The technology behind dynamic ad insertion in VOD is proven and available from any number of vendors. These systems have been successfully implemented by operators all up and down the size spectrum, including Comcast, Bresnan Communications and Sunflower Broadband.

Sunflower Broadband began trialing dynamic ad insertion in 2006 and is often credited as the first operator to introduce it commercially. The company is using SeaChange International’s AdPulse ondemand ad insertion system.

Cablevision began dynamically inserting ads one year ago, including some limited targeting based on content.

Virgin Media, another AdPulse customer, began rolling out dynamic ad insertion earlier this year.

Late last year, Comcast began a VOD ad insertion trial in its Jacksonville, Fla., system with BlackArrow, in which it is an investor (along with Cisco and Intel, among others). BlackArrow provides ad management systems.

Cox Communications began a trial around the same time, inserting ads in a small number of shows available through its MyPrimetime service, partnering with NBC-Universal, and using technology from SeaChange, Avail-TVN and Texscan NT.

Earlier this year, Bresnan ran a trial that brought together system components from Arris, Avail-TVN and BlackArrow. Bresnan CTO Pragash Pillai told CED in our "CTO Roundtable" in last month’s issue that the equipment worked well.

Bresnan isn’t going beyond the trial, however, for lack of workable business models. That workable business models are wanting is a widespread complaint about dynamic ad insertion in VOD.

Frequently when “business models” is invoked to explain the lack of activity in one endeavor or another, the missing element is a client that will pay for the service. But with VOD availability expanding and VOD viewership growing rapidly, there’s no shortage of advertisers that would like to take advantage of dynamic ad insertion.

In fact, Sunflower says it regularly sells out its ad inventory well in advance. The company reported being able to charge CPMs 10 to 50 times higher for VOD ads than for ads in linear TV, and the operator is growing VOD ad revenue. Sunflower is selling inventory largely to local advertisers.

The business model problem seems to kick in when the MSO is much larger and national ad dollars are on the line. In those situations, the problem is that there’s an ongoing argument about who gets the money for the ad placement.

There’s a relatively fixed number of ad spots (aka “avails”) in each program, usually fixed at 30 or 60 seconds. Programmers keep most of the avails in their programs, which they typically sell to national advertisers. The remaining slots go to the distributor – broadcast station or pay-TV system operator – which typically sells to local advertisers.

“The question is now that we have addressable dynamic advertising in VOD, what’s it worth?” said Nick Troiano, president of BlackArrow. “TV is a broad-reach play; you reach 10, 15, 50 million. The issue is scarcity – there are only so many slots at 9 p.m. on CBS. The challenge of online video is there’s no such thing as scarcity. VOD is a commingling of the two.”

The entertainment industry has come to an uneasy accommodation when it comes to measuring audiences, with everyone agreeing to abide by allowing companies like Nielsen to aggregate viewing statistics for the initial showing of a network program, plus on-demand viewing during the subsequent three days – the shorthand for that measurement window is C3.

The value of advertising in C3 is well established, Troiano noted. “But what about after that, C4 through C7? We think that’s a unique advertising window for those who couldn’t afford $900,000 at 9 p.m. against ‘Heroes.’”

Another issue is that there may be any number of avails; the length of the spots could be variable, and they have different levels of effectiveness under different circumstances.

For example, ads placed before the beginning of the requested program (a pre-roll) or in the middle (a mid) tend to be seen by significantly more people than those placed at the end (a post-roll), which tend to be skipped more frequently. But if an ad at the end is watched, it has attracted the attention of the viewer, and thus might be considered more effective.

All of which begs a ton of questions. Who gets to sell the avail, or avails? How much are they worth? If there’s a split on multiple avails, or a split on revenue generated, what’s the split?

“In North America, pre-rolls and postrolls and mids may have different ownership,” explained Malcolm Stanley, director of advertising product management at SeaChange. “The valuation of that, that’s what the discussion is all about.”

