IP Democracy asked an interesting question that piqued OMPG's interest. We all know that video over the Internet is becoming an important discussion point for major networks but what should it be called. Our suggestion below:
Broadcasting (‘casting’ in general) implies a push medium. The difference with all of the online content is that the networks are not ‘casting’ but simply allowing content to be pulled.
We think any term that is going to become the default for describing video distribution/consumption over the Internet can not have traditional media connotations. So a word that implies openness, availability, consumer control….hummm…Internet on-demand it…released for on-demand on Internet….
Could a show or movie simply be iReleased? Yep, we like it. For example: “The first four Studio 60’s will be iReleased prior to their television broadcast” or “House will be iReleased every Tuesday at 8pm Eastern” or “does anyone know when West Wing’s iRelease date is?”. If apple has the monopoly on iAnything, then eRelease or vRelease could work as well.
iRelease, eRelease or vRelease all have positive connotations as release is a generally positive word associated with anticipation and freeing. i (or v or e) cover the necessary web referral. Our personal vavorite is iRelease (for internet released) but eReleased (or electronically released) and vReleased (for virtually released) both have some catch to them.
While release does have some traditional media connotations (movie releases, dvd releases...) we think it best describes a point in time when the consumer is then allowed to decide whether or not they wish to pursue the content other the channel of release. In these terms the Internet is just a new channel that a content producer could announce the availability of their content, even though it is probably the most important since the television.
The recent SES Conference in San Jose included a panel called "Meet the Search Ad Networks". The panelists seemed to have broad ideas about the identity of their ad networks, which is likely why Emily White of Google recommended the panel simply be called "Meet the Ad Networks", citing the increasing mediums (i.e. radio, print, video and games) and advertisement types distributed by the companies represented on the panel.
To the dismay of the panel's moderator Danny Sullivan, who understandably wanted to keep the conversation search focused, in turned took the opportunity to expand on some panel members' comments (Emily included) to briefly address the ability of these ad networks to distribute brand advertisements across publishers/content. Although it is clearly the goal of Microsoft, Yahoo! and Google to become one-stop-shops for advertisers and it is absolutely the goal of brand advertisers to find new channels to garner some of the consumer attention that is increasingly directed online and to the infamous Long Tail/User Generated Content, it doesn't mean they are the answers to each others problems... just yet. Brand advertising does not fit into the current ad distribution models - it requires something different. Let's look at why:
Relevancy vs. Targeting
First and foremost is the issue of targeting versus relevancy. When an audience member asked if Google would continue to provide highly targeted advertising opportunities over the new mediums served, the response was "targeting has always been, and will continue to be, a basic tenet for Google". We all know that targeting is important, but the core of what Google provides is relevancy - namely relevancy of search results and relevancy of advertisements. There are infinite reasons why Google has been successful, but the most basic is that they have always focused first on relevancy. This has allowed them to capitalize on the concept that ads are actually part of the content, not simply a negative externality. Ads served with search results on Google are in some cases more valuable to the searcher than organic results. Ads served by Google on a publisher's web page add value to the publisher's content through relevancy. What exactly does relevancy mean? It means that value is added to all members of the advertising ecosystem. The user receives value, the publisher receives value and ultimately, the advertiser receives value - though none of them have complete control over the process. The question remains; how can you apply this to brand advertisements?
The proposed distribution methods for brand advertisements across vast publisher networks revolve mostly around site targeting and demographic targeting. This is because contextual relevancy/distribution does not apply to brand advertisements in the same way that it applies to transactional advertisements (something we will get into later). Targeting has a number of problems including that site targeting isn't scalable - brand advertisers have a difficult enough time negotiating buys across the current television landscape (hundreds of channels) let alone across the seemingly infinite spectrum within the long tail of content online. They are now experimenting with eBay to create a more efficient market for buying ads across those hundreds of television channels. Online, we must also consider the motivations of the content creators and how often the content changes (something else we will get into later). For these reasons (and countless others), let's assume that site targeting isn't the end game.
