VOD Ad Project Reveals Results Of Survey on Industry Expectations

Mike Donahue, EVP, 4A’s

Mike Donahue, EVP, 4A’s

May 11, 2011 – There’s no doubting the ad industry and service providers see a big revenue opportunity in VOD, but it’s equally clear the players have a long way to go if they’re going to make good on the promise.
Those are the conclusions to be drawn from research conducted by the Advanced Advertising Media Project (AAMP) in the first phase of its initiative, which, as reported previously (March, p. 8), got underway in October. The project, spearheaded by 4A’s, the trade organization of the advertising agencies, and ad technology supplier BlackArrow, is an industry-wide research initiative created to gauge the effectiveness of advertising within on-demand television programs.

Latest entities to sign on to the project are ABC, NBC-Universal, CTAM and Intel, bringing the total of named partners to 14. Others include A&E Television Networks, CBS, Comcast, Digitas, Discovery Communications, Horizon Media, NDS and Rainbow Media.

The first-phase survey consisted of in-depth interviews with more than 20 media industry thought leaders with the goal of securing a baseline understanding of industry perceptions and opportunities related to dynamic VOD advertising. One of the main findings was the perception that free VOD must be marketed as a unique product based on a better understanding of how consumers are using it.

Summing up the results, Mike Donahue, executive vice president of 4A’s said, “There was a clear sense among all participants in the study that VOD offers unique strategic advantages to service providers, programmers and advertisers. At the same time there was widespread affirmation that VOD is advanced television – not simply an alternate form of Web-based video, and as such requires specific agency approaches that maximize its value to consumers and the media industry.”

At the same time, respondents indicated they saw a role for free VOD as a bridge that connects linear TV and online environments. From an advertising perspective, this suggests VOD should not be lost in operators’ attempts to position TV Everywhere and certain over-the-top options as branded components of their service portfolios but, instead, should promote free VOD as the dominant source of time-shifted high-value programming for viewing on the TV.

AAMP offered a handful of anonymous quotes from interviewed executives as examples of commonly held views. For example, the yin and yang of the VOD advertising category were well expressed by a network ad sales executive.

“It is way too hard [to sell and manage VOD advertising,]” this person said. “But, we believe in it as a medium. It is funny: my team will moan and complain about it, but nobody wants to give it back to the television team, because we still believe it is the future.”

AAMP was encouraged in its primary goal of learning more about consumer behavior with respect to VOD viewing and responses to advertising. The expectation is that the approach needs to be different from what’s done with linear TV.

“I really don’t think we understand what consumers decided about VOD and what they really want and expect,” said an executive at a cable distributor. “Right now, I think a lot of people are thinking, ‘Oh, let’s just throw in a bunch of commercials like we do on regular TV and we will make money’. I don’t think that is going to happen.”

Said another executive engaged in advertiser marketing: “VOD offers the consumer the ability to manipulate time, content and access in ways I don’t get to do in linear TV…Now we are talking about not CPM or impressions, but going further into the relationship-building process with the consumer.”

Indeed, said a cable VOD executive, “How that [VOD advertising] inventory is presented to the market has the furthest to go. I am not sure that the merchandising of the platform and the way in which it will be brought to market actually matches well with the functionality provided.”

Metrics to be used in assessing performance on VOD advertising are much on people’s minds with the thought that ways must be found to use the systems Madison Avenue is already accustomed to rather than imposing new modes of measuring results on the category.

“If you can use existing metrics that everybody sort of accepts, but use them in a way that helps us understand and demonstrate what we want to show, I think you are better off,” said a programmer research executive. “Any metric we have is always, in some way, a proxy for a real gain: ‘Did we sell more Coca-Cola today?’”

Bottom line, survey participants made clear VOD is an opportunity that can’t be ignored. “Our VOD growth has been phenomenal,” said an advertising sales executive at a programming network. “[W]e are actually seeing good VOD growth numbers across the board and have been for a number of years. I think it goes back to that fundamental or philosophical question, which is: Is it marketing your own shows and driving tune-in? Or, is it about…extending your reach and providing ad impressions?”

Among the companies that participated in the survey were A&E Television Network, Cablevision-RASCO, CBS, Combe, Comcast, Digitas, Discovery, FOX, General Motors, Interpublic Group (IPG), Mediasmith, MediaVest, NBCU, Rainbow Media and Starcom. An abbreviated version of the detailed Phase I study is now available for download from the AAMP website at http://aamp.blackarrow.tv.

The AAMP working group also announced it has completed the test design and has defined the parameters of the second phase of the study – a VOD research lab that explores and validates consumers’ responses when engaging with advertising in simulated VOD versus traditional TV environments. Phase II is expected to be complete by the end of the summer.

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.