Tim Hanlon is a big proponent of video-on-demand and interactive-TV advertising, but he warns that operators and other distributors risk losing ad revenue to the Internet. As the senior vice president and director of emerging contacts at Starcom MediaVest Group, Hanlon’s opinions are significant. Starcom is one of the largest brand communications groups in the world, with a vast client roster that includes Procter & Gamble Co., General Motors Corp. and Coca-Cola Co. Recently Hanlon spoke with Multichannel News Internet editor Steve Donohue about his provocative opinions. An edited transcript follows:
MCN: You’ve said in the past that operators are missing the boat with interactive TV, suggesting that they should team up with national cable networks to enhance their ads.
Tim Hanlon: It’s VOD specifically. There are a bunch of cable operators who are effectively trying to figure out what their local ad avail is in VOD streams — their split of their ad units. A better model may be to basically reposition themselves as services or facilitators. The cost of hard drive space, the cost of encoding — those are basically services. What is the cost of that? Put a margin on that, and then hand that off to the programmers, big and small, whether it’s a Ripe TV or an ESPN or anybody in between.
MCN: Operators would charge networks fees for enhancing national ads?
TH: Exactly. Clearly what folks like Comcast [Corp.] have done to date is basically hold VOD advertising hostage to that local-advertising conversation. You can’t buy VOD advertising on the Comcast platform now without it being part of a local-advertising-sales conversation.
MCN: Meaning to do any kind of VOD advertising deals, Comcast is leveraging its local ad inventory?
TH: In the beginning, they said buy more local cable spots, and we’ll throw in things like addressability and VOD as part of that. It’s basically a reward for shifting your local broadcast money or even national money into local spot cable. And this is the problem. These are the fiefdoms that are getting in the way. You’ve got local ad sales kind of holding all of the stuff back.
MCN: What kind of interactive advertising would be compelling?
TH: I imagine the day when I could buy an ad message, say in an ESPN program, have an icon that pops up and then allows the ad message to go further, based on the individual that has pushed the button or raised their hand.
So if you live in Manhattan, and you’ve got Time Warner Cable, and you’re watching television, you might get served up an ad message that’s a little different than someone who lives in the suburbs of Chicago.
The far bigger pot of gold here is to enable what have been largely mass, nationally branded ads. To say that the only ad messages that we can make more relevant and more targeted are local spot cable avails — or local spot satellite avails — I think is silly. It basically denies the far bigger kettle of fish — the 90% of ad revenue that’s done in national-advertising messages.
MCN: Comcast has run local cross-channel spots in Philadelphia for car ads in which subscribers can link to long-form VOD ads. Is that a model you would like to see work with national advertisers?
TH: Absolutely. I think the question for every operator — satellite, cable or telco — should be: How can I help facilitate national programming inventory to be addressable, extendible for VOD or [digital video recorder], etc.?
MCN: What kind of advice do you give Starcom MediaVest media buyers when it comes to recommending media buys for VOD content?
TH: I advise them that VOD is simply another consumer video touch point that judicious ad messaging can be a part of. We’ve come up with a term called Video Investment Group, where the idea is less about buying linear-television spots than it is about buying video-ad-messaging opportunities across a whole host of video scenarios — mobile video, VOD, broadband video, linear TV, inserted DVR, all of it.
MCN: Does the lack of data out there about VOD viewing, including the number of people that view specific shows, prevent you from recommending VOD ad buys to your colleagues?
TH: I think sitting back and waiting for perfect data is dangerous. And frankly I’ve been chafing for the last couple of years against [companies] like Comcast, who have basically held back access to that data, for whatever reason they throw out this week.
MCN: Do you think VOD isn’t as popular as they’ve suggested it is?
TH: I’ll give them the benefit of the doubt. I think consumers are using DVRs more than we know. I think they are accessing VOD more than we know. The old adage applies for advertising: That which gets measured gets bought. The sooner we get to an agreed-upon metric scheme for things like on demand, the sooner we can make it a viable business. And frankly, the folks that are holding that conversation back are the cable operators, plain and simple.
MCN: Are you getting more detailed information from Internet advertising?
TH: Absolutely. Broadband video is exploding right now. Frankly there’s more demand than there is inventory — quality broadband inventory. That’s why you see content providers falling over themselves trying to create new environments for broadband video.
MCN: Is the better data for Web advertising one of the factors that’s driving ad spending from TV to the Internet?
TH: Absolutely. It’s certainly not perfect, but it’s a lot better than what we can do with regular television today, and it’s certainly a lot better than we can do with VOD right now. We have access to no data from VOD, or very little of it. And we don’t have to deal with a distribution intermediary in broadband video like we do with VOD.
So while the Comcasts of the world putter around with a little bit of data here and a little bit of data there — and a reluctance to share that data because they fear or they don’t know what the new business model looks like — we’re putting television advertising dollars into broadband video right now. And the operator gets none of that.
It’s literally a conversation directly between the programmer and us. And by the way, the consumer doesn’t have to worry about an intermediary either, because they can get it directly themselves. It doesn’t matter who their broadband provider is, they can go to ESPN.com, Living.com or MTV Overdrive and get access to stuff directly.