Have Good Content, Will Watch Ads

A couple months ago, executives from erin- Media LLC released some eye-opening video-on-demand usage statistics at a conference on advertising and technology. In a nutshell, the research showed that a majority of the people who call up a VOD program watch the 15- to 30-second commercial associated with that content.

This is one of those kernels of information that most VOD proponents hoped would become reality. And it’s another important step towards legitimizing VOD as a viable revenue stream.

The services erinMedia provide are detailed on page 37. It joins an underground band of companies pushing to make VOD a legitimate advertising revenue stream. Like other proponents in the space, change can’t come fast enough.

But if you step back and take a look at the big picture, you can see several undercurrents that are quickening the pace of VOD as an advertising medium.

First, Madison Avenue executives know their business is undergoing a sea change. Most aren’t quite sure what direction it will all take, but VOD will be part of it, and perhaps a big part of the new media landscape.

Traditional advertisers are spending more and more money on the Internet, especially as broadband connections increase, making video ads more palatable. Internet advertising is approaching $10 billion in annual revenue. While much of that is paid search, an increasing amount stems from traditional advertisers shifting dollars to reach desirable younger demographics.

The usage patterns of those demographics are causing advertisers to open their eyes to new media, including cell phones and portable devices, beyond the Internet. That’s good news for VOD, because any new platform will have a cache for agencies that need to look smart for their clients. Nothing pleases a client more than an agency that has the magical answers on how to reach consumers in this new world where TV’s mass medium status is losing some cachet.

The steady increase in digital video recorder penetration also serves to hasten interest in the VOD platform. Advertisers may play in the DVR universe, but VOD, today, represents a slightly better way to reach audiences that can be verified by ratings.

All the work MSOs and the Cable & Telecommunications Association for Marketing are doing on VOD ratings should be applauded, but can’t come quick enough for some.

The sooner cable meets most of the needs of agencies and clients, the quicker VOD ad dollars, and better programming will flow to VOD.

One intriguing finding of erinMedia’s research was how ads tied to program content are watched by consumers. Ads for National Football League merchandise inside NFL Network On Demand programming is a no brainer, erinMedia says. Viewers don’t even see those commercials as advertising. It becomes a seamless part of the programming, which is more than any advertiser can ask.

VOD allows such targeted opportunities, and the ability for advertisers to be even more effective with their message, compared to regular media.

While not all MSOs are following Comcast Corp.’s strategy of thousands of hours of free-VOD content, the constant flow of statistics coming from the company is gaining the attention of Madison Avenue.

Every time Comcast reiterates it will record 1 billion “views” of VOD programming this year, it forces the advertising community to pay attention. That community may still have a laundry list of wants and desires, but Comcast chairman and CEO Brian Roberts and company, by sheer force of will, is making them pay attention. That also is a good thing.

Nascent interactive TV ads, like those seen on competitors Dish Network and DirecTV Inc., have a beneficial effect because it shows Madison Avenue is starting to think outside the box. MSOs could carry the same ads. Comcast signed a deal with Reebok to carry an extended version of an ad featuring pro basketball star Allen Iverson on its VOD platform.

At the end of the day, VOD advertising is coming together. It may be moving a bit slowly for some, but the signs of progress are there. At this stage in the development, it’s all about momentum.

That’s the key the industry has to keep in mind. Keep moving things forward. Keep adding strong content. Keep refining ratings and measurement tools for agencies and clients. Keep willing to experiment with new message forms.

If all those things keep progressing, VOD will become a solid advertising revenue stream that benefits all.