With cable video-on-demand services now including free content, advertising is finding a prominent spot inside video streams — and new innovations able to target ads down to the individual consumer may make VOD an even more powerful draw for advertisers.
The question now is how fast and how complex these ad placement systems will become, and to what degree viewers will buy into targeted commercials.
Cable operators and advertisers are indeed bullish on ad-supported on-demand content because it offers the ability to measure usage and target customers — and because in the early stages it is a relatively uncluttered environment, said Ken Papagan, executive vice president at Rentrak Corp. The content tracker is developing a service called AdEssentials that will enable operators and advertisers to track ads within content.
“The fact of the matter is that television remains one of the most, if not the most powerful advertising mediums,” Papagan said. “And when you combine the emotional involvement of television with the targeting capability that is not unlike the Internet, it really is a very powerful proposition for advertisers.”
Another reason advertisers are showing interest in on demand has to do with the way video is accessed and played. Many operators and programmers are putting short, 15-second ads at the front of a video file. So if a viewer tries to fast-forward through it, they run the risk of missing the first few moments of the video.
“And after a while they habituate towards watching it,” Papagan said. “And since it is aligned with the content that is being directed at a consumer, that ad that is more likely to be watched is much more targeted.”
On-demand server vendors, meanwhile, see the need to create software systems that track what users watch to support advertising in the VOD world. That’s the case for SeaChange International Inc., which recently added AdPulse, a new advertising management system that can track, measure and quantify video streams as they flow to viewers. It also offers trick modes, which track what viewers do with video — where they fast forward, reverse or pause content.
“So you can know exactly what time was spent in view speed, in fast forward, rewind — all of those kinds of things which frankly advertisers are demanding,” SeaChange director of advanced advertising Terri Swartz said.
Ultimately, most see these ad systems moving toward what is called dynamic ad insertion — the ability not just to place ads within on-demand video but to send individually targeted ads, so two viewers watching the same video will see different ads based on their own interests. That customer data can be drawn from analysis of their viewing habits or information about products they have purchased in the past.
But such a system isn’t an easy sell. To start with, viewer data doesn’t always translate to an ad strategy. That’s why most of SeaChange’s cable customers are concentrating on simple ZIP-code targeting based on economic data, Swartz said.
“By its nature with a point-to-point connection, VOD is a perfect medium for that kind of targeting,” he noted. “It’s just that the rest of the tools — how you place an order that is that targeted, and how you bill and place an order that is that targeted — there really are not traffic and billing systems out there that can manage that yet.”
Given that factor, SeaChange did not make individual home targeting a feature in its initial AdPulse rollout, although the system can be upgraded in the future to do so. Swartz noted that just getting advertising to flow from standard television shows to on-demand — and the need to update them during the lifetime of the content on the server — is hard enough without adding individual viewer targeting.
“It will certainly be valuable, but the business models and the process by which it will find its value are still being worked out,” Swartz said. “We have more immediate challenges to solve than trying to jump to that kind of point-to-point targeting.”
Dynamic ad insertion does increase the complication of the system, but much of that technology can be drawn from Internet advertising systems, according to Braxton Jarratt, senior vice president of marketing and business development at digital video technology provider Tandberg Television. Indeed, much of the pressure to add advertising systems that can beam a specific commercial to a specific home is coming from comparisons to the Internet, Jarratt added.
“What I’m seeing is as that market gets a lot of attention, and advertisers are spending in broadband video, that’s getting people to think 'Why shouldn’t we be able to do this with VOD?’” he said. “I think every dollar spent on broadband video is a dollar left on the table by the guys who are running the VOD networks, because I think most people would prefer to watch programming in higher definition on their TVs in their living rooms if they had the choice to do that, and there is nothing technically stopping the ability to do more targeted dynamic advertising.”
The barriers may be more political than technical. For example, targeting specific customers by how they use a service could trigger privacy concerns. As with other tracking systems, Rentrak is careful to strip out the name and address of specific viewers, focusing instead on their ZIP code for identification. But it can track what type of programming an individual user is watching, and that in turn could lead to ads targeting those content subjects, Papagan said.
“If you think about it, on the Internet they do a lot of these kinds of things,” he said. “The correlative of a cookie on a computer would be an application on a set-top box. Those applications exist, but they have not been yet widely deployed. But in time we may see that.”
Given the issues in targeting individual customers, it may be some time before that will become part of Comcast Corp.’s On Demand service. Comcast is in the process of upgrading its on-demand advertising system to more efficiently add national and on-demand spots, and while dynamic ad insertion “is of interest to us, and it is of interest to our advertisers — and in order keep from falling flat on my face, I’m going to walk before I run,” said Paul Woidke, vice president of technology for Comcast Spotlight, the cable operator’s advertising division charged with creating the on-demand ad insertion system.
Technical issues aside, the bigger problem may be that dynamic ad insertion systems will complicate the business relationships with advertisers.
“When you start getting down into the nuances and the fine points of how you build it and how you operate it — golly, I wonder how you write up a sales contract for that, and I wonder what the invoice for that looks like?” Woidke said. “There is a whole lot of work to do in that area.”
So if it is going to be more complex to administer, is dynamic ad insertion worth the effort? Woidke thinks that issue has already been proven with the billion-dollar Internet advertising industry.
Cable on-demand systems are creating a one-on-one relationship between viewers and the content they order, and giving advertising that same relationship with the customer is key “because that’s what advertisers are looking for in the world today,” he said. “We see that with the revenues that are flowing to Internet advertising, and why? Because it is accountable, it is measurable and it provides an advertisement piece that is meaningful and relevant to the subscriber, and that is absolutely the direction that we want to go in.”