Inserting advertments into a Video-On-Demand (VOD) stream is akin to inserting rich media ads into a web page in this way: the advertising inventory of both mediums are non-linear. Television advertising is traditionally a linear inventory model - that is, commercials appear in pre-defined breaks inside regularly scheduled shows.
So this prompts a question if the advertising divisions of the cable companies repackaged their VOD or DVR content as "ad networks," would advertisers accept that model?
History is filled with examples of ideas that sound logical at first blush but fail because they are not ultimately accepted by the market. The creation of a VOD Ad Network is a big idea whose underlying premise is that advertisers will buy it in substantial quantity. But the question still remains, if you build it, will they come?
To date, the most significant one-on-one advertising network is DoubleClick's DART solution and it does not address television-oriented video. This network coordinates rich media advertisements like banner ads and flash ads onto web pages in real time. While DART is good for its intended business mission, it cannot handle the requirements of VOD because of content distribution logistics. Also, it cannot function on cable's infrastructure - a significant source of VOD content. Nevertheless, it is a good place to study the advertisers who spend significant dollars to target their message. A more specific question might be this: will the advertisers who currently value Internet-based non-linear inventory also find value in non-linear television-based inventory?
A careful review of the top advertisers by volume in 2003 tells an interesting story. The significant advertisers were the surviving "dot-com's" and joining them were mainstream advertisers who also buy television. The accompanying table lists the 24 largest by volume. The advertisers shown in red are those that also buy 30-second spots on television. From this we can see that 15 of the top 24 Internet advertisers already buy both linear television ad inventory and and non-linear Internet inventory.
The rationale for this is straightforward; advertisers want to display their message to a significant sized demographic and do so repeatedly. In the advertising business this is called reach and frequency. When the eyeballs shift from one medium to another, the advertisers follow. Note: rarely does an individual advertiser simply increase their total budget because of the new medium, rather they shift the dollars between the media as is appropriate.
Video-on-Demand is expected to change viewing habits forever and advertisers will have the same requirement to reach them. The dollars that they spend on these new mediums will probably not be new. Instead, they will plot how much traditional televison's value has eroded and reallocate those dollars into other media. With a transactable VOD ad network in place, it is logical that many of those dollars will remain in television-oriented advertising but with a different media focus.
Once VOD and DVR usage reaches a critical mass, there should be a ready acceptance by the advertisers to transact it.
First, VOD and DVR ad inventory are non-linear, just like the Internet, and many advertisers are already comfortable with that inventory model because of their use of DoubleClick's ad server.
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Second, unlike the rich media content that DART delivers, Video-on-Demand and Digital Video Recorders are television and advertisers have demonstrate their preference for the motion and emotion that can be delivered through that medium every day by the huge amount of money they spend on television.
There seems little doubt that advertisers could accept a VOD Ad Network if it were built and marketed correctly.
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