Advertisers Tune In New Video Platforms

News Analysis: When Apple unveiled its video download partnership with broadcaster ABC, media advertisers began scrambling for answers about how to shape their marketing strategies to address new distribution models.

BOSTON—Oct. 12, 2005: a day that will live in infamy.

If youre trying to remember the notable event that occurred on this date than youre probably not an advertising executive tasked with sorting through the growing morass of video content offered to consumers over Internet technologies.

For, as anyone who fits this description knows, that seemingly pedestrian Monday just over two months ago was the day that Apple Inc. and broadcaster ABC Inc. announced their new online video download strategy. The rest is history.

Introduced as part of Apples popular iTunes content download service, the partnership offers consumers the ability to buy prime-time ABC shows in digital format at $1.99 a pop, and to watch those programs at their own leisure without being forced to sit through ads. The revolution had officially begun.

At least thats how executives and analysts gathered for the Future of Video Online conference held here Tuesday framed the landmark event.

With numerous video content delivery deals announced since the iTunes launch, those people working to create new online video services and the methods for advertisers to piggyback on those offerings say that some important questions have been answered, but that many uncertainties remain.

While iTunes allows consumers to bypass the advertising experience completely, for a price, most media industry watchers believe that a majority of the nascent video services that will successfully lure cable subscribers, Web surfers and mobile device users will evolve more closely to the traditional TV ad model. That is, people will be asked to view advertisements in order to gain access to video content for free.

The working theory of such new media experts is that while some consumers will eschew traditional video formats in favor of paying for ad-free content, most people will still be willing to give up some of their time to view advertisements, as long as the ads are more intelligently linked with the content theyre hitched to, and delivered in formats that blend well with that programming.

T.S. Kelly, analyst with New York-based researchers Media Contacts, which sponsored the conference, said that content providers, video services carriers and advertisers will need to work closely together in order to understand just what ad delivery models consumers will tolerate, and respond to.

By experimenting with new ways to package Web-based video with ads and other types of content, such as social networking communities, he said, those companies should be able to make as much money, and someday even more, than they have generated using traditional strategies.

The analyst said it would be a mistake for content providers and advertisers to view each video service as a unique opportunity, despite the various intricacies of those offerings.

Rather, said Kelly, companies should understand that video available over the Internet represents an unparalleled chance to better tailor all their ads to suit the content the spots air with, and the viewers that they hope to reach.

"Consumers are changing habits for how they watch video, and people are consuming media in a more individualized way," Kelly said. "Development of new services cant be about individual programs from different providers; there has to be an aggregate opportunity to distribute content and advertisements across an almost limitless range of channels."

Kelly said that most people will still accept the placement of ads with their Web video, including downloaded content and streaming media services, as long as the available video clips remain attractive enough. The analyst agrees that most consumers still prefer to watch ads, rather than have to pay for individual programs that are delivered without them.

"If consumers are getting something good for free, theyre still much more amenable to video advertising, as long as its not too much," Kelly said. "Companies are still experimenting with [their ad programs], but they will find out over time just how much advertising customers are willing to consume, and build out new business models from there."

Despite the multitude of new services on tap, including mobile video offerings such as Verizon Wireless V Cast, some advertisers remain wary that it will be hard for companies to shift their existing strategies from TV to emerging platforms.

/zimages/4/28571.gifRead more here about emerging video platforms.

Ellen Comley, managing director of New York-based marketing and advertising firm Media Planning Group, said that content providers and service delivery companies shouldnt expect that they will be able to move their ad plans from the offline world into the Internet space with ease.

The industry vet said that it remains hard for companies to plan advertising strategies for the future when so much is up in the air regarding which new video formats consumers will truly embrace.

"As much promise as there is, the jury is out on what people want to interact with on the Web, broadcast TV has been very successful, and its a gateway for marketers, but major hurdles to advertise successfully on the Web remain," said Comley. "Its still a major challenge just to figure out which shows to take online."

Comley predicted that the Web video advertising market will gradually take off, but not before the many companies involved can attract larger numbers of viewers willing to share more information about themselves with potential marketers.

The tradeoff needed for such involvement by consumers will be even higher-quality content from producers, and the ability for businesses to convince viewers that their ads are actually worth watching.

Next Page: Pushing video to consumers.