Canoe Ventures is gearing up to launch a national advertising platform for video-on-demand later this year that will represent a "pragmatic" approach to monetizing billions of free VOD views, said Arthur Orduña, Canoe Ventures chief technology officer.
"It is clear that VOD is a huge, yet unrealized, opportunity for all of us in this room," he said.
Added Orduña, "We must figure this out or the train will leave the station without us... Our Darwinian driver is not just survival of the fittest. It's the appeal of lovely, filthy lucre."
Orduña delivered the afternoon keynote, "Making Real Money With VOD: Increasing VOD Monetization Via a Standard Industry Platform," at the B&C/Multichannel News On Demand Summit 3.0 conference here Wednesday.
Canoe, the joint venture of the six largest U.S. cable operators, is currently in the "crawl" stage, having identified and started to assemble the pieces necessary for national VOD dynamic ad insertion, he said. The service will use the systems and processes MSOs already have in place, with support for multiple ad management and ad decision systems
"We want to make it easy for ecosystem participants to say ‘yes,'" Orduña said. "The complex reality of the business demands we be smart and realistic about deploying this system. We are not interested in disrupting what MSOs and programmers are already doing with their carriage deals."
As part of the pragmatic approach, Canoe initially will allow for the replacement of ad loads in free on-demand assets, while "in time it will also grow to meet additional requirements at scale for advertising served based on the way buyers and sellers can more easily accommodate," he said.
Later in 2011, Canoe intends to test the VOD dynamic ad insertion stewardship platform, first in the lab then in the field. As part of that, the company will standardize and normalize process and reporting for VOD DAI; establish operations requirements for commercial launch; and test out the end-to-end flow of processes necessary to replace ads in VOD assets on a national basis.
Imagine if the cable industry were able to generate "just a single ad dollar for every currently unmonetized VOD view -- the mind reels," Orduña said. "If we have learned one thing from online video, it's that people will tolerate advertising if they get to watch what they want to watch, when they want to watch it."
Last year, according to measurement firm Rentrak, operators served approximately 5.8 billion free VOD views, representing 74% of 7.8 billion total VOD transactions; the firm does not report what portion of those included ads.
Orduña said Canoe's work in the VOD area began in February 2010 with the establishment of the Canoe Innovation Lab, whose initial project was proof of concept of national interoperable platform for VOD ad stewardship.
He recalled an even earlier initiative, when the company was Project Canoe, around the 2008 election season. According to Orduña, the Canoe team at the time coordinated "three 24s" to place national VOD ads -- meaning 24-hour lead time for asset publishing, 24 hours for teardown and 24 hours for consolidated reporting -- "despite glaring dissimilarities across MSO systems."
"For a single, national VOD ad campaign, where before there was no national commonality, this was a huge if unheralded step forward," he said.
Orduña acknowledged that it has been incredibly difficult for the cable industry to make money from ad-supported free VOD, for a variety of reasons.
Among those he cited: lack of accepted business models; content owners' reluctance to offer premium content on free VOD; and the fact that cable operators have deployed disparate VOD back-office systems in standalone silos.
"There are key operational and technical reasons why a market for free on-demand advertising does not exist," he said. He pointed out that cable networks have systems for monetizing video content for every platform at scale -- except cable VOD.
One of the next issues for the industry to tackle is to figure out the "structure, ownership and valuation of new on-demand inventory," Orduña said.
He urged programmers and cable operators to work "collaboratively and quickly" to get the business frameworks in place that will enable national VOD ads. He also called on advertisers and ad agencies to work with on-demand ad inventory owners to expand their campaigns.
"Together I think we can take the practical, pragmatic steps forward to create a national VOD advertising market," Orduña said.
Canoe recently hired Chris Pizzurro, formerly in charge of Turner Sports and Entertainment digital ad sales, as vice president of product strategy and business development to spearhead the launch of multiple-operator VOD dynamic ad insertion.