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.
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.