Demographic targeting, which aggregates information about who the content reaches and allows advertisers to target based on desired demographic reach for their brand campaign, isn't the end game either. Why not? Television does it this way, right? Wrong. Ads on television are 30 second spots between content. Ads online are part of the content. Even more so than on television, online page content ‘bleeds' onto the brand ad, and in turn the content of the brand ad ‘bleeds' onto the page. Allowing the advertiser to target gives too much and not enough control at the same time. It says ‘forget if the publisher wants this brand ad, forget if it is relevant to the content, advertisers are paying for it'. It also says ‘forget if this is going to add to or detract from the user experience, forget if it is going to interrupt the page/video/radio consuming experience'. In short it is not based on relevancy. This is not how Google has done business in the past and it would be a mistake for them to do so going forward. On the ‘not enough control' side, demographic targeting does not say to the brand advertisers that the images, sounds, art or even text put together by the site to convey an image will enhance/amplify the brands image; only that the audience of the page is the audience they would like to enhance/amplify their brand to.
Creating one market for distribution of transactional and brand advertisements
The idea is that there is one pool of inventory where ads (whether brand or transactional or some other form) can be displayed, so there needs to be one market for bidding on this inventory. The problem is that while the search companies can use their massive amounts of data to estimate an acceptable CPM bid based on what a CPC ad might generate in the same location, the value of the two cannot be measured in the same way and in many cases would represent very different uses of publisher inventory. What is needed is a separate market for brand advertisers that determines the market value for brand advertisement distribution within image enhancing content reaching particular demographics. The two markets could then be combined to determine the most efficient combination of distribution/placement of brand and transactional advertisements across publisher networks. There is a lot more to this idea with regards to optimal combinations of CPC and CPM as well as determining measurability of effectiveness, but we can go into that at another time.
Intentions of Long Tail Content Creators
The final piece to this we have already spoken about at length, so we will try to just restate it a little more clearly. The intentions of those whom create long tail content, especially social content, are not the same as the intentions of a studio creating content. Studios consider possible audiences and advertisers when creating content, because they know they have to/want to monetize the content. This is very different from the generation of long tail of content, which almost never considers advertisers when deciding what content to publish, at least in a traditional media sense. We will write more on this in another entry.
So what is the missing link between the brand advertiser's need to increase reach online, television's reach/ad value being increasingly compromised, and search ad networks' desire to attract these brand advertisers' online budgets? The link is a whole new system for determining relevancy of brand advertisements; a system which will create a market for brand advertisements and facilitate the rethinking the advertising ecosystem, taking into account brand advertisement goals as well as the intentions of the ecosystems participants and their effects on a market for brand advertisements. And what does that look like?...
Chas Edwards has a great post he pointed us to over on Chasnote (http://chasnote.com/?p=189) on brand advertising and scalability. He also pointed out that the trouble is between the bots and human recognition of context. We certainly agree, but we do think it is necessary and eventualy possible to have a scalable, technology based system; it just needs to be something different then what the options are today.
Excerpt of our response on Chas’ page:
The problem is you need the brand marketers to bid to set a price for display because each site displaying brand ads is truly unique in its value to the brand. With transactional, display on a site is worth exactly the marginal value from acquiring transactions regardless of the context (in most cases). For brand advertising display within various contexts has very different value, even if the viewing demographic is the same. And we certainly agree contextual relevancy isn't the answer. But there are other types of relevancy...
The effects of scalable ad-serving systems such as Google AdSense and Yahoo!'s Y!PNO, while already making a considerable impact on online marketing, are in the earliest stages of changing the way that all companies look at marketing. Given the mass movement to distribute all types of content by market pull (search) rather than push (broadcasting) and the ability to gather information about and target specific users using scalable ad-serving technologies, advertising itself is in the midst of a marketing revolution which will affect all mediums. This has the potential to improve the efficacy across all of advertising and change the way companies' message to, and communicate with, their customers and clients, in the end shifting the entire market for the attention of consumers. This is particularly true with regards to the monetization of video content as online in-demand or DVR access becomes the dominant model for video consumption.
