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Mo Al Adham is CEO and cofounder of mobile video discovery app Telly.

Digital video companies like YouTube are not living up to their full potential when it comes to generating revenue. Despite the fact that the company has tripled its revenue, YouTube could be leaving tons of revenue on the table by not innovating on its advertising model beyond traditional pre-roll ads. In the increasingly mobile-first world, people’s attention spans are shorter, and they are less likely to tolerate an interruptive ad before watching a quick, short clip on their phones.

Advertisements are an essential part of online video, but done the wrong way, they can become a huge annoyance to consumers. No one enjoys a 30 second pre-roll ad blocking the video they want to watch, especially on their phone. The fact that a whopping 70 percent of consumers skip pre-roll ads after the required five seconds proves this. But what if instead of watching the same boring ad, you chose to watch a promoted piece of content after your video that was tailored to your interests and something you actually wanted to watch?

Here’s why digital video companies need to rethink their revenue models.

Interruptive pre-roll ads have a negative impact on the advertised brand

You know the ads that I am talking about. You go to YouTube and find the video you want to watch and click play, but instead of watching the video you find yourself watching a 15-30 second car advertisement, waiting anxiously for the “Skip Ad” overlay to appear. Gone is the instant gratification you were expecting, and the enjoyment of watching the video is subdued. This is especially frustrating on mobile, or when you want to watch a series of videos and have to watch the same ad again and again.

These intrusive, in your face advertisements are not well received by the viewer, which negatively impacts the advertiser. Contrary to a Harris report that surveyed 2,516 adults in the U.S. ages 18 and older in October 2012, a more recent Nielsen survey, which teamed up with Sharethrough came out in March 2013 and found that consumers were, “more likely to have negative brand opinions after being exposed to the pre-roll than the native ads.”

Native ads are content that is crafted based on users’ past activity and fully integrated into the site experience, creating a natural and more seamless user environment for the viewer. The Nielsen study reveals that forcing ads onto consumers has backfired. While it may give the brands a wider net of exposure, it is having a negative impact as well.

The fact that 85 percent in the earlier Harris report found native ads misleading, speaks to the innovation that needs to happen by advertisers and consumer video sites like YouTube. Namely, brands need to produce meaningful content that users want to engage with and consumer properties need to do a better job of showing that content in the right context and with the right user controls.

Consumers want control over the content they watch

Other digital video services need to take a clue from Hulu, which provides a more consumer friendly ad experience. With their service Ad Selector, which allows users to select which ad they want to watch, Hulu found that the power of choice drives nearly 2x higher effectiveness metrics when compared to a standard pre-roll. A second service, Ad Swap, similarly allows users to switch to a more relevant ad and let Hulu know if the ad was relevant to them or not, creating a more tailored experience for next time.

People are recognizing the advantage of Hulu’s ad personalization, going as far as saying that Hulu would have been a better deal than Tumblr for Yahoo as the company looks to expand its advertising network. While still lagging behind, YouTube has been testing a Hulu-esque pre-roll ad chooser, which was a smart move seeing as Hulu found that ad control improved brand favorability by 27 percent and purchase intent by 35 percent. But even with these high growth stats, Hulu’s ad model is only halfway there.

Digital video’s mobile advertising model is broken

According to a recent Cisco study, Two-thirds of the world’s mobile data traffic will be video by 2017, and a recent Adobe study found that users are the most actively engaged when it comes to consuming ads on tablets and smartphones. With more people watching videos on mobile, a new advertising solution is in order.

More and more companies are realizing this and are searching for creative ways to raise awareness via mobile video ads. For example, Lowe’s the home improvement store created a series of eight home improvement/DIY Vine videos #lowesfixinsix creating a perfect medium between brand advertisement and consumer insight.

Pre-roll ads just don’t make sense for advertisers or consumers, especially on mobile. Having to watch a 30 second ad, which was created for television in the first place, in order to watch a 30 second clip online is ridiculous. Native ads give viewers something they want to see and allow advertisers to get their ads in front of their target audience.

Native ads also drive the highest brand lift. A recent Nielsen study, found that native ads generated a tremendous 82 percent brand lift among users exposed to the ads, compared to the pre-roll units that generated a meek 2.1 percent brand lift.

The death of pre-roll video advertisements is upon us, and media giants such as YouTube and Vimeo need to innovate or risk disruption by new companies with a better grip on ad solutions for an increasingly mobile world.

Mo Al Adham is CEO and cofounder of mobile video discovery app Telly.

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