Virgin touts VOD ad success, but market still evolving

Virgin Media’s expanded TiVo rollout and high-speed data subscriber growth attracted media coverage following its earnings call last month, but in last week’s Videonet-hosted webcast, a Virgin executive drew attention to one segment of its advertising business that also appears to be picking up steam.

“At the moment, we do have a targeted advertising solution running on our VOD platform, delivering … pre and mid and post-rolls,” said Aleks Habdank, Director of Digital Entertainment Product for Virgin Media. “The response from the advertising market has been absolutely phenomenal.”

Virgin began to deploy dynamic VOD advertising in late 2009, offering 30-second pre-roll and post-roll ads from brands such as L’Oreal, Sony, Sony Ericsson, Kellogg’s and Microsoft, according to a press release at the time from SeaChange International, which provided the company with software that enables automatic program and ad matching decision.

Since then, subscribers have increased their on-demand viewing. In its year-end and fourth quarter earnings report in early February, Virgin announced that it had served more than 1 billion VOD views in 2011, an increase of 14 percent over 2010. In its latest quarter, Virgin averaged 90 million monthly views, a 36 percent increase from late 2009.

Those additional views have increased the value of the VOD platform. “I’d almost say that there is more demand than we actually have inventory to supply, which is a fantastic position to be in,” Habdank said. The market nonetheless remains young.

“The challenge that we have is convincing content owners and broadcasters that this new way of delivering eyes is not cannibalizing their current revenue streams, but that it’s additive,” he said. “We’re having to do a bit of an evangelizing job with the advertisers themselves, but also with the broadcasters to embrace this opportunity.

Given evidence from Virgin’s Help & Support Forum, not all subscribers are on board. Complained one sub in early January: “Since you have decided to squeeze more money out of us by putting adverts in on demand programming could you please provide a way of fast forwarding around 4 mins as I WILL NOT BE WATCHING any of these adverts nor buying any of the products advertised as a matter of principle!”

How much to infer from isolated complaints is an open question. According to the Advanced Advertising Media Project (AAMP), which has studied consumer acceptance of VOD advertising in the U.S., consumer enjoyment of VOD remains constant, regardless of the size of the ad load.

The idea that less is more nonetheless has some currency at Virgin. Interviewed last fall for a Videonet report on advanced advertising, Commercial Director for Virgin Media Direct Sales Mark Brandon said that Virgin was taking a minimalist approach to the question of how many ads to air during on-demand programming.

“If you do the minimum possible, by way of ad loads, then you protect and preserve the premium nature of the proposition,” Brandon said. â€œBut much more importantly, from our point of view anyway, you protect and preserve the all-important billing relationship that we have with our customers.”