Future-of-advertising Videos

Phil Leigh Will consumers pay to watch TV shows and movies at the hulu.com website? Hulu.com’s website hosts popular TV shows and movies after they have been released normally. Owners include Disney, NBC-Universal, and News Corporation (Fox). Viewers can watch shows for free but in exchange must also watch commercials since the videos are streamed and not downloaded. Last month, Chase Carey who is the President of News Corporation said that Hulu should start charging fees sometime next year. Presumably he envisions a premium subscription service providing more content or viewing time in exchange for a monthly fee. There are two reasons to be doubtful about the success of such a plan. First, as author Matt Ragas put it, “We all love the information highway, but we don’t want to pay a toll every five miles.” Second, incumbent media companies may be overvaluing their own content. Matt’s remark led me to examine my own subscriptions which are summarized in the accompanying table. Already I pay over $220 monthly for telephone, Internet, and video entertainment. Other services under consideration would advance the total to about $265 monthly.  Such an analysis makes me look for ways to cut, instead of add, services. Phil s Monthly Subscription Fees Naturally, I’ll focus on the bigger numbers first which come from the cable and wireless providers. However, if The Wall Street Journal (owned by News Corp)   editorial viewpoint prevails, the carriers will likely increase ISP fees even higher. That leaves consumers with thinner wallets to buy additional services from Hulu or anyone else. Even if cable and wireless charges don’t go up, consumers may calculate that they’re already paying enough in service fees. Readers of the Baltimore Sun seem to be strongly opposed to paying for hulu.com access. A polling button on the newspaper s website reveals that they voted 20-to-1 against it. You can see the results and review reader comments here. As for content value, the recent success of Paranormal Activity might serve as a reminder to media producers that we characteristically undervalue the works of people who are not like us. It’s reported that the movie was set in a single San Diego home and produced for $10,000. By the day after Halloween it had grossed over $80 million in box office receipts. Much like Internet publishing demolished the value of the printing press, low cost video cameras combined with computer-based film editing and an abundance of people seeking stardom and film-crew careers, necessitates an introspective reassessment of Hollywood’s self worth. Paranormal Activity is more than an isolated echo of The Blair Witch Project. Years from now we’ll look back to see it as data point in a connect-the-dots trend line pointing toward a future of content abundance. To learn more about how your business can exploit or adapt to thye future of media, feel welcome to contact us. You may also want to consider buying our research reports Third Generation Television and Future Developments in Video Advertising.

Phil Leigh What if sponsors paid for video ads only when they are actually watched? As John Wanamaker put it long ago, “I know that half of my advertising is wasted, I just don’t know which half.” For over half-a-Century Nielsen audience rating have supposedly addressed Wanamaker’s question for television ads. It’s the foundation supporting a $70 billion annual business. It’s supposed to tell advertisers which programs viewers are watching and for how long. Given present computer technology it’s downright stunning when one learns Nielsen’s techniques for collecting its data. With so much money on the table there’s a lot at stake. Some industry constituents want to update the measurement technology while others want no changes at all. Any changes are likely to upset somebody’s apple cart. That’s probably why progress in measurement methodology has moved at the pace of continental drift. Nonetheless, sponsors pay the bills and ultimately they’re going to demand more for their money. Nielsen’s flagship service tries to estimate the viewing habits of our entire nation from a polling process based upon imperfect diaries of 18,500 homes. Given the sample size, three-fourths of the 400 cable and broadcast networks are simply not watched enough to be accurately measured. Except for the top 20 markets, Nielsen mostly relies upon paper-logs that panel members (i.e. participating consumers) maintain on the honor system. Even in larger markets where Nielsen provides electronic log-entry, the company acknowledges that users sometimes press the wrong key resulting in a measurement error of up to eight-percentage-points. Owing to the shortcomings of Nielsen data, a number of vendors sell supplemental information. TiVo is one example. With several million DVRs deployed across the nation they provide more granular and real-time data. For example, TiVo can tell how long a viewer watches a commercial. Similarly, the CATV industry hopes to provide far more detailed and accurate data via its Project Canoe initiative. Unfortunately, Project Canoe faces a significant technical challenge. Data formats are inconsistent among different CATV systems. Some set-top boxes are incapable of capturing data and passing it back to the head-end. Each Multiple System Operator (e.g. Comcast, Time-Warner, etc) has proprietary elements in its networks. Proprietary inconsistencies are amplified to the nth degree considering that each MSO is by definition an amalgamation of independent systems typically acquired over decades. In sum, the problem of getting universally accurate measurements out of the legacy CATV and Satellite platforms is going to be as convoluted as the Gordian Knot. Ultimately, the solution could well be to simply cut the knot by putting all video on the Internet. Standards on the Net are decades old, uniform, and well understood by an abundance of developers all over the planet. Measurements can be in real-time and sliced & diced nearly infinitely. Most significantly, Internet sponsors are increasingly demanding Cost-Per-Action (CPA) advertising. Google AdWords conditioned them to expect that it is only necessary to pay when a visitor clicks on ads. Once video resides on the Net, sponsors may insist that they only pay for video ads that get watched.  The new paradigm will nearly eliminate the utility of audience measurement statistics as we have known them. We’ll want different data, but it will be more readily attained on the Net where the granularity and accuracy of measurement is infinitely better. To advertising executives who don’t want to be accountable for the performance of their ads, such a paradigm shift is so horrible as to be unthinkable. So they may choose to simply avoid thinking about it. To them, it’s a creation of Satan anyway, more destructive to their business as the ability of the iPhone to display its Internet Videos on a television screen. Yet, when sponsors pay for video ads only when they actually get watched, the ghost of John Wannamaker will break into a happy grin.

