Video On Demand: Trying To Capture The Potential

With all the recent chatter about video on demand—at least three sessions at the 4A's Media Conference this month were dedicated to the topic—you'd think ad sales in that space would actually amount to some real business. Not even close. VOD ad sales are an infinitesimal piece of the total ad pie at this point. "Less than negligible," said Josh Bernoff, lead media and marketing analyst for Forrester Research. He estimates that 23 million households had access to VOD by the end of 2004. But, based on conversations with cable operators, he believes fewer than half of them have actually used it. "So the real audience is more like 8 to 10 million," he said. No one tracks VOD ad spending yet, but "to say it's a handful of millions is probably an accurate figure," noted Steve Grubbs, CEO of Omnicom's PHD North America. Still, "there is more interest in VOD than any other emerging technology" he said. Here's one reason: analysts such as Bernoff predict that in five years it will be a sector generating billions in advertising and growing as quickly as the online ad world. And after several years of testing and experimentation, some agencies, such as Aegis' Carat, are beginning to incorporate VOD ads into the planning process, even putting them into upfront strategies. Mitch Oscar, evp at Carat Digital, admitted that while VOD dollars are being tucked into bigger advertising packages, he and the rest of the industry are still trying to figure out how to price and value individual VOD ads. One of the issues is audience measurement and how TV viewing patterns differ in the channel-based linear world compared to the program-based, on-demand world. Nielsen Media Research doesn't even have a plan for measuring the VOD space, although the ratings service (which, like Adweek, is owned by VNU) has promised to get back to clients with a plan by the middle of May. Meanwhile, other measurement companies are filling the void. For example, Rentrak just struck a deal to provide monthly VOD usage reports to Comcast Cable. Another company, erinMedia, also has agreements with cable operators, clients and agencies to provide VOD usage reports based on data collected from set-top boxes and VOD servers. Frank Foster, president of erinMedia, said the company tries to link what viewers are watching on-demand with what they're watching on ad-supported networks, and then answer questions like where it makes sense to promote VOD offerings. "It's early on in the process," he noted, but VOD, like digital video recorders, "make advertisers nervous. It's a game-changing event."Making consumers aware of VOD is also a huge issue. And as the audience grows, buying VOD gets more complicated, explained Bernoff, because it's not like you go to a single source and purchase VOD as a run-of-schedule buy. "You have do it program by program, and if you think cable television is fragmented, wait until you look at video on demand," he said.Still, a big plus is that VOD is considered an opt-in medium, where viewers aren't trying to avoid ads like they routinely do when playing back programs on their DVRs. "Advertisers look at VOD as an opportunity space and DVR, in its current form, as a risk space," said Pat Dunbar, co-founder and evp of the DiMA Group. She manages a project called the Innovations in Digital Advertising Program, which is trying to help shape the process through which agencies and advertisers conduct transactions in the VOD sector. Programming, advertising, promotion and measurement models all have to be redesigned for the on-demand sector to make it a mainstream medium for advertisers, Dunbar contends. Meanwhile, some cable networks will start selling VOD ads as part of the upfront packages for the first time this year. For example, this will be the first year that all the Turner networks have some form of upfront VOD sales offering, said Chris Piczurro, vp of multimedia marketing at Turner Broadcasting."We've been working under the radar for the last couple of years, making sure we understand what the medium is," said Piczurro. "We've done a lot of research, a lot of focus groups, and looked at set-top data. We feel there's a convergence where we now have a product and an avail structure, and at the same time there's now marketplace demand for it." VOD, he added, has already "shown viability on a small scale, so we have no doubt as it scales up it will be a great business."Locally, Comcast and Time Warner are the two biggest players among cable operators in the VOD sector. But Warren Schlichting, Comcast's vp of new business strategy, acknowledges that VOD's potential still way outstrips the reality at this point. "What we've demonstrated is that once you offer a differentiated VOD product and promote it effectively, people will watch," said Schlichting, indicating that VOD users in Comcast's Philadelphia system watch an average of 12 to 13 hours of on-demand content per month. "Now we need to exploit that opportunity."One company, ExpoTV, has created a VOD service entirely for long-form infomercials that direct marketers have gone gaga over. Currently, the ExpoTV service is seen only across Insight Cable's VOD platform, with plans this year to roll out as a linear channel as well. But it's the VOD piece that has the direct marketers most intrigued. "What they've done is essentially created the future of video-based advertising," said Tim Hawthorne, chairman of Hawthorne Direct in Fairfield, Iowa, which bills approximately $120 million annually in direct marketing ads. "We are moving to the nonlinear model where people have choices to watch their shows with or without commercial interruption and where interactive elements will allow you to go deep within a product, from 30 seconds to 30 minutes."Advertisers who have tried VOD compare its potential to the online sector. "We think in the future consumers will be able do more shopping and have more in-depth interaction with our brands through this medium," said Betsy Lazar, general director of media and advertising operations for General Motors. "It will be another enhancement to how we use television moving forward."

Brand Marketing

Video On Demand: Trying To Capture The Potential

Steve Mcclellan

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Steve Mcclellan