Broadcasters: What Business Are You Really in?

Viewpoint: Brightroll's CEO and Founder Tod Sacerdoti

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Tod Sacerdoti
Tod Sacerdoti
A common adage in business schools today is that the railroad companies failed because they didn't realize they were in the transportation business, not the railroad business. I would suggest that today, broadcasters are similarly confused. National broadcasters are in the video-advertising business.

Any TV company that generates more than 50% of its revenue from selling video advertisements is in the video- advertising business. It is not in the content business, as it would like to believe. TV content is simply the delivery mechanism for video advertising.

This is an important distinction. A range of delivery mechanisms have arrived and the ensuing tsunami of available video inventory is going to threaten all broadcasters who don't recognize this emerging phenomenon and address their customers' changing viewing habits and needs.

Fundamentally, video advertising will no longer be tied to TV content. This is not a futuristic prediction, as the inventory shift is already clearly evident in two massive categories.

First, the web has begun to democratize the ability to use video content as a delivery mechanism for video advertising. Today, nearly every major media property has created a pool of video content, most of which is not TV content, and offers video advertising inventory to the market.

Second, large publishers and display-advertising networks used technology to turn display inventory into video- advertising inventory. These days, display inventory is already the largest pool of video advertising outside of TV, and is growing quickly.

Video ads are everywhere
However, this is just the beginning. Video advertising is going to appear nearly everywhere users use IP-based services.

Already, every major online consumer service has begun to offer video-advertising inventory. Online games, radio, instant-messenger clients and every other high-volume application are offering video inventory to the market. There is more video-ad inventory, in fact, in online games than there is in online video -- and that is just one category.

Other IP-connected services, such as cellphone applications and set-top boxes, have jumped into the video-advertising game headfirst. It is hard to be in public today and not see another emerging video-advertising category, whether you are in an elevator, the back of a cab or looking at a billboard at the airport.

Today, broadcasters control the vast majority of video- advertising dollars. If they want to avoid the fate of the music, newspaper and magazine industries, they must realize the business they are in: the video-advertising business.

If they don't recognize this fact, video advertisers will flock to those companies who are solving their needs, and abandon the broadcasters entirely. In today's world, audience aggregation, targeting and measurement are more important than TV content. There is one company that understands this better than anyone. I am pretty sure that Google doesn't anticipate producing TV content anytime soon.

Tod Sacerdoti is CEO and founder of video-advertising network BrightRoll.
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