Phil Leigh If you would like to learn how newspapers and TV affiliates can generate incremental ad revenue by selling behaviorally-targeted Internet ads to local businesses, this audio is for you. Behavioral-targeting is one of the keys to success in online advertising.  For example, consider how online merchants such as iTunes and Amazon.com are among the most successful websites in terms of translating visits into sales. There are two reasons why their conversion performance is exceptionally good. First, visitors are obviously pre-disposed to buying since they are visiting an online merchant. But the second reason is more interesting and significant in terms of implications for online advertising. Consider how both Amazon.com and iTunes do a good job of suggesting alternative titles for visitors who arrived looking for related books or recordings. It is not uncommon for visitors to purchase the suggested alternate titles. The banners and texts that suggest such titles are examples of behavioral-targeted ads. Amazon and iTunes target such ads based upon the consumers’ prior purchasing experience at each site. Delivering behaviorally-targeted ads when the ad serving company does not have access to such proprietary information requires a different approach. Most identify visitors by assigning a unique id “cookie” to each visitor at a client site. Thereafter the cookie tracks visitors throughout their ensuing web journey. The platform then makes a rules-based decision about what content to serve based upon the multiple websites that a cookie-enabled browser visits. Behavioral data can be combined with demographic and geographic information in order to produce a greater degree of targeting precision. Last year Yahoo developed such a platform and is offering it to outsiders, including newspapers, and more recently AT&T Yellow Pages, among others. Essentially, newspapers are discovering that their existing sales-force can be used to sell both newspaper and Internet ads to local businesses. Typically one of their strengths is a trusted prior relationship with local advertisers. Yahoo has partnered with a consortium of newspapers to which it provides its targeted advertising platform. There are two advantages that the Yahoo consortium provides to participating newspapers. First, it enables them to sell Internet ads for local businesses that will be distributed on Yahoo web properties as well as the newspapers’ websites. Second, and more importantly, it enables newspapers to sell behaviorally-targeted ads on their own web pages. For example, assume the Yahoo cookie learns that I have been searching for information of BMW automobiles at a variety of websites. Should I next choose to visit my home town newspaper website merely to check on unrelated stories, the Yahoo platform is likely to place ads for local BMW dealers within the online pages of the newspaper that I see. You will see different ads on those same pages based upon your own prior browsing patterns. While Yahoo has not yet made the platform available to local TV affiliates it may do so in the future. Alternately, a competing platform could offer similar services to TV affiliates thereby enabling them to also sell higher priced behaviorally-targeted Internet ads as well.

http://www.insidedigitalmedia.com/002-free-prospectus.phpIf you would like to watch an example of a successful Internet video ad format, this video is for you.MTV conducted a research study to discover the kind of video ad format that works best for their streamed music videos. The results are important because we infer that they ll apply to Interactive television as well. The project concluded that a five-second pre-roll followed by a temporary translucent overlay along the lower third of the screen of the ensuing music video provided the best results. To see an actual demonstration of such an ad click here. While the results of the survey are significant, it is dismaying that the press release failed to contain links to videos illustrating the formats tested. Not one of the three involved companies, MTV, Panache, and InsightExpress, seems to understand that demonstrative videos can be embedded in such releases. If they do understand it, then they don t seem to realize the advantages of demonstrating the video ad formats as opposed to merely describing them with text. Major video-centric media companies should stop complaining that the Internet is not generating enough revenue for them if they fail to use the Web s multimedia characteristics in such obvious opportunities. It s the 21st Century and time to get rid of PR firms that still seem to think that most press release recipients only read them after they have arrived via postal mail.

