While cable operators have wrestled with how to make video-on-demand (VOD) compelling for advertisers, Charter Communications thinks it has the solution. Charter has enlisted a team of technology vendors, programmers and advertising agencies to create a “dynamic-insertion system,” being tested in St. Louis, that switches VOD spots out on the fly and allows advertisers to match the freshest ads with the most relevant content.
Participants in Charter’s trial, which kicked off late last month, include video-server vendor C-COR, encoding- and transmission-infrastructure supplier Harmonic, advertising-software firm Atlas On Demand, content distributor TVN Entertainment, programmers Hollywood.com Television and Vehix.com, and ad agencies Ogilvy North America and Mediaedge:cia.
The VOD ads are available to 250,000 Charter digital subscribers in St. Louis. “It’s the largest field trial of dynamic ad insertion in North America,” says Todd Stewart, Charter corporate VP of national advertising sales and development.
With VOD representing cable’s biggest weapon against its satellite competitors, operators offer a bevy of pay-per-view movies and, increasingly, primetime shows. But the mass adoption of free VOD has been slowed by the difficulty of inserting advertising into the content, a process that usually involves placing the spots at the same time the program is compressed as a file for storage on a VOD server.
Charter had done some advertising around free on-demand content before, but it was limited because of the labor involved in pre-encoding spots. Its participation in last month’s “Monsterfest” on-demand initiative with AMC took 45 hours of encoding, says Stewart, because Charter had to prepare seven versions of the VOD files in order to localize ads for different geographic zones.
Inserting commercials during the VOD-encoding process means that an embedded spot might be several weeks old before it airs and can’t be removed or changed without redoing the encoding. Such shortcomings have limited the appeal of free VOD to advertisers, which might not be able to promote time-sensitive events or change spots as part of a long-term campaign.
Charter aims to fix that with the test, which places pre- and post-roll spots ranging from 15 seconds to two minutes around movie trailers and car-shopping segments. The dynamic-insertion trial isn’t the first of its kind. In September, small cable operator Sunflower Broadband teamed with VOD vendor SeaChange, Atlas, MTV Networks and Mediaedge:cia to successfully insert ads for the film Jackass: Number Two into Comedy Central VOD content.
But this represents the first time a major cable operator has rolled out the technology. It’s aimed squarely at national advertisers, which have long awaited dynamic insertion.
LEARNING WHO THE VIEWERS ARE
Charter’s new insertion system will allow advertisers to rotate out spots based on changes in their campaigns. For example, a commercial previewing a theatrical release could be swapped out for a spot touting a strong opening weekend at the box office. But the real benefit of dynamic insertion is the addressability of the VOD system: its ability to target individual set-top boxes. That will allow Charter to quickly match relevant spots with VOD content based on genre, deliver geographically and demographically targeted ads, and accurately track viewing of pre- and post-roll spots.
Stewart expects to begin testing the addressability of VOD ads, including targeting spots down to the ZIP-code level, next year.
The targeting and measurement data possible with VOD advertising are very attractive to advertisers, which have complained about the lack of accountability in TV advertising. “We’re just starting to figure out how to leverage it from an advertising standpoint,” says Maria Mandel, partner and executive director of digital innovation for OgilvyInteractive. “But the work we’re doing with Charter is very analogous to the way online advertising is being served, tracked and optimized.”
With VOD consumption on the rise —research states that 85% of digital homes have access to on-demand, up from 50% two years ago—its ad marketplace is growing as well. Industry analyst Bruce Leichtman, principal of Leichtman Research, thinks dynamic insertion could theoretically combine the best of online and TV advertising. “You get a click, and you know who’s there,” he says. “And you can have a video ad, tailored to that show and tailored to a specific audience. It’s clearly what the advertiser wants.”
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