Ad Agencies Join Effort Aimed At Defining VOD Opportunity

Nick Troiano, president, BlackArrow

Nick Troiano, president, BlackArrow

March 18, 2011 – Signaling that Madison Avenue senses the time is finally at hand for bringing dynamic advertising to VOD, the advertising agencies’ major trade organization, 4As, has signed on with technology supplier BlackArrow to spearhead an effort to define the opportunities.

The Advanced Advertising Media Project (AAMP), undertaken without fanfare last October, is drawing a growing number of additional participants, now including A&E Television Networks, CBS, Comcast, Digitas, Discovery Communications, Horizon Media, NDS and Rainbow Media, among others, officials say. “As consumer viewing trends evolve, agencies are seeking clarification on how best to integrate numerous TV viewing platforms into their media buys and optimize value for advertisers,” says Mike Donahue, executive vice president at 4A’s.

AAMP has already completed the research slated for the first phase of its agenda with the intention of eventually developing a road map to effective advertising on all the categories of VOD that are offered at no extra charge to pay TV subscribers.“ By working together with industry leaders on the AAMP initiative, we will be able to gather and analyze data that supports research-based, strategic decisions around advanced VOD advertising,” Donahue says.

In the first phase of the study, AAMP researchers completed in-depth interviews of more than 20 media industry thought leaders to secure a baseline understanding of industry perceptions and opportunities related to dynamic VOD advertising. Study results, to be announced shortly, will cover such topics as the current perceptions of TV, the future of advanced TV, barriers to advertising adoption within VOD and the prioritization of requirements – by sector – of VOD advertising.

Phase Two will engage a VOD media research lab to explore and validate consumers’ experiences when engaging with advertising in simulated VOD and linear TV environments. Phase Three, an in-market test, will employ the collected media lab data as a basis for comparison with real-world results in a live consumer trial with an unnamed service provider.

“The advertising community clearly desires the mechanisms to deliver effective, relevant messages to on-demand viewers, but also needs to understand how technical potential and consumer usage will converge to create optimal business models,” says Carl Fremont, executive vice president and global media director at Digitas. “Because AAMP explores a wide variety of VOD advertising variables, the initiative is uniquely designed to identify the obstacles and opportunities for brand content that are shaping new on-demand advertising models and measurement.”

Such research is essential now that the technical foundation has been laid to scale VOD advertising, says BlackArrow president Nick Troiano. “No one has done research on advertising effectiveness in VOD,” he says.

Moreover, with TV entertainment programs now accounting for over 30 percent of the time people spend watching VOD content, viewing trends have raised the profile of VOD as an attractive advertising medium. “VOD consumption is growing at a rate of over 20 percent per year, and the fastest growing and now largest category is TV entertainment,” Troiano says.

“We knew 2011 would represent a tipping point for the industry to start thinking about how advertising in VOD can be monetized,” he adds. “Beyond the technology and operational issues, it’s generally a perception issue. We wanted to understand what those perceptions and issues were.”

Based on what’s been reviewed so far in over 40 pages of transcripts generated by interviews with executives from across the advertising, content and distributor communities, those perceptions are all over the lot. “One of the real interesting things we learned is at the highest level there’s not a common view of ad insertion in VOD among stakeholders,” Troiano says. “Agencies and advertisers have different views than operators or programmers.”

More fundamentally, there’s even lack of clarity as to who watches VOD. “There needs to be a better understanding of what people watch and who they are,” he says. “That’s one of the key questions that everyone is asking.”

Another question raised in the interviews is whether the 30-second commercial is viable for getting messages through to VOD viewers. It may be that the way advertising is done with the clustering of spots in live TV programming conflicts with how people want to experience TV when watching it on demand. As the consumer research segments of the project get underway “we’ll be testing long-form ads, maybe 75- to 90-second ads,” Troiano says. “We’re looking at the VOD medium as wide open.”

In the next phase of the project consumer, now underway, research firm Ipsos OTX is providing media lab facilities for testing consumer behavior in a simulated living room environment. Slated for completion in June, the research is taking place in Los Angeles and New York with plans to engage 500 people in each facility to watch programming with various ad types and formats.

“We want to measure ad effectiveness on the consumer in VOD as well as the DVR and linear environment,” Troiano says. “We’ll be looking at things like the impact of different advertising modes with respect to brand recall, demographics, ad categories, content genres – the whole suite of advertising metrics the industry has identified to test advertising effectiveness on TV. We’ll be testing across those variables with low, medium and high advertising loads and correlating that experience with the DVR and linear results.”

The simulated environment is an essential step to mounting a real-market trial, he notes. “In a controlled environment we can create many more different types of engagements than you could in the home environment. What we learn from all those scenarios will help inform what the phase 3 initiative will look like.”

While individual characteristics such as age and gender will be taken into account, the project at this point is not attempting to measure the effectiveness of targeted advertising based on individual tastes and behavior. Nor will the testing look at how free VOD viewing is apportioned across the generations of content from old chestnuts to the latest prime-time fare.

“We are testing ad effectiveness by ad categories – retail versus tech versus travel” Troiano says. “But our focus is on testing ad effectiveness in the time-shifted environment without regard to the age of programs or specific behavioral characteristics of the viewers.”

Through these three phases there won’t be any attempt to factor in advertising measurements respecting content offered in on-demand mode through online TV Everywhere strategies. “Where AAMP moves on will be up to the members,” Troiano says. “There’s clearly an expectation that ad sales processes will eventually incorporate TV Everywhere with VOD. The infrastructures are aligning toward it, and there’s certainly an interest on the part of the advertising community in achieving non-duplicative reach across different mediums.”

But even though the content might be the same in both venues, there are issues that must be resolved before the two are brought together in research. “To be honest the issue is when you converge online with TV you have a lot of those big questions around standardization of use of data and reporting that haven’t been answered,” Troiano says.

“There’s not yet a clear business model for online distribution, but as TV Everywhere rolls out there will be an opportunity for the industry to determine the best ways to monetize,” he adds. “Advertisers care less about platforms. They are looking at integrated channel strategies. What we’re doing now is just one step toward helping to bring VOD into the mix of what advertisers are looking for in the way of cross-platform opportunities.”

The participation of Digitas in AAMP is a good sign that things are moving in this direction, he adds. “We’re excited to have Digitas. They’re a digital agency that recognizes the importance of the convergence of VOD and broadband. We have another major agency that’s unannounced at this point which will be supporting the initiative.”