify (《暗黑者》), a 2015 web drama. The series ran 26 of them, more than half for made-up products with no advertiser behind them. "Death Notify didn't actually sell that well — you couldn't explain to people what it even was," said Bai Yicong, the show's producer. "Back then we shot a lot of fake ads, things like 'Dake English,' just to use the format to show clients what we meant."

Many people consider Bai Yicong the inventor of the creative mid-roll. He started as a traditional screenwriter; the first production he worked on was Zhang Jizhong's 2002 adaptation of Demi-Gods and Semi-Devils. In 2014 he founded his own company, Shili Zhizuo, and Death Notify, which ran on Tencent Video, was his first job as producer.

"Back then none of the platforms were making money yet, and production companies had very few revenue streams of their own. I remember thinking: if the platforms all went under, who the hell would production companies sell to?" Bai also figured that if video sites lost money on a hundred shows and his show didn't, that would make him more competitive.

Strictly speaking, the format wasn't invented for film and television. "Comedies already had something like this — the 'Laughing Half-Step Lunacy' bits in All's Well, Ends Well Too (《花田喜事》) and Flirting Scholar. But we were the first to make money off it," Bai said.

Trace it back further and mid-roll ads were already brewing in Dragon Gate Escort Agency (《龙门镖局》), a 2013 comedy written by Ning Caishen. In the short mid-roll films built into each episode, most of the brands were invented by Ning for laughs; a few real sponsors were mixed in, but more often the segments worked as a bonus thrown in with product placement.

A clip from Flirting Scholar

The Mystic Nine, which ran in the summer of 2016, was the turning point. Produced by iQiyi as a prequel to The Lost Tomb, and again produced by Bai Yicong, it was the most-watched original web series of that year. Every episode had its own take on the "brace yourself, the show is about to resume" mid-roll; the ads were later cut together into a standalone reel that drew tens of millions of views on its own.

Over the next six months or so, creative mid-rolls spread fast across the major video platforms. Almost every show expected to pass a billion views was selling them. The entertainment research firm EntGroup estimates the mid-roll ad market was worth about 800 million yuan in 2016.

A year earlier, almost no one had seen it coming.

According to Bai Yicong, the platforms at the time "didn't think much would come of it" — "Tencent didn't pay it much attention back then, and neither did iQiyi with The Mystic Nine."

It Made Money, So the Video Sites Took It Away

The first mid-roll ads on iQiyi ran in The Mystic Nine. Back then the production company still embedded the ads in the episodes itself and handed over the finished files.

That arrangement is impossible today. The major platforms now hold the right to sell creative mid-rolls to advertisers, and they hold it tightly.

"Right after The Mystic Nine, the platforms sealed off that opening," Bai said.

Yuan Jialu, general manager of iQiyi's flagship-drama marketing center, told QDaily that "Original Inserts" have become a major revenue source in top-tier shows and have lifted overall marketing income from flagship dramas.

Zhang Xuan, head of drama marketing at Youku, put it this way: "These new sellable formats add to our existing revenue — they might raise earnings by something like 30%."

In the Death Notify days, one creative mid-roll sold for 500,000 yuan. Prices have since risen several times over. QDaily has learned that Youku now gets an average of 1.5 million yuan per spot, and that for shows with a guaranteed floor of 1.5 billion views, iQiyi asks 2 million to 2.5 million yuan per episode. One brand said mid-roll prices on some flagship shows have already passed 3 million yuan.

iQiyi calls creative mid-rolls "Original Inserts," short for "native creative insert" — a rename that also looks like a way of claiming ownership of the format.

Plenty of others tried to carve up this untouched ground: platforms, production crews, and agencies like Century Kunpeng, whose main business is product placement inside shows. Nearly everyone in the industry had heard about the lucrative new line of business, and in the end the winners were the platforms, the ones who could "gather the clients in one place." "They really are under a lot of pressure to earn their costs back," said Li Kun, general manager of Century Kunpeng's marketing center.

Take The Advisors Alliance. According to Sohu Entertainment, Youku, as the exclusive platform, paid 8 million yuan per episode. The 42-episode first half alone cost 336 million yuan; add the second half, Growling Tiger, Roaring Dragon (《虎啸龙吟》), and the total came to at least 600 million yuan.

At 1.5 million yuan a spot, creative mid-rolls could bring Youku 63 million yuan from The Advisors Alliance alone — though it does have to pay the production company a cut as a production fee.

Why Does Ad Innovation Have Nothing to Do With Ad People?

Ever since The Lost Tomb, Zhang Jieying, senior media planning director at Isobar, has worried that the money she spends buys less and less.

The Lost Tomb, a season-based drama adapted from Nanpai Sanshu's novel of the same name, went online in June 2015. Using an early-access perk for VIPs, iQiyi signed up 2.6 million new paying members in five minutes. According to iQiyi's White Paper on the Paid Online Video Industry, the paid video market passed 1 billion yuan in the third quarter of 2015, up 256% from a year earlier.

"We'd actually raised this with the platforms before: you keep adding VIP members, so what happens when nobody sees the ads?"

