In a Sept. 17 presentation to investment analysts, Comcast CEO Brian Roberts described an initiative among major cable operators to build an interactive television advertising infrastructure designed to help cable fetch a bigger share of the U.S. television advertising market.
Roberts described the planned interactive platform as a “great monetization machine” that will help operators and programmers attain a bigger national-advertising profile.
But for now, much of the action taking place in interactive cable advertising — and particularly on video-on-demand platforms — has little to do with the kinds of prominent national advertisers Roberts referred to. Instead, for a variety of reasons, cable's attempts to integrate advertising with VOD technology and programming are occurring mainly at the local level, involving homespun programming and advertisers that range from local banks to restaurants and automobile dealers.
A SMALL-SCALE LABORATORY
One reason: Local advertisers seem to be more willing to experiment in isolated campaigns and trials that don't require a grand level of scale across multiple markets.
“I think it's kind of easier for local, in-market understanding in perhaps a more cost-efficient way to test this opportunity and to get excited as an advertiser about this opportunity,” said Comcast Spotlight vice president of sales Kevin Cuddihy. “As for how to build a national plan around an on-demand opportunity, and how am I going to get my clients to it through promotional spots or through telescoping, that consistency needs to be built. But for that local person in the market, it's very easy to understand.”
Local advertisers have been the rule in several of the higher-profile efforts undertaken to marry advertising with on-demand television platforms.
In Seattle, for example, Comcast televises high-school sports over its local VOD platform, with regional bank Banner Bank as sponsor. The “Comcast Varsity Sports on Demand” program “allows us to truly connect with our families and kids,” said Mindy Kraft of the Seattle ad agency Dave Syferd & Partners in a presentation Comcast produced.
In Lawrence, Kan., independent cable operator Sunflower Broadband sold out inventory on its local VOD-content service three months in advance of the debut of a lineup that's 100% local — and populated with original shows like the Sunflower-produced Jayni's Kitchen. Grabbing up available slots tied to the local on-demand cooking shows, news and other programs produced by Sunflower were about a dozen local advertisers.
According to statistics compiled by SeaChange International, which provides on-demand technology for the Sunflower deployment, the Kansas operator served more than 75,000 advertising streams from January through April as part of the effort, elevating its advertising revenue by 4%. More recently, a summer VOD-advertising initiative launched by Charter Media of St. Louis involved a series of local, viewer-generated product reviews produced in concert with ExpoTV, which aggregates product research and shopping information for Web and on-demand TV exhibition. Charter Media recruited a local Chevrolet dealer group to sponsor the local VOD program, and advised the auto consortium about using the VOD platform to create its own long-form content that combines information with an advertising message.
“That's a big part of our proposition: turning that advertiser into a programmer,” said Tom Feary, general manager of advanced media for Charter Media. “Right now, in St. Louis, we're not necessarily focused on network-created programming.”
ExpoTV CEO Daphne Kwon said she thinks ad-supported VOD programming is evolving locally in part because the business arrangements between national cable programmers and local operators over VOD advertising aren't well-defined. “The cable operators locally, they're all trying their own thing, because nobody's helping them, on VOD especially,” Kwon said.
That's not to say on-demand advertising is off limits to national advertisers. Programmers including Turner Broadcasting System, Discovery Networks and others have worked to integrate national sponsors into VOD content they supply to their cable affiliates.
Currently, major cable operators and CableLabs, the industry's technology development consortium, are working to come up with common approaches across markets for describing, televising and tracking viewer response to VOD advertising, which could usher in more interest and usage from national advertisers and agencies. The effort, which Roberts referred to in his September presentation, is being orchestrated under the working name “Canoe,” which was suggested by Comcast president Stephen Burke as a way to signify a collective effort.
But for now, there's not much interplay between national cable networks and local cable providers around VOD advertising. Ad executives contend that national networks offer little inventory for the insertion of local VOD ads. That's why trials like Charter Media's early-2007 test of dynamic on-demand ad insertion in St. Louis relied on content supplied by nontraditional cable programmers.
In its trial, Charter used program clips supplied by Vehix, an automotive information publisher, and Hollywood Video, which supplied movie trailers viewers could request. “We don't have a huge amount of on-demand inventory,” said corporate vice president of national advertising sales and development Todd Stewart said in an April interview.
The absence of defined rules surrounding how much local advertising operators can place around network-supplied VOD shows also is a factor in Sunflower's deployment. “They are not being held up by the issues of scale or deals between content providers and operators,” said SeaChange director of advanced advertising Terri Swartz.
Cable advertising executives also point out that local advertisers may have more flexibility than national advertisers in accepting relatively small numbers of “views” to the commercials or long-form advertisements they place around VOD content.
“Think about a local hospital: If it's a $15,000 surgery, they don't need to generate that many leads through that,” said Comcast Spotlight's Cuddihy. “I think it's just easier at the single, local-market level where there's less of that national planning around it.”
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Media, Math and Myth blogger Stewart Schley writes about media, telecommunications and the business of sports from Denver. He is currently writing a book about the transformation of the U.S. cable television industry.