Advertisers Starting to Buy In

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On-demand advertising has obvious revenue appeal for cable operators, but are advertisers sold on the idea?

If Comcast Corp.’s On Demand ExerciseTV channel is any indication, the answer is yes — and it’s becoming a healthy business.

Launched in January, the channel featuring on-demand fitness programs recently signed its second major ad sponsorship deal with The Gatorade Co., which joins original sponsor New Balance Athletic Shoe Inc.

Comcast’s On Demand service is offered free to all of its 10.1 million digital cable customers and in 2005 it served more than a billion streams. Based on feedback from Comcast’s recent, first-ever On Demand advertising upfront presentation, those numbers are drawing advertisers’ attention.

“I think many advertisers are starting to earmark budgets for next year in the same way they have earmarked money for broadband,” said Matt Strauss, Comcast vice president of programming and content development.

That is the case for Starcom USA, an ad buying firm with clients primarily in the children’s products and entertainment sectors.

“I have advertisers that fall in both camps — people who are interested and buying in VOD, and those people who are assessing the marketplace,” Starcom USA vice president and video innovations director Tracey Scheppach said.

She noted there still is a lot of room for improvement in on-demand systems in navigation, promotion and the time to get an ad placed on the on-demand servers. Nevertheless, there are several Starcom advertising clients who are budgeting funds for on-demand, and “for some advertisers I would describe it as large,” Scheppach said.

Similarly, Cmedia is starting to experiment with on-demand advertising. A media buying firm for direct marketers with clients mostly in health and fitness and entertainment, Cmedia has been involved in on-demand advertising trials with TiVo Inc. and ExpoTV, an on-demand product channel that has launched with Adelphia Communications Corp., Charter Communications Inc., Mediacom Communications, Bresnan Communications and Insight Communications Co.

The company also has several clients testing the on-demand concept to gauge its value to their marketing campaigns, according to David Savage, Cmedia executive vice president.

There are question marks, and for Cmedia’s direct-marketing customers cost is a big one. Other issues yet to be determined include the duration that a direct marketing ad should sit on an on-demand server, Savage said.

That is something Comcast is working to define, even as it expands the ad potential beyond just the 30-second ad. For example, the ExerciseTV deals with New Balance and Gatorade include development of original sports-training videos featuring those products. These “advertainment” videos range from a recent video on the history of New Balance to an upcoming video on how Gatorade’s sports drinks work.

“For a company like Gatorade or New Balance, you know that if someone is watching exercise TV, they are likely to be the target you are trying to reach — that it’s allowing a whole new way to think about how advertisers can reach their audience, not only through traditional spots but through creation of original programming where we can integrate their message into the content,” Strauss said.

And ExerciseTV is just one of more than a dozen on-demand channels Comcast has launched, ranging from Dating on Demand to Karaoke on Demand and Movie Trivia. With that range of content genres in place, on-demand has the makings for a new generation of advertising on TV.

“In the same way that cable gave birth to the cable networks that we now know and love, and the Internet did the same thing for Web sites, VOD will give birth to the next generation of non-linear brands and networks, and advertising will be the underlying model to push that forward,” Strauss said.