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September 25, 2006

On-Demand Advertising in the Slow Lane

Last year the top MSOs promised to report better and deeper VOD usage data in a timely fashion. Why is Madison Avenue still waiting for it?

In March 2005 Brian Roberts hand-delivered a gift to Madison Avenue: a commitment to report
video-on-demand data metrics to help advertisers invest in cable’s cutting-edge advertising platform.
    In a keynote address at the American Association of Advertising Agencies’ annual media conference, the Comcast chairman and CEO said his company and other top MSOs would unify their VOD measurements and reporting to make it easier for clients and agencies to do business with cable.
    Roberts, speaking on behalf of the MSOs who participate in the advertising subcommittee of the CTAM On Demand Consortium (Comcast, Cablevision, Charter, Cox, Time Warner Cable and the now-defunct Adelphia), promised to immediately start reporting four types of VOD measurements each month to agencies and their clients. 
    Dubbed their “phase one” metrics, the MSOs agreed to report the number of total VOD-enabled set-top boxes, total VOD streams, unique streams per set-top box and total time spent viewing on a monthly basis. But as CableWorld reported in April 2005, advertisers and agencies aren’t interested in those four metrics and could care less about set-top boxes.
    Ads target people, not machines, and advertisers say they need granular VOD measurement that tells them who’s watching (and when and why), not what a set-top box is doing. So last November the cross-MSO group announced two additional phases of deeper metrics—including, in phase three, demographics and psychographics that Madison Avenue is accustomed to when buying ads on linear television. The group vowed to report those metrics by the end of this year.
    So, how’s cable’s doing almost a year later? Not well. Executives in the VOD advertising space say the top MSOs are not close to delivering on all three phases (see sidebar). “It’s very quiet out there from the MSO side,” says Carat Digital North America EVP Mitch Oscar of the cable industry’s progress since Roberts’ pledge at the AAAA meeting.
     Curious to learn the reasons for the delay, we spoke with more than two dozen operators, vendors, technologists and advertising executives. We heard a litany of complaints from all sides and a variety of reasons as to why the biggest cable operators have hit the pause button on their plans to improve VOD reports, including:

Priorities: Put simply, MSOs’ goals differ. Comcast (which didn’t comment by press time) is hepped on VOD, more so than any other cable operator—witness its “3 billion views” VOD announcement earlier this month and its so-called VOD upfront this past spring. Time Warner Cable, according to its new president of ad sales Joan Gillman, is more interested in addressable and interactive advertising and some of the other advanced ad technologies it’s been testing in different markets.

Bread and Butter: All operators, even if they are excited about on-demand advertising, must focus on their primary ad sales revenue generator: spot cable.

Technical issues: MSOs use different VOD vendors with various reporting capabilities. Don’t blame the vendors—they were never given a uniform set of standards for measuring and reporting VOD in the first place. Now, vendors are retrofitting their VOD technology to incorporate the cross-MSO metrics.

Definitions: MSOs use different benchmarks from Madison Avenue. “Three billion VOD views? Who cares?” carped one media buyer who requested anonymity, after Comcast’s announcement this month. “Let’s talk GRPs (gross rating points) and DMAs (designated market areas). Cable operators don’t speak my language.”

OK, Let’s Talk DMAs: Advertisers use a shared currency when buying time on television—Nielsen ratings—and they typically target their campaigns by Nielsen-designated DMAs. Operators, conversely (or perversely, to some) sell their local cable systems and zones (to ZIP+4) or they sell interconnected markets that join two or more operators’ ad sales efforts in one outfit; that differs from Nielsen’s DMAs of New York, Los Angeles and so on. Take the New York Interconnect, the country’s biggest. The Big Apple is a nightmare for advertisers who want to test VOD because Time Warner Cable (which covers Manhattan) isn’t part of the interconnect. The two operators that are, Cablevision and Comcast, have different VOD interfaces, vendors, categories and ad sales philosophies.

Who’s Watching? Advertisers sell to people based on demographics, psychographics, dayparts and so forth. Cable operators can’t divulge personal viewing information unless a subscriber agrees by opting in to release his or her viewing data. 

VOD’s Roots: VOD was never designed to be an advertising medium. It was envisioned to replace pay-per-view and deliver movies at the customer’s convenience and thus report titles ordered by a set-top box for billing purposes. Whether a piece of video attached to a title—such as an ad inserted in VOD—is fast-forwarded or watched again and again didn’t matter to operators when VOD launched. But it does today, especially to advertisers.

WHAT’S LOST?

