Virgin Media, the UK cable operator, has built an on-demand audience totalling a billion views a year and though only part of this can be commercialized with advertising (the rest being from ad-free sources like the BBC), Mark Brandon, Commercial Director at the company, sees on-demand as a big advertising opportunity. But he warns: “It takes time to build a market and it was not easy, but the really tough part is working with the market stakeholders to make sure they understand the value proposition [of on-demand advertising, including dynamic advertising insertion] to them.”
Speaking at a Breakfast Briefing at Future TV Advertising Forum recently, Brandon emphasized that the on-demand advertising market is like the Wild West: a nascent market that is still being built. “We are the only scale player in the UK at the moment,” he noted. Brandon thinks VOD advertising represents a big win for the content owners, pointing out that his company pays for their content and then creates further revenue generating opportunities for them with the VOD advertising.
Simon Kelehan, Head of Content at UPC Ireland, also believes cable VOD is an opportunity broadcasters will want to exploit further. UPC Ireland introduced VOD in May this year, reaches 55% of its user base with VOD and is generating 500,000 on-demand streams from this user base to date. Kelehan reported that those customers who are using the on-demand service typically use it 3-4 times per week at this early stage, describing the take-up as pretty rapid.
“This is television VOD on the living room, big screen TV – we are not talking about five minute snacking but watching programmes from start to finish,” he said at the London briefing, which was sponsored by SeaChange International. “It is an altogether more immersive experience than online VOD.”
Half the on-demand streams watched by UPC Ireland viewers are catch-up TV content (within the seven day window after broadcast). Because the national broadcasters in Ireland are dual-funded, taking revenue both from a public license fee and advertising, there is clear potential to harness advertising in this catch-up domain.
Indeed, Kelehan views cable VOD as a broadcaster friendly solution for time-shifted viewing, especially when compared to DVR. “Depending on the programme, half the viewing is now time-shifted, like with a U.S. drama. That is really challenging the business models [for broadcasters],” he explained. “ Why acquire those programmes from the U.S. studios in the first place if everyone can fast-forward the advertisements on DVR?
“Our implementation of cable VOD disables fast-forward. As long as you keep the advertising to a maximum of 160 seconds it is not too intrusive to the viewer and you can monetize those eyeballs.”
One common debate when it comes to monetizing on-demand is about ad load. At least one major control group study has shown that people will happily accept more VOD advertising per programme, but Pay TV operators are sensitive about overloading people when their subscribers perceive the content they are watching to be paid for (within their subscription).
Venkat Krishnan, VP of Products, Advertising at SeaChange International, which among other things provides VOD and VOD advertising solutions, said ad abandonment rates could rise if the ad breaks (rather than the total load) get too long. But he pointed to digital advertising insertion (DAI) as a key opportunity in the on-demand market.
This is where the original advertising, shown during the first broadcast, is replaced with different advertising for the on-demand views. The technology has been available for some time and Virgin Media has been pioneering this model in Europe. UPC Ireland is the first of the Liberty Global cable companies to start implementing DAI and is currently testing this with its broadcast partners. Unitymedia will introduce DAI next year.
For all types of on-demand advertising, reporting and measurement have been key considerations when building the market. Dr Daniel Hesselbarth, Head of CPE and Product Innovations at Unitymedia, noted that while GFK measures linear viewing in Germany with its viewing panel, there is no established measurement system for VOD in the country. So Unitymedia provides reporting to the broadcasters directly using its set-top box data.
George Robbins, Head of Video at the media agency Starcom MediaVest, confirmed that agencies will accept STB data without expecting third-party accreditation of it. That STB data will give them a good understanding of what is happening inside the home and it can be combined with third-party data from companies like Experian if they want to make advertising more addressable.
Brandon at Virgin Media said there is nothing in terms of measurement that is constraining the on-demand advertising market today. “There are already many millions of pounds being traded in on-demand advertising based on set-top box data,” he said. “That is not a constraint currently. Maybe it could become a constraint moving forwards, if you want to scale this market, but we are a Pay TV business so we have limits to how many advertisements we can carry anyway.”
There was a consensus that STB data will not replace panel measurement like BARB. Robbins explained the process for trying to make advertising more addressable in the on-demand environment. He said agencies like his will use the BARB-type panel to understand the audience profile for a programme, like whether it attracts women, based on its linear viewing. However, they still treat on-demand as a separate audience and weave other sources of consumer data into their considerations.
The cable operators acknowledged that when it comes to delivering more targeted advertising, they have a wealth of customer data that is valuable but must be closely protected. Virgin Media’s Brandon pointed out: “What happens to that customer data and how it gets used will play out in time, but we see it as our customers’ data so we will jealously protect the integrity of it.”
Kelehan at UPC Ireland believes data is an area of differentiation for cable VOD. “We have a one-to-one relationship with the customer that a company like YouTube cannot give you. You have to guess who is using an online video player,” he argued. “With cable, if you have a direct customer relationship and an advertiser is interested in selling to a family in a certain postcode with three dogs and a Ford Mondeo, that is probably possible. Data is the family jewels and we can monetize that.”
Brandon pointed out that the on-demand advertising market can only develop at the pace the broadcasters and advertising agencies are comfortable with. Robbins at Starcom MediaVest said this pace of change is ultimately driven by the audience. “Is our target audience viewing the VOD content?”
His attitude was that if they are watching, and in scale, then the advertising market will follow. With a billion views a year, Virgin Media is doing its part but it was clear from this briefing that these are still early days for VOD itself, not just VOD advertising, when you look at the market on a pan-European basis.