Dynamic ad insertion (DAI) allows network operators to deliver targeted, addressable ads, and by monitoring subscriber response, operators can reap mountains of valuable viewer data. Deploying DAI still tends to require the resources available to a Tier 1, but like many expensive innovations, DAI is becoming more common, will become more affordable and easier to implement, and should be showing up on the radar screens of Tier 2s and Tier 3s soon. Wide Open West (WOW), for example, is heading into a trial of the technology soon.
“The bulk of DAI interest is with larger operators, but once they adopt best practices it trickles down to smaller operators, who are definitely interested in DAI,” said Aravindh Vanchesan, digital media industry analyst for Frost & Sullivan.
Traditional ad insertion technology has gained traction, experts maintain. Now, DAI is gradually getting its own traction too, albeit with some major hurdles, particularly for the smaller cable operator community.
“DAI is a good way to monetize investment, but challenges such as storage capabilities, ad servers, rights agreements and a lot of complexities make it difficult for tier 2 and 3 operators. And it’s not just VOD, but linear, TV everywhere, and mobile. It’s proportionate to how large their VOD libraries and subscriber bases are,” Vanchesan added.
Despite those challenges, a handful of smaller operators are wading into the DAI pool, or at least exploring its potential.
Patrick Knorr, EVP of business solutions for Wave Broadband, said, “VOD advertising is key, and the opportunities for tier 2 and 3 operators to support local ad insertion and national ads will be increasingly important to the ecosystem, which ultimately will include Internet advertising. Most smaller operators outsource their advertising, so the question is how efficiently can they mine the revenue. But DAI is the future.”
And there can be a clear return on investment with DAI, explained Chris Hock, SVP of marketing and partners for BlackArrow, a leading provider of ad insertion solutions.
“Revenue has grown with DAI, Scripps for example, so operators must look at DAI, along with advertisers. They want to reach targeted markets and unlock audience data,” Hock said.
Tier 2s and 3s want the same thing. But getting it won’t be easy.
Added Hock: “There’s a change in tone among tier 2 and 3 operators. They get it, and know they must eventually do DAI. But there are major hurdles like capex. The technology issues have been solved, so now it’s about the business plan, justifying it, and putting the business ecosystem together.”
And a key component to that ecosystem may be outsourcing DAI, maintains Mark Lieberman, president and CEO of Viamedia, a leading cable advertising firm.
“There is opportunity for tier 2 and 3 operators and a table stakes opportunity for DAI. Once appointment TV goes away it all goes to VOD, which will require a different kind of TV advertising. So there’s both opportunities and challenges for tier 2 and 3 operators with DAI.”
One major challenge, he noted, is competition. And it’s from giant Comcast. “Comcast also competes for ad dollars. That leaves smaller operators out there without a solution. That’s what we’re working on.”
In the meantime, service providers such as Wide Open West (WOW) are moving closer to DAI.
“We’re very optimistic about DAI. It’s still early, but the technology issues have been thought through. It’s still costly, and there are rights issues, so most won’t be investing in DAI any time soon. But the day will come for DAI with tier 2 & 3 operators,” said Peter Smith, SVP of programming and advertising sales for WOW, which will begin a trial of DAI at its Lawrence, Kansas, system (formerly Sunflower) and based on its results could launch DAI in its Chicago and Detroit systems.
In the meantime, small operators are exploring the potential of DAI.
“There is an appetite among smaller operators for DAI, even with inherent challenges of scale and resources. So we need a model that works across all tiers. We’re seeing smaller operators waiting for the technology to shake out and mature, then go to DAI and take the benchmark from the larger operators. And the cost of deployment is coming down,” said Charlie Barnes, SVP of product strategy and management for FourthWall Media.
Just how far down those costs drop, and how content libraries grow will likely help determine DAI’s future in the smaller operators’ community. But it’s still early.
Concluded Hock: “DAI will be in smaller tier 3 systems down the road as adoption occurs, particularly when hooking up to the cloud. The challenge is putting all the pieces together.”