While these and other hurdles get worked out, cable operators’ ad sales divisions may be leaving ad dollars on the table. How much is difficult to say.
     Magna Global Research director of industry analysis Brian Wieser has estimated that VOD ads generated up to $50 million in revenue in 2005 (three years after commercialization). In comparison, three years after the Internet was commercialized in 1997, Web ads generated $907 million in revenue. The exact size of the VOD ad market, he cautions, is difficult to pin down.
    “We published a very rough estimate that the size of the [VOD ad] market was approximately $50 million last year, although this figure was likely too large,” says Wieser. “There is no way to know with any certainty, but that [estimate] gives a sense of relative importance—or lack thereof [of VOD ads]."
    “VOD remains an experimental medium, and not a core part of media budgets for more than a handful of advertisers,” he adds. “As a result, it’s hard to say that they’re losing something that wasn’t there in the first place.”
    Meanwhile, Internet advertising, with its well-established measurement standards from the Interactive Advertising Bureau, is already diverting dollars from cable and other media. Online ad spending reached $3.9 billion in the first quarter of this year, according to the IAB. Wieser projects that this year, Internet advertising will probably be around $17 billion.
    In any case, data is critical to advertisers, says Wieser, because his industry is increasingly held accountable for how budgets are allocated and whether or not it is effectively reaching a target audience. Cable operators have been learning just how critical as they attempt to step up their VOD reporting.
    “It’s been slow going,” admits Cox Media director of new media David Porter of the cable industry’s individual and collective progress. “Phase two is a lot harder to get our hands around than phase one was…By the end of the year if we don’t have a solid scorecard published for phase two and a cleaned up [scorecard] for phase one, then that’s bad.”
     Porter, who helps lead the cross-MSO group, is still hopeful its members can meet the year-end deadline on their promises, although he wouldn’t discuss individual MSO progress.
     The biggest payoff could come from phase two’s goal of adding demographics to VOD reports. Moving from set-top to household reports will create more of an “apples and apples” comparison with Nielsen’s reporting by demos, such as men 18-34, for advertisers.
    Porter hopes operators will go a step further—start issuing VOD reports using Nielsen’s categories and deliver on their promises to advertisers. He sees Nielsen’s efforts to integrate VOD viewing into its own reports, as it’s now doing, as complementing cable’s efforts.
    “The two [Nielsen and MSOs] can work really well together and help provide what advertisers are looking for—a holistic view of how their [on-demand advertising] campaign is doing,” says Porter. “We’re not there yet, but we’re moving in the right direction.”

Cable’ VOD Metrics

PHASE 1

  • Total views by VOD title per month
  • Total minutes viewed by VOD title per month.
  • Number of unique set-top boxes viewing a VOD title per month
  • Number of VOD-enabled set-top boxes in a DMA
PHASE 2
  • Reports by household (a la Nielsen) in addition to set-top box
  • Reports by orders in addition to streams
  • Reports by daypart
  • Unduplicated unique streams (also called “views”) across custom-defined ranges such as day, week, month or life of campaign
  • Unduplicated views such as by genre or category
  • Reports by ZIP code to zip+4 level
  • Quicker delivery of VOD usage reports to 48 hours or less
PHASE 3
  • Trick mode analysis (fast-forward, rewinding)
  • Improve frequency and delivery lag of VOD reports
  • Demographic and psychographic information (such as Claritas)
  • Trending over time periods (weekly, monthly or campaign-long basis)
  • Ad flags within video assets
  • Ad-ID tracking (a system developed by the AAAA)
  • Linkage to and from a VOD title (called click-stream tracking)
  • Third-party verification of VOD usage data (external auditing services)

Related stories:

New Media Demands New Thinking CableWorld, July 17, 2006

Coming Next Year: A Bounty of VOD Ad Dollars? CableWorld, July 17, 2006

VOD: Half Full or Half Empty? CableWorld, June 26, 2006

Cox's Local Ad Sales Laboratory CableWorld, May 1, 2006

For VOD Metrics, More is More CableWorld, Nov. 7, 2005

Will Cable Meet Advertisers' (Video on) Demands? CableWorld, Apr. 18, 2005

Comcast Spotlight Takes TV Beyond the 30-Second Spot CableWorld, Mar. 7. 2005

It's an Ad, Ad, Ad, Ad On-Demand World CableWorld, Oct. 18, 2004

Ratings By Rentrak? CableWorld, Oct. 18, 2004

IAG Group Backs On-Demand Ad Platform CableWorld, Sep. 8, 2003

Group Seeks to Develop On Demand Ad Models CableWorld, July 28, 2003

The Flavor of VOD:
Music Videos, Kids Shows and Flav

Comcast On Demand this month hit the 3 billion views mark. A snapshot of Comcast’s Boston market reveals the secret sauce in its ad-supported on-demand content: music videos, followed by kids shows. As a result, Music Choice On Demand is now the No. 1 free VOD service in the U.S. Since launching in Nov. 2004, it has racked up close to 500 million orders in Comcast homes. VH1’s reality series Flavor of Love also broke into Boston’s top 10 before Labor Day.

No. 9 on Comcast’s VOD hit list.

No. 9 on Comcast’s VOD hit list.

Comcast Boston, Week Ending Sept. 3
RankGenre/Title or ArtistProvider
1Music video: Chris BrownMusic Choice
2Music video: CiaraMusic Choice
3Music video: CassieMusic Choice
4Music video: ShakiraMusic Choice
5Music video: Yung JocMusic Choice
6Kids’ Show: Dora The ExplorerNick
7Music video: CherishMusic Choice
8Kids’ Show: SpongeBob Nick
9Reality show: Flavor of LoveVH1
10Music video: Sean PaulMusic Choice

Source: Comcast







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