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Making the Case for Free On Demand

8/01/2004 8:00 PM Eastern

Imagine a world in which the ratings services upon which the entire TV ad-sales business is based made a living analyzing their clients' empiricals instead of selling sampled data. This environment would seem to be a nirvana for advertisers.

Now imagine a world where no advertiser is restricted to any standard ad unit: Produce 30 seconds, or 10 seconds or 8 minutes — or maybe lead from a 5-second tease to a 5-minute opt-in. This environment would also seem a nirvana for advertisers.

How about verified viewing of an ad? Also nirvana.

This whole new paradigm can be organized via an evolution within the current system that will be talked about for years. (“Remember when we had sampling?”)

Digital cable — more specifically, the ad-supported video-on-demand platform, or as it's come to be known in some circles, free on demand — can provide these things.

Nirvana is within reach, but there are problems: Advertisers and ad sellers can't agree on how to measure it, how to value it or even whether to measure this new inventory at all, which could doom the FOD platform, with all its win-win facets. (A traditional media agency executive vice president recently put it to me rather succinctly: “If we can't measure it, why would we try it?”)

As a content provider stuck in the middle, it seems that both sides are blocking implementation of the paradigm, perhaps unintentionally. So let's have some mutual acknowledgements, all get over it, and move on with the business of evolving the advertising industry into the modern age.

Advertisers want cable to track FOD's empirical details because it's now possible to do so. Cable sees no reason to suddenly be accountable and would rather be counted like a print medium, selling on circulation (homes passed) vs. actual ad exposure (viewership).

Since TV has historically strived to get to actual viewership, albeit imperfectly, I'll side with the advertisers — if it can be counted, it should be counted. Since only cable can do it, this would seem a nirvana for cable operators to continue to grab market share from broadcasters.

We're talking about growing the cable piece of the pie, with all its unique, trackable, targetable benefits. So what's the delay? Both sides need to jettison the inertia of being married to the current imperfect metrics systems. In any case, these will persist in some form through sheer tenure. But that's not to say the ad industry can't evolve into more of a science.

Zero-value inventory pricing, via packaging with traditional ad sales, may be attractive to some local advertisers — but how about national clients?

They're the sophisticated big-money guys. Why would cable sellers ignore the case for doing national brand business as a long-term strategy, enabled by the newest cable technology?

MSOs need to agree to a metric to afford national advertisers a count of what their money buys.

For their part, advertisers need not be coy about the need to pay big money for what we all know the technology can now produce in terms of real numbers — money that pays for all the incremental benefits, thereby not threatening the entire existing television ad industry's economics.

Who can blame cable's ad sellers — moreover, all of TV — for worrying about the effect on CPMs of now-feasible methods of waste measurement? After all, they've so far been spared the accountability for waste, officially charging more or less on a gross CPM basis.

So here's a solution: a new metric called “cost per engagement.” Is it an “impression” if instead of having a 30-second spot pushed on me randomly, I tune to a long-form ad — or retrieve one proactively from a VOD server — and watch an advertiser's message for 4 minutes on an empirically verified basis? What's that worth? The consumer was with my brand eight times longer than via a 30-second ad.

Plus, they literally opted in, and are paying attention, so the waste factor is zero, compared with what the latest common wisdom implies is as much as a 50% waste of TV media dollars, in terms of actual ad exposure.

In this VOD example, the consumer is not just paying attention, they're at heightened attention, since they didn't simply say “OK, I won't turn away.” Rather, they pushed buttons to pull in the content.

So 8x2x2=32x a regular TV $10 CPM and you've got an ad unit, if it were measured, that may be worth $320 per 1,000 engagements more or less. (That's got to be worked out in the marketplace.)

While the dialogue regarding FOD has been most cordial, an even more open, less-posturing dialogue between agencies, their clients and cable ad sellers is needed for getting the most out of these new platforms for advertisers, by agreeing on metrics that don't threaten existing business models.

As one MSO ad seller said to me, “Advertisers have got to figure out what they're willing to pay.”

We can achieve nirvana on both sides. But if the cable sellers and media spenders don't loosen up with each other soon, FOD will be stuck in its infancy for years to come.

What a shame … oh, for the TV-spending market share.

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