Targeting With VOD

Jun 9, 2003  •  Post A Comment

Video-on-demand has reached the crucial tipping point where it is no longer just a technology and has now become a service. That means equipment makers and cable operators are seriously evaluating how to take VOD to the next level through advertising, the tried-and-true revenue stream for television.
The notion of targeted advertising has been bubbling for some time and will make its official appearance sooner than anticipated.
VOD equipment and software provider SeaChange plans to introduce later this summer a software solution that will enable cable operators to offer one-to-one advertising by inserting ads into a VOD stream. Fellow VOD technology players nCUBE and Concurrent are working on similar solutions.
SeaChange will test both one-to-one and demographically targeted ad insertion capability in the third quarter of this year with a major multiple system operator, said James Kelso, VP manager for broadband at SeaChange.
The notion of ads offsetting the cost of VOD will emerge rapidly over the next six to 12 months through software enhancements to deployed video server systems-such as the ability to replace ads and to target ads to homes and neighborhoods, he said. That’s because the industry has learned through consumer usage, interest and acceptance that on-demand content can be successful beyond movies. That additional content necessitates a new revenue model based on advertising rather than paying to play.
Ad targeting entails customizing ads that reflect city, neighborhood and eventually individual home demos. Such targeted ad delivery ranges from inserting an ad directly in a stream for an individual home; targeting a node reaching between 200 and 500 homes or a ZIP code plus 4; or customizing the ad at the set-top-box level so the ad runs across a designated market area but can vary widely with different music or graphics, for instance. Advertisers can eventually buy very specific zone placements and deliver specific messages that can be modified on the fly, Mr. Kelso said.
Many of these advertising possibilities are being referred to by the new term “ad replacement.” That means the ads originally included in the content would be removed and replaced with new ones, or the existing ads would be “tightened” by refining the demography, timing and geography of the ads, since viewers are more likely to watch programs when they choose.
These technological possibilities will impact the way ad sales people peddle spots. Ad replacement could be part of an overall buy in which advertisers get the value-added service of having their ads in the VOD stream as well, which could attract new advertisers or entice existing ones to spend more, Mr. Kelso said. More important, subscribers won’t need to foot the bill.
With VOD in 110 markets, operators need to put processes and procedures in place to integrate the two sides of VOD-technology and now advertising-to take VOD to the next level, said Terri Richardson, VP, product management, with nCUBE, a VOD equipment supplier.
Part of the process entails working with programmers on the terms of how ad avails are split nationally and locally, said Guy McCormick, VP, technical operations, Cox Media. “If [content providers] want more targeting, more dynamic ads, that opens up a broad discussion into who owns what, what do you do,” he said.
Ad replacements need to be fluid, dynamic and easily updated, since viewers will be watching at different times, said Stephen McHale, president of Everstream, which has partnered with VOD equipment supplier Concurrent to provide ad insertion capabilities. Everstream is currently integrating with an MSO and plans to roll out a beta trial in about three to four months, with field trials slated for the next six to 12 months, Mr. McHale said.
“We need to up the stakes and create more meaningful and relevant advertising,” he said.
VOD is available to about 9 million digital cable customers, which means the service can potentially reach 25 million total cable subscribers, according to Leichtman Research Group.