July 17, 2006

Coming Next Year…a Bounty of VOD Ad Dollars?

The maturation of ad insertion technology means making money off the on-demand platform no longer seems far-fetched.

By Michael Grebb

Selling traditional ad avails can be, well... boring. But the buzz out of this year's SCTE Cable-Tec Expo suggests a much more targeted, interactive and exciting future for MSOs looking to score new ad revenue. "[Dynamic ad insertion] is a huge missed opportunity today," insists Rick DeGabrielle, president and CEO of Arroyo, which sells VOD servers that can enable dynamic ad insertion. "You've got to be able to make a few bucks on that. There's considerable revenue to be had."

Is he right? Hard to tell at the moment. But Tandberg TV, which provides ad-insertion technology for Arroyo's servers, already is working with Comcast to inject national ads into VOD from its Denver hub. Bob Waln, Tandberg's director of product management, says that program will expand this month to include local VOD ad insertion at certain head-ends—enabling more specific targeting to each neighborhood and, eventually, to each home. "Ad insertion will be a big issue next year," predicts DeGabrielle.

Such addressability also enables more interactivity within those ads—a prospect that is only now starting to bear fruit after years of talk. "Interactive TV doesn't make money," says OpenTV chairman and CEO Jim Chiddix. "But interactive advertising does." OpenTV, which recently powered Ford's ITV ads on EchoStar, will complete an upgrade of 4 million Time Warner Cable set-tops by year-end (the firm is also in talks with Comcast).

Vendors' enthusiasm might seem a bit self-serving: After all, they're anxious to sell advertising "solutions" to anyone who will pay them. But that doesn't mean they're wrong about where things are going. In fact, SCTE's fixation this year on switched digital video and other bandwidth-saving technologies was quite telling. Such innovations aren't just about cranking out more video choices or speedier data rates; they're also about setting the stage for an onslaught of on-demand advertising.

Increasingly, both MSOs and programmers are getting on board. Time Warner Cable CTO Mike LaJoie said at an SCTE panel that long-term, the deployment of switched digital and VOD will enable MSOs to "harvest the usage information" of customers. Operators will then be able to more accurately send the appropriate ads to their set-tops. Meanwhile, Vincent Roberts, Disney ABC Television Group's EVP, worldwide technology and operations, told SCTE opening-session attendees that interactive ads are a big part of Disney's strategy for the future. If the buzz at SCTE is any indication, that goes for both MSOs and programmers alike. And while those camps may tussle over revenue splits, one thing is for sure: The technology is clearing the way for additional profits.

Michael Grebb is executive editor of CableFAX Daily. He can be reached at mgrebb@accessintel.com.