Crafting the elusive business model for advanced advertising and its multiple revenue-generating mediums and devices takes a combination of technical and engineering smarts and strategic, visionary business savvy.
The payoff, experts maintain, will be well-worth the effort. But first, a viable business model must be built to capture the potential revenues from Internet advertising, VoD, streaming video and other sources.
Cable’s ad revenue for 2009 was $24.3 billion, about 25 percent of the industry’s total revenue, according to SNL Kagan. By 2015, the U.S. mobile market will add 80 million subscribers, reports Pyramid Research. When you connect the Internet, mobile and cable dots, it’s no wonder advanced advertising and its gaggle of carriers, programmers, equipment manufacturers and the advertising community are wide-eyed about its potential.
“Web-based video, VoD, streaming video—there are so many options online, and the technology is slowly getting to extreme targeted advertising and intelligent ad insertion to online video,” said Mukul Krishna, global director for digital media at Frost & Sullivan.
Yet finding revenue from it is the challenge, he admitted: “It’s critical for cable to invest in advanced advertising, especially with VoD and how to monetize it. It has all the streams, IP video, the triple and quad-plays, and the revenue potential of a targeted advertising model across all screens. Advanced advertising is no longer a leap of faith, but a critical component to their revenue.”
The model, although taking shape, needs work. “Things like order-to-cash systems need to happen at cable systems and providing new, incremental value. Operators want to get going with advanced advertising, but we’re not far enough along to understand all of the interactive devices. It’s just too new,” said Malcolm Stanley, GM/Monetization at SeaChange.
What isn’t new is scaleability, a crucial hurdle that must be overcome before a workable business model can be deployed for advanced advertising.
“The business models for Internet TV and advanced advertising are evolving, and media buyers are looking for scaleability. That is a challenge because, without standards that can connect consumers and scaleability, you can’t grow the business model,” said Sherrill Mane, SVP/Industry Services for the Internet Advertising Bureau, whose members include MSOs, mobile carriers, telcos and TV networks.
Growing the model will require some shifts in traditional media buying as well. “When time-shifted, advanced advertising represents scale, we’ll see ad dollars start to flow, and interoperability is the key to scale. But it’s hard getting media buyers to understand what that’s worth,” said Nick Troiano, president of BlackArrow. “If there’s a model for cable it’s creating a convergence of consumer, content and leveraging it with advertising. The model invariably will include the user experience as a key component.”
Concluded analyst Krishna, “Consumers want a more engaging experience with any device, and advertisers are looking closely at that phenomena and trying to understand it.”