Media and Advertising’s Killer Cloud

When I state that media and advertising will start sucking up obscene amounts of processing, storage and bandwidth to become one of the largest vertical markets for cloud computing offerings, I expect some cloud techies, and perhaps a few Adweek readers, will raise their hands and say: “Wait a minute. Media and advertising firms don’t have gigantic data processing operations like pharma or defense. Why care about cloud computing, especially right now when media and advertising are gasping for breath?”

Fair question — here’s the bottom line. A significant illustration is the way cloud computing will revolutionize how consumers experience video content on the Web, their phones and their networked consumer electronics. When that happens, television and film — along with the advertising they carries — will flip from being a mass-market proposition to becoming a targeted, direct-to-consumer proposition.

This isn’t semantics. Print publishers ignored how Web technologies changed how people “read” text. Now, newspapers, magazines and the book industry are retrenching in order to survive. MP3s, file sharing and the iPod changed how people “listened” to music. The incumbent music industry has become a shadow of its former self.

Back to video: The television and filmed entertainment industries are next to be disrupted. To be fair, video executives tried to learn from the struggles of print and music. But most video executives searched for a video “killer app” like BitTorrent, which they could buy or sue out of existence.

However, cloud computing isn’t a killer application but a “killer environment” for media distribution and consumption and therefore advertising and marketing. That’s a lot bigger.

Cloud computing comes into focus only when you think about what we always need: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. From a technical point of view, cloud computing involves access to high-performance computer storage, processing and network resources as a service delivered over the Internet and charged according to use.  

Cloud computing hits both sides of the ledger. First, it dramatically changes the economics of operating and scaling an interactive HD-quality multimedia network. Second and equally important, cloud-native media is more likely to act like software than a piece of content. By that I mean that media on the cloud carries with it the ability to transact — for money, for attention, for ID, for anything that makes sense from a social and/or business point of view.

A changed cost base combined with a new platform for innovation via the cloud creates a bellows effect that injects true electronic commerce into media and advertising.

New media cloudonomics matter. Cloud computing enables anyone to access the video production, editing and distribution firepower of today’s broadcast networks at a fraction of the cost. Scores of cloud-based video providers are fielding complete systems for managing, syndicating, analyzing and monetizing video and other multimedia assets. These systems ride on server, storage and networking infrastructure rented from giant data center owners like Amazon, Cisco, Google, HP, IBM, Microsoft and Sun. Tailored services are then provided to end customers as usage-based, on-demand offers that can be charged to a credit card or another simple payment scheme.

Ooyala is a California-based start-up founded by ex-Googlers that offers anyone a complete HD-video network as a service. Customers access the service via a Web interface or a simple client program. They are charged according to the costs of content delivery ($0.075 per hour of video delivery) and the amount of media being managed. Ooyala has loaded its entire video system onto Amazon’s cloud infrastructure, buying only the processing, storage and network bandwidth it needs depending on actual customer demand. Ooyala’s customers need only create an account, a payment method and upload their content. 

Ooyala is one of scores of video service providers that have jumped onto the cloud. Justin.tv and encoding.com are other good examples. These service providers remove many of the infrastructure and management headaches for using visual data (e.g., video + photographic images + CGI) as an interactive storytelling medium. Not surprisingly, lower costs and ease of use have expanded the ranks of multimedia “producers” to include social networkers, merchants, governments, nonprofits and local groups like schools and churches.

When anyone can become a HD media studio, distributor and ad server riding on rented infrastructure, it’s likely that cable, satellite and phone companies face a harder sell to bundle a dedicated media subscription on top of basic broadband. This will have a ripple effect on media studios that sell their content into cable/phone/satellite systems, not to mention the marketers placing ads on those networks.

Right now the number of “cord-cutters” — people who opt for online video in lieu of a cable or satellite subscription — is tiny. But print businesses said the same thing earlier this decade about people reading non-professional Web sites and blogs. Moreover, Leichtman Research Group reported in March 2009 that while only 8 percent of Web-video-watching adults say they view less TV because of their Internet viewing habits, 18 percent of Web-video-watching teens say they’re turning away from the tube thanks to the Internet. 

As the father of Web-only teen, I can only attest that they grow up fast.

There is more to cloud computing than just changing the cost of handling interactive multimedia. A potentially more profound impact is that it will enable media to act more like a computer “object” than just a piece of content. By that, I mean that applications will be layered on top or embedded directly with the content itself. Again, this is not a brand new thing. Media providers and advertisers have tried to make video content “clickable” for a long time. The difference this time around is that cloud-based media systems make the process far more simple, effective and cheap. 

Overlay.tv is a Canadian company that allows video producers to introduce annotations, images, widgets and links as a layer on top of digital video. Inside a layer placed on top of a video or still image, there are clickable “targets” that can link out commerce, information and/or educational resources, social network profiles, or even communication functions like chat. Overlay.tv worked with the Jonas Brothers to create tools that let fans online sing along with the band’s new single “Lovebug” and record themselves as they sing. According to the Overlay.tv CEO Rob Lane, 54 percent of people who visited Jonasbrothers.com during a 30-day period created their own karaoke video. Besides the Jonas Brothers, Overlay.tv’s customers include Disney, Nettwerk Records and Canadian media company Transcontinental. Other service providers like Veeple are turning video into an interactive palette for inserting links, captions, thought bubbles and other collateral.

Forget for a moment that only uber geeks would want their video draped in all that digital bling. The bigger point is that creativity has replaced technology as the primary challenge to overcome.

While video is having objects or other functions added to it, marketing messages are being broken apart and reassembled to display and act differently. Start-ups like Tumri are taking ad creative units and breaking them into their core sub-components (e.g., brand logo, background color and visual, product image, offer/price, call-to-action, attention grabber, etc.). These sub-components are then manipulated independent of each other on the fly to present a customized ad to the consumer. The ad might emphasize different elements such as specific products, prices, promotional messages or localized images depending on geography, daypart, Web site or another targeting parameter. Tumri is an indicator species for the kind of advertising models we might expect as more marketing firms migrate to the cloud-based way of doing business.

Cloud computing won’t change the basic marketing questions of who buys, why do they buy, or how do they buy. However, the cloud will deliver a new context in which marketers ask those questions.

By dramatically lowering the cost of producing and distributing high-end video while making it act more like software, the cloud will accelerate media and marketing’s shift to a consumer retail and service-based business model instead of an infrastructure and distribution-based business model. Does this spell the doom of today’s large TV networks, film studios/distributors and the marketers working with them? Probably not.

But as we saw how retailers, automotive dealerships, and travel and real estate agents scrambled to reorganize their businesses once e-commerce negated much of their information and infrastructure advantages, we should expect a similar — perhaps violent — overhaul of media and marketing. Given the current flux caused by the Great Recession of 2009-?, media and advertisers would be wrong to assume they will have a similar time cushion to respond.

John du Pre Gauntt analyzes the intersection of cloud computing and online media and advertising for Media Dojo.