Bright future for VOD ads but cable could miss out on iTV advertising

The failure of Canoe Ventures to deliver on its promise of advanced interactive TV advertising has left the U.S. cable industry exposed to competition from Connected TV and synchronous second screen advertising. That is the view of Andrew Rosenman, President of Arise Communications, someone with inside knowledge of the Canoe project from his time helping to define and develop Comcast’s dynamic advertising insertion (DAI) platform for cable and working with the teams tasked with delivering the EBIF interactive TV platforms at the operator.

Interactive TV has never really fulfilled its potential on traditional TV. Rosenman highlights the long innovation cycles typical of cable operators and telcos and the time it took to bring concepts like OCAP/Tru2Way and EBIF to reality. He says there is an ongoing danger that the market moves on before the major operators have finalised their solutions. He contrasts this to the rapid innovation in the digital online market. “Even at the big U.S. service providers you are limited in what you can achieve on your own. All the innovation in second screen is the result of thousands of people worldwide being able to work independently and in competition on a common development platform, the web. That is going to result in faster innovation and more interesting developments.”

Bullish about the prospects for interactive advertising on Connected TV and second screen, Rosenman believes there is a distinct possibility that content and channel owners will bypass the Pay TV platforms in favour of companies like Shazam and GetGlue to help them develop interactive relationships with viewers. “There are hundreds of providers competing in that second screen space and content owners would have much more leverage over a second screen partner than with their traditional distribution partners. They would have control over their roadmap for interactive services,” he explains. “Second screen interactivity is outside the realms of any revenue sharing that operators might insist upon, as well.”

It is a completely different picture when you talk about on-demand advertising, however. Rosenman, whose company is a specialized consulting practice covering advanced advertising and emerging media channels, was early to spot the potential of dynamic advertising insertion (DAI) for VOD and how it could help advertisers reach audiences in an increasingly time-shifted world. “VOD is self-selected by the consumer and typically if they self-select, rather than choose it from a linear schedule, the probability that they will complete watching a programme is much higher,” he argues.

Rosenman, who is speaking at this year’s Future TV Advertising Forum,  adds: “Cable operators have already sunk their capital into providing on-demand content but the costs are rising because they want to provide larger libraries, including past seasons. They are worried that without this people will go outside their walled garden for that content. So VOD DAI has enormous potential. There are billions of free views and nobody is monetizing them today, and this is advertising via agencies, which is very clean.”

The business model is simple: content owners pay the platform operator a flat CPM fee to harness their on-demand advertising capabilities. There are no revenue shares. “There could be a relationship where some content providers let the local advertising operations for the distributors sell some inventory if they cannot sell it themselves. But nobody wants to audit this and count revenue,” Rosenman reports.

While dynamic ad insertion for VOD has been around a few years, the technology made it difficult to insert new ads (in place of the originally aired advertisements) midway through a programme. That is now changing. Rogers Communications, the Canadian cable operator, became the first North American service provider to introduce dynamic insertion during mid-roll breaks in February, using the technology for content promotions in its Rogers on Demand programme streams. This was another sign that VOD DAI is advancing.

Rosenman reckons it is now a no-brainer for a service provider with an on-demand catalogue to use ad insertion technologies to monetize the content. However, he cautions that content owners will want to avoid a new ‘silo’ so will insist that their VOD DAI consoles integrate with their digital campaign management systems.

Right now, dynamic ad insertion does not necessarily mean the advertising is addressable, but addressable ads are coming, first to VOD but then to linear television. Rosenman thinks this will be a powerful tool for linear TV. “I think the power of the platform will start to emerge when operators start to use set-top box data and third-party data to do much more relevant ad matches. In the next 18 months we will see an improvement in the use of the vast amounts of data that are available through telco and cable systems and the quality of the ad matching. That is the next big phase. Addressability of VOD based on household profiles will be the first usable advance.”

North American operators have pioneered advanced advertising and at Future TV Advertising Forum you can hear from some of the people who made it possible, including Andrew Rosenman. Arise Communications was used by Comcast to manage the development of its first broadband video advertising platform in 2006 and was retained to define and develop the Comcast Cable VOD dynamic advertising insertion platform. The company also worked with the teams at Comcast tasked with delivering the EBIF interactive TV platforms. Andrew Rosenman is also working with Rogers Communications to deploy advanced media products and business platforms. He is highlighting what has worked and failed in North America and giving his insights on how advanced advertising will develop at the London conference, November 28-29.  Download the agenda here.