http://www.insidedigitalmedia.com/002-free-prospectus.phpIf you would like to learn why product promotion campaigns will replace advertising campaigns, this video is for you.Traditionally advertising campaigns are executed by media buyers. Ad preparation, termed creative work, is done by the advertising agency. The sponsoring company determines the campaign budget and contracts with a media buyer to place the ads on the appropriate media. The media buyer determines the optimal allocation among television, newspaper, radio, Internet, and other formats. The buying organization also determines how the ads will run in each media. For example, they will decide which TV shows will get the ads. They seek to optimize the demographic match between the show audience and the profile of customers for the advertised product. From the beginning the sponsor is focused on the advertising process. Ad agency selection is based upon a judgment of agency skills in ad creation. Media buyer selection reflects the sponsor s assessment of buyer s effectiveness in ad placement. The process will be different in the future. In the years ahead, sponsors will think in terms of product promotion. It is a larger concept that advertising promotion because it takes into consideration how the sponsor will use media directly, as well as indirectly, within the promotional campaign. Direct media applications are those that the sponsor can implement autonomously without a media buyer. Examples include promotions on the corporate website, email, Twitter, press releases, and YouTube postings, among others. Aside from the obvious use on YouTube channels, the use of video can augment the effectiveness of each example. In contrast, advertising is an indirect media application of the sponsor. He relies upon the media buyer to place ads on properties that he cannot access directly. Aside from the conventional examples of TV, newspapers, and radio other examples include third-party websites like Huffington Post, or Sportsline. Significantly, however, they not include Web properties that sponsors can use themselves such as YouTube. The replacement of advertising promotion by product promotion carries a number of implications. First, the marketing executives at sponsoring companies will need to enlarge their job description. In addition to optimizing indirect media (advertising) returns they must also maximize returns on direct media applications. That means they ll have to learn more about how to make direct Internet contact with customers effective. Learning about online email campaigns is only a starting point. They must also learn about how to use YouTube, FaceBook, and Twitter, among other applications. Since the Internet permits interactivity they must learn how to deploy applications that engage users. For example, an online game that users find entertaining might be an excellent brand promotion tool. Second, promotional materials need to be tailored to the intended media application. Videos for television might be longer than videos for the Internet. Similarly, videos embedded in an email campaign or press release might be different that those on the corporate home page or those on third-party websites. Some may contain calls-to-action, whereas others may not. Third, advertising will follow us around. We ll see one version of conventional TV and another in Internet streams to fixed devices such as desktop computers. Our mobile phones will get yet another version. The ads will follow us into elevators equipped with built-in screens and we ll see special versions on electronic billboards at airports and even on the highway.

If you would like to learn why search will become a crucial part of future video advertising, this video is for you.Once video migrates to the Internet the search function will become crucially integrated with video advertising. This applies to both short and long form programs including TV shows and movies. As discussed in our Future Developments in Video Advertising research report, there are three reasons for our conclusion. First, viewers will search for the video programs they want to see. YouTube has already surpassed Yahoo to become the second largest search engine. Consumers love having long-tail content available, but they cannot find what they want without a search engine. Over time each of us will exhibit a pattern of searches enabling video ads to be targeted for the type of video programs we watch. Second, sponsors will learn to enhance Google AdWords by linking to video landing pages. Instead of structuring an AdWords Click-Through to link to a landing page that merely contains text and graphics about the advertised product, future landing pages will make increasing use of video. For several generations TV demonstrated the power of video to stimulate consumer demand. A broadband Internet enables sponsors to harness that power in conjunction with AdWords at their own websites without reliance upon ad agencies or media buyers. Third, YouTube recently started offering contributors the opportunity to place overlay ads on their videos. The process is similar to AdWords but is concentrated on videos within the YouTube community. Consider the hypothetical case of a producer with a popular YouTube instructional video explaining how to connect HDMI-equipped laptop computers to flat-panel TVs. This enables the TVs to display Internet videos and provides for unlimited Internet access via the television. A computer company like Acer may wish to place overlay ads on the video for its laptops that have HDMI sockets. The computer company would bid for YouTube-specific AdWords like computer-to-TV-connections , Internet-Video-on-TV , and HDMI computers . Thus, viewers watching the instructional video could easily click-through to Acer in order to buy an appropriate laptop, to wit, one with HDMI sockets. Length: This video is about 5 minutes long.

If you would like to learn why future video commercials will be shorter, this video is for you.In our new research report, Future Developments in Video Advertising, we predict that video programming will migrate away from Cable TV and onto the Internet. Furthermore, we conclude that the great majority of consumers will expect to watch videos for free in ad-supported formats as opposed to paying a fee for rental or purchase of copyrighted content. Thus, it is crucial that future video ads be more effective than previously. One way to improve the consumer experience, and thereby amplify demand for video programs, is to reduce the time allocated to commercials. For example, at Hulu.com viewers can watch TV shows from ABC, NBC, Fox, and some Cable Channels for free in an ad-supported environment. Typically an hour long TV show can be viewed in 48 minutes because Hulu.com cuts back on commercial time. In our analysis there are three reasons that Internet video can economically justify a reduction in time dedicated to commercials. First, there is no need to set-aside advertising slots for a local TV affiliate. Typically this amounts to a savings of six minutes per hour. Second, unlike DVR owners, viewers of Internet video cannot fast-forward through ad-rolls from websites that transport them as streams. As a result a higher percentage of consumers actually end-up watching them because the ads cannot be easily avoided. Third, the Internet enables new types of ads that do not disrupt the underlying video program. One example is the clickable overlay, which often appears along the lower border of the video for 10 15 seconds inviting the consumer to click-through for more information, or to even execute a transaction. Given the IP addressing and other techniques inherent in the Internet, advertisers are better able to target such ads than on CATV systems.