With operators giving viewers more on-demand choices,
and viewers responding by ordering more and more on-demand titles,
the time is ripe for inserting timely, pertinent ads in VOD sessions.

The market for video-on-demand (VOD) advertising is raring to go. The technology is there, and the interest is definitely there, but there are several crucial stepping stones cable operators have yet to cross – namely negotiating business MONEY with VOD adsmodels and receiving premium VOD content.

Everyone in the value chain – from advertisers and ad agencies to networks and operators – realizes the huge revenue potential the technology holds for each one of them.

“This is the first time, in terms of a disruptive technology, that every constituent in the value chain benefits,” says Scott Ferris, SVP and GM of emerging media at Atlas on-Demand. “This is a very unique advancement in television for everyone, especially the consumer.”

Last February, Tandberg Television and Comcast Spotlight – the ad sales arm of Comcast Corp. – announced the deployment of TandbergTV’s AdPoint platform for the placement and management of dynamic ads on VOD. And last September, Lawrence, Kan.-based Sunflower Broadband commercially launched the technology with the help of Atlas’ automated campaign management, ad decision logic optimization and reporting tools, and SeaChange International’s AdPulse on-demand advertising system.

In November, Charter Communications trialed the technology in its headquarters market of St. Louis with C-Cor’s nAble on-demand ad-insertion solution, Atlas’ technology and TVN’s ad distribution system. Currently, many other hush-hush trials and tests are being conducted by operators nationwide.

“Operators are pretty much full-throttle, full-speed ahead with this,” says John Morrow, VP of strategy development and execution for Scientific Atlanta, a Cisco company. “Everyone is on the edge of their seat, working hard to conduct trials and validate the attractiveness of the technology.”

Custom orders!
Traditionally, ads have been pre-baked into the VOD content, so advertisers have to know what ads to place, and where to place them, months in advance. These monolithic, static assets have to be pulled from the video server and re-encoded with a new ad if the original one grows stale, and that process can sometimes take weeks.

With dynamic ad insertion, when a VOD stream is requested by a consumer, a campaign manager instantaneously picks the most relevant ad or ads to accompany the content, and a dynamic playlist is created on the fly. “This creates a unique, one-to-one relationship that every advertiser dreams about because video-on-demand, by definition, is a unicast stream,” SA’s Morrow says. “Every time a consumer orders a movie or anything else, there is a definite link between the subscriber and the cable operator.”

Patrick Knorr

More and more consumers are time-shifting their TV-viewing experience, making traditional TV advertising an even more shot-in-the-dark proposition, and making addressable advertising extremely enticing. Instead of reaching a mass audience, the ad will reach a segmented – or niche – audience, increasing the CPM (cost per thousand) of the ad. When advertising on Sunflower’s VOD offering, advertisers can easily see CPMs that are anywhere from 10 to 50 times higher than on linear channels, says GM Patrick Knorr.

And manufacturers are ready to make dynamic ad insertion a widely deployed reality. Vendors such as C-Cor, Cisco, Concurrent, Harmonic, Motorola, SeaChange and TandbergTV have developed ad-insertion solutions. Atlas provides ad-pairing abilities – and has a relationship with C-Cor, Concurrent, SeaChange and TandbergTV. And Everstream, along with Rentrak, fills in the measurement hole with granular data.

The Charter trial was successful thanks to the Internet-like metrics possible with the technology, says Atlas’ Ferris. Ad agencies were able to see granular measurements on the viewership of their ads, which gives them the ability to pull or modify campaigns based on the results. Data available with dynamic advertising includes who is watching the ad, how long they watch it, what type of household they live in and what they do after watching it.

The ability to fast-forward through ads – a highly debated topic – was allowed for the trial. Some operators think that the fast-forward capability should be disabled or advertisers won’t stand for it, and others think that the fast-forward measurements show whether or not an ad is effective.

Also up for debate is the usage of “targeted” vs. “addressable” advertising. Most people in the industry agree that “targeted” sounds threatening to consumers, whereas “addressable” more aptly defines the architectural implementations of the technology. “‘Targeted advertising’ sounds like you’re going to shoot somebody,” says Jonathan Bokor, VP of business development for TandbergTV. “Certainly there are people who might not be happy about being targeted.”

