Building VOD’s New Ad Model


Television, from its onset, has been a medium of the masses. As media, communication, entertainment and leisure-time choices have grown, however, television audiences have splintered. Additional terrestrial networks, an explosion of cable channels and, more recently, the introduction of pay-per-view and video-on-demand are all contributing to the fragmentation of today’s television audience.

Ironically, in spite of an average primetime ratings decline of 41.5% over the past 26 years, network television advertising revenues have continued to rise.

Granted, if advertisers are looking to reach the largest audience possible, traditional television is still the best game in town. But thanks to technological advances and the proliferation of digital channels, some sectors of the television industry — namely video on demand — can now offer marketers direct access to highly targeted demographic groups.


In addition to the direct hit that VOD delivers to advertisers, the cost of reaching a specific audience segment through this platform can also be extremely cost-effective.

Unlike traditional advertising — which is based on CPMs, or how many total viewers the advertising message has the potential to reach — VOD advertising rates could be based on the desirability of the targeted audience segment.

Investing a small amount of time exploring the targeted audiences of the various VOD programmers will enable advertisers to draw a bead on very specific demographic or geographic targets. And because VOD advertisements are encoded in the programming itself, on-demand programmers can also provide advertisers with an exact number of unique impressions for any specific period of time.

Frankly, the cost of VOD advertising is so insignificant in comparison to more traditional forms of media, I’m surprised more advertisers aren’t exploring the opportunities it can provide.

Once advertisers learn of VOD’s cost-effectiveness in pinpointing targeted consumer groups, they may be more interested in exploring the added returns of increased retention and brand awareness that come in producing commercials specifically for the on-demand environment. We’re working with advertisers now, trying to educate them as to how best to present their message, products or services in this unique new environment.


Unlike traditional television, where advertisements have been completely separate from the programming they surround, VOD advertising requires a more seamless transition.

Ideally, with enough time and necessary resolution of licensing issues, advertisers could customize marketing messages and possibly even include images in advertising that appeal directly to the specific VOD audience. Tying advertising to popular characters, series or movies that envelope the advertising, for example, creates a whole new entertainment aspect for the viewers.

Rather than reaching for the remote or fast-forwarding, the audience would be more likely to view the commercial as an extension of the VOD entertainment experience.


Taking this concept to the next level, advertisers would also be able to integrate products, services and brands into the actual VOD programming itself. If the advertisers and producers can initiate this discussion before the start of production, both the product placement and commercial opportunities become more cost effective to produce, build a stronger association between product and content and virtually eliminate the option to fast-forward through the commercial.

Producers could easily incorporate the advertisers’ product into the film or series and, as a further extension of the association between advertising and entertainment, additional scenes could be created to accommodate standalone advertising spots.

The key in VOD advertising is to not interrupt the entertainment experience. And it is also one of the viable solutions to advertisers’ growing fear of the fast-forward feature on every digital video recorder. Simply put, we have to give viewers a reason not to use that feature.

Some programming genres available through VOD, such as animation, make these sorts of advertising trials are much easier to accomplish. But all of us involved in VOD hope to provide cost-effective, workable advertising solutions for our advertising clients now and in the future.


For the advertisers, VOD is a great way to try a new advertising approach for a relatively small investment. That small investment, however, becomes significant revenue for the VOD provider. And by working together, we can create more opportunity and reduce risks on both sides. VOD provides a unique opportunity to explore a myriad of new advertising models.

Advancing the medium and exploring new advertising models in VOD is the responsibility of the VOD provider. The shift in approach, attitude and development begins with the VOD programmer.

We can’t expect traditional forms of advertising to score well with early adapter audiences willing to pay more for specific content anymore than we should wait for the advertisers to come to us with new advertising concepts.