Comcast Opens VOD Ad Floodgate

Feb 13, 2006  •  Post A Comment

Marking a monumental shift in the way advertising has been inserted into video-on-demand since the medium was spawned, Comcast has made a deal in which it will become the first cable operator to deploy technology that inserts fresh ads into VOD programming.

Until now, ads have been “baked” into VOD content several weeks before the content appears. But by deploying a VOD ad insertion system from Tandberg Television to Comcast’s more than 9 million digital cable homes, the country’s largest multiple system operator will be able to insert ads into its VOD content on a weekly basis by June, executives of both companies confirmed last week.

The new effort represents the first step toward realizing the industry’s long-term VOD vision, in which ads can be targeted to individuals when they request an on-demand show.

With the Comcast-Tandberg deal, which involves all homes capable of receiving VOD within Comcast’s footprint of more than 21 million homes, Comcast CEO Brian Roberts appears to be making good on his promise to attendees of last year’s American Association of Advertising Agencies conference that the cable company would work to “seize new advertising opportunities that take advantage of technological advances.”

In fact, just last week at a conference in New York, Mr. Roberts asked, “Why is Google so valuable? Because it gives you, after a very targeted search, access to those of us who did the search. It’s an advertiser’s dream. If we can morph the television model into that targeted, just-what-people-want world and then deliver that to advertisers-hello, cable is in the best position to do that.”

Comcast’s move has the potential to open the floodgates for new ad dollars to pour into VOD.

The practice of baking ads has hampered the advertising opportunities in VOD because it limited marketers to place only evergreen spots and eliminated certain advertisers with time-sensitive messages from participating.

Those long lead times prevent a movie studio, for instance, from promoting a film the week before it opens and then swapping in a fresh ad the following week.

The way Comcast and Tandberg are planning to leverage advertising opportunities in VOD is critical given that advertising has now emerged as the clear business model for free on-demand content.

The move is significant because Tandberg’s AdPoint system is now in place as the foundation for all of Comcast’s future VOD ad insertion efforts, said Paul Woidke, VP of technology for Comcast Spotlight.

“Right now in the interconnected environment, advertisers can buy as many or as few markets as they want to with any of the linear networks,” he said. “The Tandberg tools are critical because they allow us to move down the road and have that same functionality in the on-demand space that we have offered for years in the linear space,” he said.

While the new deal brings the VOD sector closer than ever to making a real business of its ad sales, major networks must get involved in the process for the VOD economic model to come to fruition.

Comcast’s initial launch is relatively small in scope. The capability will be available on only three VOD networks-SuccessTV, Music Spy Videos and DriverTV.

Getting a Cartoon Network, CNN or Discovery Channel on board is important because those brands, and other well-known cable programmers, are driving a large portion of VOD viewership. They have also stepped up to the plate early with VOD advertising and will want to reap the benefits from ad insertion and monetize their investments in content.

“The key is going to be to expand the use of this to national content providers in the near future. … You have to start enabling dynamic ad insertion for all networks,” said Raj Amin, president of Amin Media, a strategic consultancy focused on new media. Mr. Amin previously worked as a VP at Tandberg and left the company a year ago.

“For it to go mainstream across the entire VOD footprint, there will have to be input from other networks and agencies,” said Mike Bologna, partner and director of emerging communications at media agency Mediaedge:cia. “I am in conversations with more than one network and more than one operator about VOD ad insertion.”

For VOD ad insertion to happen, a handful of issues must be ironed out, such as how the revenue from these new ads will be split between the MSO, who invests in the technology, and the programmer, who invests in the content.

Many of those discussions have not yet occurred, said Jeff Meyer, senior VP of interactive sales for Scripps. “We are not hearing any significant movement towards dynamic ad insertion,” he said. “I don’t even think it’s gotten to that point of even figuring out the splits.”

But when that happens, the flexibility of ad insertion will help make more advertisers comfortable with VOD and increase the universe of potential advertisers, he said.

Still, VOD ad insertion is the first meaningful new advertising technology the cable industry has introduced in years, Mr. Amin said. So it’s a good starting point for developing VOD advertising into a broader market.

“It’s the first nationally deployed dynamic ad insertion play where a major operator will provide new advertising technology in VOD on a national scale,” he said. “It doesn’t matter that it’s a few networks [initially]. If it works for [those] networks, it can work for all the other networks too.”

Installing the basic plumbing to serve up ads in a highly targeted fashion can help VOD compete for ad dollars with broadband, where content providers have been migrating in droves in the past year, said Reggie Bradford, president of Tandberg Television.

“The endgame is sort of the Internet ad experience on television,” he said. “All of the promises that Google talks about in terms of the Internet tracking and one-to-one reporting and the perfect [return on investment] in terms of measurement is available in the cable environment. It just needs to be deployed.”

Comcast said it’s open for business and is prepared to work with all programming suppliers so they can take advantage of the capability. But big national programmers-such as Turner Networks, Scripps Networks and Discovery Networks-are not participating yet in this early round of VOD ad insertion because the initial phase is about laying the groundwork with technology, Mr. Woidke said.

For VOD ad insertion to be viable long-term, additional cable operators, advertising agencies and national networks will need to play too. Time Warner, Charter, and Cox, for example, are in various stages of testing VOD ad insertion capabilities.

“We are looking at including VOD ad insertion as part of our overall active advertising plan, which we expect to unveil later this year,” said Joan Gillman, VP of interactive TV and advanced advertising for Time Warner Cable.

Cox is evaluating potential VOD vendor partners for a field trial in one of its markets later this year, said David Porter, director of new media for Cox Media. Like the Comcast approach, that field trial would involve testing the ad insertion functionality on a small scale before it’s rolled out to national programmers. “I want to test the functionality and not the business case,” he said.

That probably won’t happen in earnest until 2007, Mr. Porter said. Cox, for one, would need to introduce the functionality in about half of its VOD markets to be attractive to national networks.

VOD technology vendors SeaChange and C-Cor are testing dynamic ad insertion capability with partner Atlas On Demand, which provides a front end “dashboard” for advertising agencies to manage VOD campaigns. Market deployments are expected in mid-2006, said Scott Ferris, general manager for Atlas On Demand. “We are mostly getting through the technological hurdles,” he said.