Why Conquering VOD TV Is Advertising's Holy Grail

Tuning In: Ability to Insert Ads on the Fly Could Help Media, Marketers Battle the DVR

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Video on demand has been around for years, but advertisers' interest in it has always been limited. That's because marketers had to bake commercials into the shows there, resigning themselves to running the same ads as long as the show was available for demanding -- even if the message grew hopelessly out of date. Holiday sale over? Seasonal Shamrock Shake no longer available? Too bad.

Now Comcast and its majority-owned NBC Universal subsidiary are offering an emerging technique known in the business as "dynamic ad insertion." Has your tentpole movie already opened? Just swap out the ad for something fresher.

Chrysler and Kraft are the premiere advertisers of the offering, which encompasses Comcast cable systems' on-demand programming from USA Network, E!, Syfy, Bravo Media and Oxygen Media.

Its early stages will focus on commercials that run before and after a program, but ad insertion for "mid-roll" ads during shows are slated to become available by the fall, said Marcien Jenckes, senior VP-general manger of video services for Comcast.

At a time when increased DVR usage renders so many ads obsolete, the offering makes it easier for advertisers to put more weight behind VOD.

"In the new world, more and more of our great content is being viewed later, and we've had no great way to monetize it," said Ed Swindler, exec VP-chief operating officer, NBC Universal Advertising Sales.

"This enables us to take that viewing and to put some value against it."

Media companies, of course, like VOD precisely because it answers viewers' quest for convenience but reincorporates unskippable advertising -- a threatened species since the VCR was invented. Cable distributors including Cox have found customers willing to sit through ads for ABC programs such as "Grey 's Anatomy," so long as the episodes were available on-demand at no extra charge. In a similar vein, Time Warner Cable lets viewers start over programs they join in progress -- but doesn't allow fast-forwarding for those that do.

But VOD doesn't do media companies much good in the battle against DVRs if consumers like it while advertisers don't. Dynamic insertion should bring more marketers on board.

As more viewers watch TV across different devices, moreover, Nielsen is working to create a system that includes all of those "airings" into one rating. In order to be counted, programs have to "mirror" the ad load included in the original TV broadcast. As Comcast's Mr. Jenckes describes the new offering, VOD content could initially mirror the ad load seen elsewhere then swap in other commercials as marketer demand dictates.

In other words, VOD viewing could be used to add to a TV show's ratings , helping TV networks get more money for their content from marketers.

VOD offers a "much broader catalog than any consumer could have just on their DVR," said Mr. Jenckes. "And certainly from a monetization perspective, the dynamic ad insertion" gives VOD "an advantage, maybe, in the programmer's eyes."

Will cable and satellite companies be able to convince TV viewers that their DVRs are obsolete, that VOD is a good enough alternative to recording shows for themselves? That's not a development past which we anticipate anyone fast-forwarding.

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Tuning In is an ongoing series of commentaries by Ad Age TV Editor Brian Steinberg on the TV schedule, the ads it carries and changes within the industry. Follow him on Twitter.

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