Another sensitive spot is the privacy issue that coincides with addressable advertising. The technology is available to telescope down to individual households, set-top boxes, and even individuals, but it is up to the operator to decide what information is collected and shared with advertisers, in accordance with the Cable TV Privacy Act of 1984, of course.

Cox Communications was one of the first MSOs to appoint a chief privacy officer, and now it’s commonplace, says David Porter, Cox’s VP of marketing and new media. “Our most valuable relationship is with our subscribers, and we don’t want to jeopardize that.

dynamic, on-demand advertising architecture
Figure 1: Charter Communications’ dynamic, on-demand advertising architecture.

“We’re very cautious, but at the same time, we can do some pretty interesting things with data that we have access to,” such as demographic – or upstream – information from companies like Claritas, and basic customer information, such as what types of services they subscribe to. “We can access that information in an anonymous format so that we’re not divulging anything personal. We can assign attributes to [the subscribers], and therefore, there may be ways to target certain ads to them,” he says.

This addressability is similar to that found on the Internet, with the same privacy concerns, and vendors looked very closely at the online component when developing their products, and they will continue to monitor the ever-growing medium.

“Internet advertising has grown significantly in the past five years or so,” says SA’s Morrow. “The benefits of Internet ads, [which] advertisers appreciate and value greatly, will increasingly become available in the TV domain. On-demand advertising is a major step in that direction.”

Advertisers are standing by!
One of the biggest holdups in the VOD advertising space is the business models that need to be worked out between the networks and the operators. “But once it’s clear to the advertisers that they can place much more valuable ads in targeted ways – like with video-on-demand advertising – that the value is proven, that it’s measurable…then of course the money will start to flow, and the ads will be purchased, and we’ll all move forward,” says Guy Cherry, principal architect of video systems for C-Cor.

ad-insertion platform with Axiom Content Dynamics
Figure 2: SeaChange’s ad-insertion platform with Axiom Content Dynamics
and the AdPulse on-demand advertising system.

Discussions between networks and operators are happening, and we’re starting to see the first signs of agreement, says Ben Hollin, an advanced video advertising architect for Cisco. “It’s just a matter of time and money.” It’s also a matter of working out the inventory-split deals on a network-by-network basis while honoring the multi-year arrangements already in place.

Hollin says another hurdle is the lack of industry standards for interoperability, although the SCTE, vendors and operators are hard at work to develop DVS-629 – a standard that allows for dynamic, addressable advertising – which will help manage the complex process of putting the right ad in front of the right subscriber.

There are currently seven parts to the document, and four of those are almost ready for ballot, according to Tom Russell, director of standards at SCTE. At press time, the ballot is planned for early October.

Cisco’s CDE-400, a component
of its Content Delivery System.

And a third obstacle, Hollin says, is the infrastructure itself. This is a huge drift from the traditional TV advertising method, and right now there is a bit of a chicken-and-egg dilemma: until there is ad inventory to sell, are cable operators going to fill their VOD offerings with premium content from the networks, and vice versa?

Advertisers, networks and cable operators all agree that dynamic advertising poses a major growth and revenue opportunity. But, as with any new service, they want to make sure they get it right the first time – that it’s integrated properly, that it’s tested properly, and that it interfaces with the traffic and billing systems.

The future is now!
Broadcast TV won’t be going away anytime soon, especially since it is still an efficient way to get content to consumers, says Tim Dodge, Concurrent’s VP of sales and marketing for on-demand in North America. But addressable advertising will allow more content to stray from the constraints of linear television.

And dynamic advertising will allow operators and programmers to make money off of the on-demand platform, says TandbergTV’s Bokor. If this happens, then they will place more and more content there, allowing consumers to receive the benefits of a DVR without having to record content, and leaving consumers without the ability to skip through ads.

“Dynamic ad placement offers a way to defeat ad skipping, it maintains the advantage that cable has over Internet distribution, and it provides new convenience to the viewer,” Bokor says. “So everyone wins. I really believe we will get there.”

And when you add in the ability to target and engage the user with interactive elements, then advertisers really win, says ICTV COO and EVP Ed Forman.

“Where I think things are going are toward ads that are far more engaging and actionable,” he says, “that actually get the viewer to do things that further the knowledge of the product and their interest in the product – in some cases, even move forward and buy the product. The notion of just playing out assets in different ways really is only a limited view of the future.”