Watermarks vs. Pre-rolls

YouTube announced that they are adopting the VideoEgg-style of overlaying advertising banners on top of video content.  In essence, these ad units are advanced forms of the promotional watermarks that are increasingly taking over TV screens.  UGC media companies have been loathe to force members to sit through a pre-roll video ad for fear of frustrating the viewer and ultimately driving away their audience.  This concern is well founded because the consumer's desire to watch a random UGC video is not as determined as their desire to watch well-branded content (i.e. TV shows, MTV music videos, MSNBC news highlights, etc.).  It will be a challenge to prevent the animated overlays from becoming so annoying in an effort to garner multi-tasking attention that they ultimately create a worse user experience than forcing someone to sit through a pre-roll.  In any event, it will be interesting to see how advertisers value overlays.  Clearly, the undivided attention levels for a pre-roll advertisement are far more valueable than a distracting, fractional overlay.  Overlay's will have to fight to maintain any impression value at all as Advertisers will likely fight to only pay for clicks to the overlays that drive a subsequent view of the Advertiser's video.