Video Research Focus

The ad landscape for professionally-produced online video has advanced significantly in the past 12 months.

The initial research focus by the networks was determining whether online viewing was cannibalizing over-the-air viewing. It makes a difference because it doesn't cost the network any more to have 100k additional viewers over-the-air. However, if those same 100k viewers watch online, the network incurs significant bandwidth costs. (Content delivery networks are more smartly delivering download-and-play streams by pausing stream delivery when the video is paused. This prevents wasted bandwidth in case the viewer doesn't come back to watch the rest of the stream.)

With sufficient evidence (for now) that online viewership is incremental, the primary research focus by networks is optimizing the ad experience for viewers. They are sharing best practices with advertisers and agencies. Fewer advertisers are using the same spot throughout an entire episode (for which they "own" that consumer-viewing experience). Rather, they know that to enhance the user's experience, they have to rotate creative. For example, on Hulu, DirecTV rotated their TV spots about a fictional cable company it is mocking. You won't see the same DirecTV spot twice.

Four or five months ago, online viewers were barraged with the same TGIF or Palm Centro spot (with the mini-me's) four or five times during an hour-long episode. Not every show is an "owned" experience anymore, with creative wear-out concerns and negative repercussions very realistic possibilities.

Other general findings show that the more interactive and/or memorable the ad experience, the more positively it reflects on the advertiser. Hence, a "branded canvas" (during a commercial pod) with multiple interactive components rates significantly better than a flat 15-second or 30-second spot. A Media Contacts advertiser, Choice Hotels, is running on NBC.com with a Pac-Man like game during the break.

Video and BT

I agree with eMarketer's Hallerman in the most recent Behavioral Insider blog entry (Video is BT's new BFF) that behavioral targeting (BT) will eventually come into play when there's more video inventory. Besides, how can you not love a blog entry that uses the acronym BFF?

Even now it could be applied to UGC and short-form content. But my take is that UGC will be on the lowest rung of the video pricing ladder and will continue to be dominated by overlay units rather than any pre-, mid-, or post-roll. Many, if not most of this inventory, will be sold on a CPA basis, and video ad networks will come into the forefront - it's the monetization (and arbitrage) of remnant inventory all over again. So BT will definitely play a role.

Then, as we go the next rung up the video pricing ladder, BT can also play a role with short form professionally produced content as well.

As you go higher up the value ladder, BT will have the least influence with premium first run shows online. They will still command premium rates and there won't be enough eyeballs generating the supply, especially with the networks offering makegoods on audience shortages with digital makegoods. The most profitable aspect of BT is taking remnant inventory and tripling or quadrupling the CPM with data. You can do that high ROI at the bottom rung of the value ladder but not at the top.

Out-of-Home Video - The Real Third Screen

Mobile is touted as the third screen. Mobile video, though, has an unjustifiable amount of buzz as the hot topic. In the US, only 6% of subscribers watched video on their mobile devices (according to a recent M:Metrics release). Granted, that number will push upward with more 3G devices and especially widely popular ones like the 3G iPhone. But it will take a while for the penetration of mobile video to even approach 20%.

On the other hand, out-0f-home video is the real third screen. Ad spending reached $1.3 billion in 2007 and is forecasted to reach $3.2 billion by 2011 (according to DigitalSignageExpo.net). The potential reach is staggering because it can take so many forms in a variety of venues: gas stations, retail locations, bars and restaurants, taxi cabs, sports stadium, health clubs, doctors offices, movie theaters, and more. According to a recent study by Seesaw Networks (Digital Out-of-Home Media Awareness and Attitude Study), on average, people recall having seen digital signage in six different types of locations in the past week.

The variety of venues, screen sizes, and network operators make it a daunting medium to take on. The entities of CBS Outernet and NBC Everywhere , as umbrella networks with familiar content, will go a long way in bringing media agencies and advertisers to a comfort level for making buys in the medium. OVAB (the Out-of-Home Video Advertising Bureau) will be releasing some audience research this month. In addition, OVAB also has RFPs out to develop a planning tool.