Television Gets Targeted

American Demographics,  Sept 1, 2002  

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Video-on-demand follows two models. One is subscription VOD (SVOD), which allows "all you can watch" access to selected programming, for a monthly fee. The other model is standard VOD, in which users order individual movie titles for fees that are typically $3.95 for a new release and $2.95 for other titles. (With pay-per-view, also known as NVOD, or near-video-on-demand, viewers cannot control when and how they view movies or programs; they cannot rewind, pause or choose precise viewing times.)

Among the advertising options in the testing phase are "pre-roll" commercials, sponsored programming, infomercials, post-movie-viewing commercials and opt-in requests for viewer information. According to Larry Gerbrandt, chief content officer at Carmel, Calif.-based research firm Kagan World Media, advertising on VOD is going to be what TiVo would like to offer but doesn't have the technology to achieve.

Says Gerbrandt: "TiVo wants to do customized, interactive commercials but is unable to; VOD will be designed to do that from the start." (Note: American Demographics and Kagan World Media are both owned by Primedia.)

Several companies are gearing up to provide such customized services. Maynard, Mass.-based SeaChange International, in conjunction with New York-based Visible World Inc., plan to help advertisers create marketing campaigns that will be carried through VOD systems. They are developing targeted ads using software that recognizes household-level demographics and user habits and preferences. Although the companies have just begun such services for analog cable systems, Bill Borrelle, vice president of marketing for Visible World, predicts that in the next few years, VOD will be used like direct mail. "The VOD server becomes a mailbox," he says. "Cable operators would be able to deliver customized messages to their subscribers about their services."

In April, Cleveland-based Everstream, which creates software for VOD advertising, and nCUBE Corp., a digital advertising company in Portland, Ore., announced a partnership to offer customized advertising via VOD. Stephen McHale, president and CEO of Everstream, says VOD "sessions," in which the viewer can connect with the cable operator, will open the door to richer advertising messages.

The first step, McHale says, is to establish VOD as an advertising medium, which he predicts will take two to three years to hit critical mass. Everstream is also working with Concurrent, a Duluth, Ga., VOD developer that builds file servers for 1.6 million Time Warner, Cox, Comcast and Mediacom digital cable subscribers. Joe Parola, vice president of market development for North American cable for Concurrent, says Concurrent is exploring how information gathered from the servers, such as how consumers use on-screen menus, can be married with demographic databases to target ads. He believes such a system is at least a year away.

"To have 1.6 million digital subscriptions is a nice number for VOD, but it's not enough to make [large advertisers like] Procter & Gamble jump up and down," Parola says. "But those numbers are rising, and the type of person who has a digital set-top box is highly desirable."