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.
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.
Pushing Video to Consumers
One of the companies aggressively looking to push more Internet-based video to consumers is portal giant Yahoo Inc., which already offers an array of news and entertainment clips to visitors of its many Web sites.
Scott Moore, vice president of content operations for Yahoos media group, said that the movement to transfer advertising strategy from the TV to the Web may be more of an evolution than a revolution, because the content may take a while to resonate with large numbers of viewers.
However, Moore said that Yahoo continues to discover new ways to attract users to its video offerings that bear advertisements, largely by offering content unavailable anywhere else.
An example of the type of program he said Yahoo is having success with is its on-location video news program “Kevin Sites in the Hot Zone,” which is based on the travels of a broadcast journalist as he visits some of the most dangerous corners of the planet.
Based on their experiences with existing online or downloadable video, the executive said that consumers will increasingly demand new content online, versus TV shows reformatted for the Web.
This reality will also demand new types of advertisements that better relate to both the subject matter and delivery platform of the programming, he said.
“If you think about whats happening to newspapers or the music industry, video is a disruptive technology that is changing everything from distribution to consumption, and well see more and more digital content created specifically for this medium,” Moore said.
“Its very clear that viewer demographics are shifting and most of the media companies have no clue how to deal with it.”
Moore believes that shorter video clips are one type of content that will probably catch on before whole TV episodes move more widely the Web, based on both users behavior online and the ability for advertisers to wrap shorter plugs into the format.
Such programs are already very popular in markets such as Korea and Japan, where users have had different types of video, specifically mobile video applications, available for longer periods of time.
Another type of clips that could challenge companies looking to attach ads to popular forms of Web video is amateur films, or so-called user-created content, the executive said. Moore also contends that video streaming services are likely to take off faster than content download sites.
One company sitting on what it believes to be a virtual goldmine of attractive, original video content that it can push to users over the Web is NBC, which holds the U.S. programming rights for the next four Olympics, beginning with Turin and running through London in 2012.
Paul Bremmer, general manager of NBCOlympics.com, said that the network plans to offer programming such as less popular events and athlete profiles on its site to augment its TV schedules.
By further isolating specific audiences that follow a particular athlete or sport, by factors such as their area of interest or geographic location, NBC could attract a whole new legion of advertisers who dont have the money or desire to sponsor the entire presentation, he said.
Since broadcasting the 2004 Olympics, the executive said that NBC has removed some major roadblocks to getting more content online, such as figuring out a way to block users from outside the United States from viewing its content to protect exclusive regional distribution rights.
“[Creating successful advertising online] is all about relevance of the environment and what the audience is looking at,” said Bremmer.
“More people than we ever expected downloaded videos in 2004, and essentially that service was just a brochure of our TV programming; we think that by 2008, video on the Web will be a prominent part of our overall broadcasting package.”