To hold on to advertisers, video platforms are hunting for new ad slots with unprecedented zeal.

In little more than a year, iQiyi's ad lineup went from a structure built mainly on pre-rolls to "11 major categories and roughly 50 kinds of ad product." Youku, which used to have pre-rolls and title sponsorships, added five or six new sellable formats in six months; according to Zhang Xuan, those new formats already account for a third of Youku's flagship-drama ad revenue.

"VIPs can see them" is the main reason they have become a scarce resource.

The most widespread of them, after creative mid-rolls, is something called the "screen bar" (iQiyi, wanting as usual to be different, calls it the "Band-Aid").

A "screen bar" looks like the traditional corner logo on a video, but its copy plays off the plot, pulling the viewer further in.

"Creative mid-rolls and screen bars both have very high ROI [return on investment]," Zhang Jieying told QDaily. Her team compares a mid-roll against a 15-second pre-roll, another video format, and the mid-roll reaches more people. "And its surroundings are relatively clean. There are four or five pre-rolls stacked up now; there's only one creative mid-roll."

More and more brand clients will pay for these formats. Money that used to go to pre-rolls now partly goes to "creative mid-rolls"; budgets once spent on app splash screens, news feeds and PC homepage exposure are being saved up for "screen bars" instead.

Placing a single "screen bar" can be more hands-on than you would expect.

No technology can automatically find the moments that talk back to the plot and the characters' lines, so someone has to pick the spots by hand and then write the copy. And because of copyright, the file for the newest episode can't get out early, which means staff see a finished episode at almost the same moment ordinary viewers do. "Our creative team really had it rough during that stretch — every day we had to watch the show, record it, find the right moment, then make the material and hand it to the platform to run," Zhang Jieying said. One screen bar takes at least one account executive, one copywriter and one designer, and the client stays late along with them.

Even after labor costs, though, these new formats — priced in the hundreds of thousands to millions of yuan — leave video platforms with very high margins.

Like the creative mid-roll, the screen bar seems to have been born by accident.

If you watched a lot of web dramas over the past year, you probably remember a brand called Eastroc Special Drink. From The Mystic Nine to In the Name of the People, its ads were everywhere.

Eastroc Special Drink is a Chinese vitamin energy drink, launched in 1987 and turned from a state-owned company into a private one in 2003. From 2013, Eastroc pushed out of Shenzhen into the national market and began spending far more on entertainment marketing.

"It started as chairman Lin Muqin's idea — make the content and the ads talk to each other. In 2016 he called in a few video sites and asked, 'Which of you can pull this off?'" Luo Yufeng, Eastroc's marketing director, who used to work in JDB's marketing department, told QDaily that iQiyi took the job first and built the new ad slot.

We checked Luo's account with iQiyi. Press releases from Youku and other platforms likewise credit Eastroc as the originator of the "screen bar."

"When people think of The Mystic Nine, the first brand they think of is Eastroc." Figures Luo Yufeng provided from the company's follow-up research show that in 2016 Eastroc's brand awareness rose 50% and sales rose 30%.

"A screen bar used to cost just tens of thousands of yuan to make; now one runs to hundreds of thousands. And it's still hard to get a slot on a good show," Luo said.

As the hot slots on top-tier shows get more expensive, Eastroc is already testing newer formats. This year it worked with Tencent Video on pause-screen ads and progress-bar ads; Youku launched its "next episode" preview ad for the first time on The Advisors Alliance, and Eastroc was again the first to try it.

The slot inside the next-episode preview has a very formal name: the trailer overlay. Viewing data from The Advisors Alliance shows trailers get 10-20% as many views as the episodes themselves.

Youku's Zhang Xuan thinks content marketing as a whole is moving upstream. "Honestly, for a format like the creative mid-roll, which has to be built into the show, people downstream in the ad business just can't do it." Interactive formats like screen bars and preview ads also depend more on the platforms' in-house development.

Still, unlike traditional video pre-rolls, these new formats can't yet be placed automatically or at scale.

Companies that use artificial intelligence to identify scenes inside video have already appeared. Viscovery, for one, says it can pick out "romantic scenes" across hundreds of films and shows and match them with ads for chocolate or red wine.

Its most recent job: in two days this July, it placed TV commercials and corner logos for Ele.me at 8,785 points across 114 shows. Liu Zhikun, the company's VP of operations, said the advantage of the technology is that it can reuse the same material and the same slot over and over, so the ad still earns its keep when a show goes into reruns.

iQiyi's Yuan Jialu says they too can now tag placements in bulk by generic scene — a meal, a confession of love. "It's just that compared with tagging by hand, machine tagging loses a bit in how closely the ad fits the content."

Even the creative mid-roll, the hottest format right now, could end up standardized into "one, two, three, four" mid-rolls in a single episode, making the media environment messier still. Tencent Video's Candle in the Tomb has already packed two mid-rolls into one episode.

"Quality is bound to drop. Then it comes down to whether there are new formats and new ways of working together," Zhang Jieying said. "This year we're seeing very high ROI, a lot of spillover, but we're also warning clients that next year's may not be as high."

Cover image from Douban.