Monday, April 19, 2010, 9:56 AM ET|Amid all the coverage that online video advertising receives, it's also important to remember that advanced advertising in on-demand and pre-recorded TV continues to evolve. News today that NDS, one of the largest technology providers to multichannel video programming distributors ("MVPDs") is leading a $20 million Series C round in BlackArrow, a provider of advanced advertising solutions, is a reminder of progress. Last week I spoke to Todd Narwid, VP of New Media for NDS and Dean Denhart, BlackArrow's CEO, to learn more about the deal.
To put the deal and its upside in context, it's important to first understand there's a big difference between how online video advertising against free streams in the open Internet works vs. how advertising against VOD and DVR programs in paid, subscription-based services run by MVPDs works. In the Internet world, there are pretty well-established standards, allowing significant interoperability among sites and ad servers. While measurement challenges persist, the act of getting video ads inserted where they're supposed to be is now pretty straightforward.
Conversely, in the MVPD world, the first challenge is just getting ad serving systems approved and deployed. Because ads are served from within the MVPD's own infrastructure, new ad servers must be tested and integrated with existing video delivery infrastructure residing in distribution centers often called "headends" in the cable world. Unlike MVPDs' broadband deployments, much of MVPDs' TV delivery architecture pre-dates the Internet and therefore is heterogeneous and often difficult to integrate with. In addition, there are the tens of millions of deployed set-top boxes which also differ in their capabilities and openness. MVPDs have made significant progress in creating their own standards and in deploying advanced services, but as anyone who's ever tried to implement any kind of advanced service in the MVPD world can attest, it's hard work and has ground down many promising technology start-ups.
When I first wrote about BlackArrow, on its launch in Oct, '07, I liked its vision of delivering advanced advertising in VOD and DVR programs, but I noted the above challenges gave it a steep hill to climb. Since then, BlackArrow has made progress, deploying with Comcast in Jacksonville, FL and with other operators (though Dean isn't able to mention them due to MVPD restrictions). Still, MVPDs have so many priorities and their resources for testing and integrating new technology are limited. Further, there's a lingering sentiment that MVPDs have only made a half-hearted attempt to really monetize VOD and DVR.
Given these circumstance, the NDS deal appears to offer BlackArrow a lot of upside. As one of the largest technology providers to MVPDs globally ("conditional access" systems that provide secure MVPD video delivery are its main product line, among others), NDS immediately gives BlackArrow both credibility and significantly improved sales and support reach, particularly outside North America. The companies also announced a joint solution offering, which will be key to realizing actual sales Importantly, NDS gives BlackArrow improved financial footing for what promises to be a very long-term process of deploying advanced advertising by MVPDs. Conversely, for NDS, as Todd explained, BlackArrow provides the monetization piece of the puzzle that MVPDs need to create business cases to help them justify NDS's advanced technology delivery systems.
For MVPDs, who are witnessing the rapid adoption of online video and the threat of cord-cutting down the road, it is essential to be able to offer subscribers more flexible viewing options like VOD and DVR and to give their content partners opportunities to effectively monetize these views. This has been the Achilles heel of VOD and DVR to date, and the scarcity of ad-supported programs in VOD (particularly relative to what's available online) is a direct reflection of this.
Going forward, the challenge for MVPDs will only intensify as content providers face escalating choices about where to optimally monetize their programming. This is where BlackArrow fits in. Plus the company has always had a multi-platform vision, so once it's enabled for TV and DVR, BlackArrow could also provide a pathway to online monetization, which given MVPDs' TV Everywhere initiatives, is also a growing priority.
What do you think? Post a comment now (no sign-in required).
Thursday, July 2, 2009, 9:21 AM ET|
Clearleap announces Atlantic Broadband as first public customer - Clearleap, the Internet-based technology firm I wrote about here, announced Atlantic Broadband as its first public customer. Atlantic is the 15th largest cable operator in the U.S. I spoke with David Isenberg, Atlantic's VP of Products, who explained that Clearleap was the first packaged solution he's seen that allows broadband video to be inserted into VOD menus without the need for IT resources to be involved. Atlantic initially plans to use Clearleap to insert locally-oriented videos into its local programming lineup. It also has special events planned like "Operation Mail Call." which allows veterans' families to upload videos, plus coverage of local sports, and eventually filtered UGC. By blending broadband with VOD, Isenberg thinks Clearleap gives him a "giant marketing tool" to raise VOD's visibility. As I've said in the past, VOD and broadband are close cousins which can be mutually reinforcing; Clearleap facilitates this relationship.