Another factor is that MSOs are understandably taking the position that since they are investing money to create the ability to dynamically insert ads in VOD streams, creating ad avails where none had previously existed, they ought to get paid more for those spots. Content owners apparently aren’t ready to concede that point.

With neither side backing down, the result is a standoff, meaning few largewww. CEDmagazine.comjune2010 25 scale rollouts of dynamic ad insertion in VOD until those issues get resolved.

The exception is Virgin Media in the U.K., where many of those issues have already been hashed out.

A key to dynamic ad insertion is doing it in real time, said Craig Schwabl, chief architect at Concurrent, but the problem is that network architectures are different (hub-and-spoke, distributed, etc.), and the VOD ad insertion solution sometimes needs to be crafted to the architecture.

“Our approach is to push decisionmaking to the edge,” Schwabl said. “We think it’s the way the industry is going.”

Another element of enabling the insertion of ads in VOD streams in real time is the ability to manage playlists, according to Stanley. The ability to manage playlists in real time allows an operator to assemble a stream that combines the requested program with ads that are ideally suited to the viewer.

Arris recently cut a deal with Clearleap to accelerate the ability to ingest new ad spots. The two integrated the former’s ConvergeMedia on-demand content management and distribution system with the latter’s Web-based content and workflow management suite for a content management solution for VOD and advertising services. Arris’ system can now leverage Clearleap’s ability to quickly ingest, manage and deploy a variety of advertising assets. The assets range from video pre-rolls and interstitials to graphic overlays that integrate directly into traditional linear or dynamic third-party advertising systems.

OpenTV's EclipsePlus/xG OnDemand

At The Cable Show last month, OpenTV announced the beta availability of its newest campaign management solution designed specifically to handle advertising in on-demand. The company’s EclipsePlus/xG OnDemand manages copy versions and audience segmentation to provide more relevant, audience-specific advertising to viewers.

Content management, audience qualification and placement opportunities are linked.

“There is a clear shift toward a more consumer-controlled on-demand viewing environment. This means that operators require new ways to manage their ad inventories and to maximize how those ads are delivered,” said Paul Woidke, senior vice president and general manager of advanced advertising for OpenTV.

Also at The Cable Show, Ericsson introduced the ability to more accurately target ads in a VOD stream based on EBIF (see “The 2010 Cable Show”).

Part of the goal is to create a playlist for a VOD session – a stream of content with appropriate ads inserted in the appropriate places.

“Once you have a playlist, you now have to manage your assets and advertisements, and that means you need decision support,” Stanley said. “That’s what SCTE 130 is for.”

SCTE 130 is the standard that defines the elements of a national ad insertion system, showing how operators and national advertisers can interface. The first step is to get the capability to individual operators; the next is to aggregate operators.

And that’s where the SCTE 130 standard and Canoe Ventures come in.

“What Canoe brings is a promise of scale,” Stanley said. “Canoe gives operators the confidence to deploy. EBIF is coming online in truly large numbers. The industry would not be making progress without the promise of scale that Canoe provides.”

There are many working parts to the problem, including ingest, the insertion of metadata, transcoding, verification and distribution.

“Doing anything at scale is challenging,” Stanley said. “And as you scale, you want to centralize.”

To that end, SeaChange is using its AssetFlow asset management product as its means of interfacing with all of the other vendors of the various other elements of the system, including encoder vendors, NAS (network-attached storage) vendors and others, Stanley said. “So the operators get the benefit of a highly scalable, highly open system. AssetFlow is in the market now, and we have more in the pipeline for aspects of the upper end of the market.”

Another step is enabling interactivity in an ad inserted into a VOD stream. “It’s an incremental step,” Schwabl said. “You can’t support only linear, or only VOD, or only EBIF. Advertisers want to run ads that may cross all three media.

“Even more important, systems absolutely have to be accountable. If you’re looking at audiences across linear, interactive and VOD, you have to have all the data for the full measurement of campaigns.”

And then what happens if part of the same campaign extends to a handheld? How is that measured? The management platform and the back office systems will have to be able to handle all of that. This is why VOD companies are also involved in the industry’s discussions about multiscreen capabilities.