Free video on demand, by far the most popular on-demand service for most cable operators, has largely missed the advanced advertising boat. But with the continued deployment of dynamic ad insertion, advertisers, programmers and distributors are beginning to take notice and advantage of the multibillion-dollar opportunity they have been missing, according to a panel session at the B&C/Multichannel News Advanced Advertising event here Wednesday.
According to SNL Kagan, pay TV customers accessed about 7.8 billion VOD streams in 2011, with free VOD programming accounting for 76% of those transactions.
"Free VOD is highly popular, but it's a huge missed opportunity," said B&C Business Editor Jon Lafayette, moderator of the panel entitled VOD Advertising: Unlocking the Dynamic Opportunity.
That is beginning to change. Comcast has rolled out dynamic ad insertion in 17 million homes using the SCTE-130 suite of standards approved by the International Telecommunication Union earlier this year. That deployment -- representing about 80% of Comcast's footprint -- was a huge step in giving the product the scale, scope and credibility need for it to catch on with other distributors. And advertisers and programmers are beginning to realize the business potential of being able to target ads in particular VOD shows.
SeaChange International general manager, advertising Aseem Bakshi said on the panel that while dynamic ads are being deployed, it took a viewer trend toward catch-up TV -- using free VOD streaming to watch episodes of a particular program that a viewer may have missed on their first airing - that forced some distributors to take notice.
"Catch-up TV is different from VOD," Bakshi said. "We don't think there is that much distinction left between linear TV, VOD and catch-up TV. With catch-up TV, there is an opportunity to do a lot more in terms of ad insertion."
Bakshi added that the growth in mobility, multiple screens and TV Everywhere like products represents a huge opportunity for dynamic ad insertion.
"All this content is being brought online but the value prop doesn't exist," Bakshi said. "Where is the money being made?"
Bakshi added that initially the revenue opportunity is in placing the ads into the program, but that expands as ads are replaced and targeted to particular homes.
"Addressability gives it a lot more value," he said.
But Brent Horowitz, vice president of business development at Internet video ad-management provider FreeWheel wasn't ready to claim victory just yet.
"We're close, but there is still a way to go," Horowitz said. "The challenge and opportunity is how to take this inventory and plug it into advertising and brand revenue workflow that already exists."
With that in place, advertisers can then take advantage of some of the unique assets of multichannel video service providers, like billing relationships, he said.
Avail-TVN vice president of product management Joni Kinsley said that after years of trials and tests the technology behind dynamic ads is solid. And with the largest cable operator in the country on board, others are sure to follow.
"I think we're almost at a point where it's almost plug and play from a technology vantage point," Kinsley said. "What is the next critical step is the focus on workflow."
Canoe Ventures general manager of VOD advertising solutions Chris Pizzurro agreed that workflow is a vital piece of the dynamic ad puzzle.
"Workflow is absolutely on the minds of every programmer we speak with, and it is all the way from how does this content get there, how do I actually track and more importantly build this," Pizzurro said.
At Rentrak, which tracks VOD views and other data from set-top boxes in the customer home, transparency is the major issue, said Advanced Media Information Division president Cathy Hetzel. Hetzel said that Rentrak extracts reams of data from set-tops on viewing habits and choices, but can't share that information beyond the cable operator. That, she said, makes advanced advertising an even harder sell to advertisers.
"The majority of our contracts prohibit us from letting an [ad] agency have the same view," Hetzel said. "That makes it tougher for an agency to be able to buy it."
But Hetzel said that is beginning to open up -- about 45 networks have agreed to start sharing their monthly reports with ad agencies.
"We're at this point to try to get the industry to continue to move to a point where there is more understanding and recognition of the power of this platform," Hetzel said. "The data is here. We need to turn it into information."
But Pizzurro added that although there are still hurdles to clear, the industry is closer than ever to realizing the full potential of VOD ads.
"In order to get to addressability, in order to get to real time, real management, all important things, and we're absolutely going to get there, you do need to have a stale, safe, scalable environment," Pizzurro said. "There are still some things that do need to be worked out. We're crawling now, but the MSOs are absolutely getting ready to run."