New Balance's "Made in USA" video - Have you seen the new 3 minute video from athletic shoemaker New Balance? Yesterday I noticed a skyscraper ad for it at NYTimes.com and a full back-page ad in the print version of the Boston Globe. New Balance's video promotes the fact that it's the only athletic shoemaker still manufacturing in the U.S. (though it says only 25% of its shoes are made here). There's also a fundraising contest to win a trip to one of its manufacturing facilities. Taking ads in online and offline media to drive viewership of a brand's original video is another way that advertising is being reimagined and customers are being engaged.
Joost - R.I.P.-in-Waiting - There's been a lot written this week about Joost's decision to switch business models from content aggregation to white label video platform provider. Regrettably, I think this is Joost's last gasp and they are in "R.I.P.-in-waiting" mode. Joost, which started off with lots of buzz and financing ($45M) by the co-founders of Skype and Kazaa, is a cautionary tale of how quickly the broadband video market is moving, and how those out of step can get shoved aside. Joost made a critical strategic blunder insisting on a client download based on P2P delivery when the market was already moving solidly in the direction of browser-based streaming. It never recovered. Given how crowded the video platform space is, I'm hard-pressed to see how Joost will carve out a substantial role.
Cablevision wins its network DVR case - Not to be missed this week was the U.S. Supreme Court's decision to refuse to hear an appeal from programmers regarding cable operator Cablevision's "network DVR" plan. The decision means Cablevision can now deploy a service that allows subscribers to record programs in a central data center, rather than in their set-top boxes. This leads to lower capex, fewer truckrolls, and more storage capacity for consumers. There's also an intersection point with "TV Everywhere," as cable subscribers will potentially have yet another remote viewing option available to them. Content is increasingly becoming untethered to any specific box.
Monday, April 13, 2009, 9:54 AM ET|
Data that TiVo released last week indicating that nearly 60% of broadcast TV programs in the 8pm and 9pm primetime slots are timeshifted for later viewing should be interpreted as another positive for broadband video advertising for two reasons.
First, because the high propensity of DVR users to skip ads means that broadband delivery can be increasingly considered the only way for big brands' ads to be guaranteed to be seen. And second, because all that ad-skipping is making the effective cost of each TV ad more expensive, thereby making broadband-delivered ads look like a better value.
In prior posts (here and here) I've outlined how a top network show drives around $.50-$.75 of ad revenue per on-air viewer. Said another way, advertisers are willing to pay $.50-$.75 to reach that show's audience. But now factor in that nearly 60% of the targeted viewers are watching via DVR, and that of this group maybe only 10% watch any ads at all. That means maybe only half or so of the intended audience actually see the ads. With half the audience, an advertiser is effectively paying 2x the CPM it thought it was.
Advertisers understand this as well, and as we know from newspapers' current plight, expecting they'll pay more to reach shrinking audiences is not a sustainable strategy. So, on the assumption that smaller and smaller targetable audiences long-term reduces the demand for on-air network ad inventory, CPMs should decline as well. On a relative basis that means that for broadcast networks, broadband video ads, which can't be skipped, have better targeting and more interactivity (all of which already drives higher broadband CPMs), start looking better and better. In short, DVRs' surging popularity is very good news for broadband video ads.
But as I explained in the posts cited above, the problem for networks today is that higher CPM broadband ads still result in lower total revenue per program for broadband vs. on-air. That's because networks are inserting a far smaller number of ad in a broadband-delivered program vs. an on-air delivered program (my estimate is somewhere around 3 minutes for broadband vs. 20 minutes for on-air). Hence the broadcasters' challenge - get total broadband ad revenue up while DVR usage acts to drive on-air revenue down.
Doing so requires better strategy and better execution. On the strategy side, I've said it before (and it always pains me to say it again), but broadcast networks have to increase ad avails in their broadband-delivered programs. That probably means more ads per pod, but could also mean other types of non-intrusive units like banners. On the execution side, it means more attention to each stream to ensure well-targeted ads that are actually delivered.
With broadband revenue still accounting for a miniscule amount of total broadcast network revenue, it's tempting to deprioritize addressing these issues. I think that would be a mistake. TiVo's stats on DVR usage in primetime (combined with other shifting consumer behaviors) should be a major wake-up call for networks about how their business models need to change. Fortunately for them, broadband offers an even-higher value delivery option if it is exploited properly.
What do you think? Post a comment now.
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