Welcome Jonathan Bokor our newest MediaBizBlogger.
With Video On Demand on pace to reach 5 billion views in 2009, and the majority of those coming from the free on demand category, we've come to the point when there's enough inventory upon which to build a meaningful advertising business. But cable and telco operators, having already built fairly expensive VOD systems, have not taken the next logical step of putting a viable advertising platform in place to monetize VOD. Why?
One of the biggest obstacles has been the misguided focus on household level targeting as the key feature of a VOD ad system. Showing each viewer a targeted ad that's relevant to him or her, and thus eliminating the inherent "waste" in TV advertising, has long been a tantalizing dream for marketers. If advertisers could send their messages to only those viewers they deem likely customers, and avoid having to pay for showing that message to customers who likely won't buy, then the ROI on their ad buys would markedly increase. If so, they should be willing to spend more on the medium that enables that increased efficiency, and pay a higher CPM to boot.
The problem is that the complexity involved in building a VOD ad system capable of household level targeting is widely underestimated. While the SCTE 130 standards represent a good start, they only address part of the problem – the management and playout of the targeted ad within the system operator's plant. Too little attention has been paid to figuring out the nittty gritty selling processes – campaign management, inventory management, sales orders, billing, etc. These processes become so much more complex when you're splitting up an ad avail to sell it on an individually targeted basis, and none of the current solutions for linear TV advertising can easily be adapted to handling these tasks for VOD.
Meanwhile, Rome burns. Although VOD views are rising steadily, it still takes about 30 days to put an ad into VOD content, and the measurement data provided to ad agencies remains fairly thin. As a result, the dollars being spent on VOD advertising remain almost negligible. At the same time, online video ad technology is improving, with a large number of well-funded startups building ad technologies that are far more sophisticated and flexible than those built for VOD. Ad agencies have come to view online video as a superior platform, and are putting far more money there than VOD.
The solution for VOD is to simplify, simplify, simplify. Household level targeting adds a great deal of complexity, so stop focusing on it for now and begin thinking of it as something to be phased in down the road. Dynamic ad placement, which essentially means splicing the ads into the content at the moment the subscriber hits the "Play" button, and better measurement are far more important in the near term. By cutting the lead time for placing an ad in VOD from the current 30 days down to one day or less, dynamism would allow ads to be swapped in and out quickly, making VOD far more flexible, timely and efficient. Marketers that have short lead times and want to advertise at very specific times – movie studios for example - would be able to meet their needs with dynamic VOD ads, which they can't do today.
Better measurement is the other critical piece that needs to be put in place. The data currently being provided to ad agencies just aren't good enough. While it would be great to have a much wider variety of data available, simple demographics would do the most to attract more dollars. Most linear TV is bought based on demographics. Agencies only pay for the number of viewers within their desired demographics, and effectively aren't charged for the other viewers, so they're already doing a crude form of targeting. They pay a higher CPM just for that demo, even though in reality their ad is shown to the entire audience. Enabling VOD ad buyers to buy based on demographics, and to do so on a dynamic basis (so that they can buy specific day parts), will match linear's crude targeting ability and should be enough to get agencies to begin buying VOD in earnest.
Make no mistake, even adding dynamic capability and some additional measurement data will not be a piece of cake, and it won't be cheap. New systems for managing and selling inventory, generating sales orders, billing and a host of other functions will still be required, but these systems will be far easier to develop and operate without adding the complexity of household level targeting. By simplifying the task to just implementing dynamic ad placement and delivering some key measurement data, monetization of those 5 billion VOD streams can begin in earnest. Comcast's recent announcement of its deployment of BlackArrow's dynamic ad system in Jacksonville appears to add these capabilities. It's about time, but to succeed, this deployment needs to be replicated across the entire cable footprint, and fast.
Jonathan Bokor is a consultant specializing in monetization strategies and business development for both digital media and traditional media companies. Jonathan can be reached at jbokor@yahoo.com.
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