Market movement to content "pull"
Over the past couple of months, the discussion regarding convergence of the Internet and "traditional" media has reached a fever pitch. Perhaps the most important concept to understand, in what has been a avalanche of announcements, is that moving forward there will no longer be cable "channels" as defined today. Television as we know it will change forever, as will many broadcast type distribution models. Instead, content will be available for viewers to pull/search at anytime. Each of the major networks and studios has shown a bit of their strategy regarding this transition, with some even beginning to produce content for online distribution only. Granted, there will still be live events and groups of viewers who will choose to watch content as it becomes available, but overall this shift in content distribution will rely on the ability of consumers to search and organize available content. This shows why Comcast's CEO states that Comcast wants to be the "Google of Cable Companies", why Microsoft is investing in Xbox to be the home media cente, why Cisco bought the number one cable box maker, why Google and Yahoo! are racing to be the interface through which content (of all types) is discovered on the Internet, and why Microsoft's MSN Originals has begun to look at content creation as a possible key to organizational success
Content will no longer come in neat 30, 60 and 120 minute blocks with "insert here" slots for traditional advertising. Video content will not only be viewed on a home television, or PC monitor, but on a vast array of devices for which each may require different ad formats to best deliver the messages to end users. This does not decrease the need for a vast array of creative advertising inventory but rather increase the inventory of creative developed. The new model of content distribution will require more advertising inventory for a product or brand, with each ad tailored for delivery in real time that speaks to individual users based on attributes far exceeding the traditional demographic advertising model. Below is a simplified look at the differences/possibilities of targeted advertising in a content pull market:
The right ad for the right user, time, and medium
The focus of advertising is reaching the right audience, with the right message, at the right time. Overture made pay-per-click (PPC) famous, and this has been the platform for the extraordinary growth of search marketing and the first step in monetizing content on the Internet. But, much as advertising has only just begun to see the effect of Google, Yahoo!, and other ad serving innovators, PPC is only the first step in improving the efficiency of ads served to all users.
As Jason Calcanis of Weblogs Inc. states so clearly on his blog, "What I really hate with CPC [cost-per-click] and CPL [cost-per-lead] models is that when you embrace them you're saying that there is no value to the impression. That looking at an advertiser is worth nothing. I'll never accept that as a publisher. No one clicks on a billboard or magazine ad and people pay a lot of money for those." Google recognizes this, as they have focused recently on building image and brand ad inventory, and certainly companies wishing to promote brands as well as their advertising agencies, have long known this. What an ad serving system would do, in an ideal world, is display the most "relevant" or effective ad at any given point. Relevancy and effectiveness apply in this context not only to the content of the ad delivered to the users, but to the way in which that ad is monetized. Aligning the effectiveness of the ad served, for both the advertiser and publisher, is the ultimate goal of automated ad serving systems.
ABC and NBC aren't competing to make the best medical drama anymore. Okay, yes they are-but there's a twist. It includes advertising (doesn't it always?). We recently saw one figure that puts television advertising at $46 billion for 2005(some have it at more). Advertising supports much of the content that we take for granted-we couldn't have been inspired by a television president on NBC for seven seasons without consumer packaged goods, automobiles and countless other iconic American companies buying 30-second-spots to try to inspire us with their ease of use, safety features, or "low-low" financing. But all of this is changing. We are not saying the sky is falling...just upfront buying.
In an economy driven by consumption (where consumption's number one driver isn't necessity but rather forces higher up on Maslow's triangle), advertising very much provides an engine, if not the engine, that drives a choice ridden society to consume. However, too many consumers of content simply see traditional "push" advertising as a negative externality. That is, they see commercials as a necessary evil. Simple market dynamics suggest that if there's a consensus in the market regarding a negative externality, and the technology is available to remove it, then you won't have that externality much longer. TiVo stepped up and is providing consumers with the technology to make the traditional 30-second-spot obsolete. But this is only the tip of the iceberg; the end game is a full digital living room where the broadcast model goes out the window. No more push advertising.
What does this mean? Where is advertising headed? We need to support the development of content (We mean, how is ER supposed to pay for all that fake blood without us?) but traditional push advertising is becoming more avoidable each day. Could people pay for each piece of content? Well, we don't know about everyone else, but we have been trained like it's our god given right to channel surf. We won't even go into the macroeconomic implications of erasing television advertising from our consumption economy-it's not going to happen. Nobody making content wants it, nobody distributing content wants it, and we, as consumers of content, really don't want to buy every piece of content that we want to check out. The answer for the content producers, advertisers and distributors is to understand the New Media Value Chain.
Understanding the New Media Value Chain will allow media companies to decrease the negative associations with advertising. In addition (media companies are going to love this), innovation and creativity (rather than a limited time available to sell) will set the limit for the amount of revenue that can be generated from a piece of content. As such, there will be competitive advantages to be had. Yep, let's just put it out there and say that innovation in advertising will be the new competitive platform for content.
Let's look at the media value chain in the simplest form:
Traditional push advertising takes place almost exclusively at the distribution stage. (From this point on ignore all numbers; we are only making a point, call Nielsen if you want ratings and ABC if you want rates). Let's say 20 million people watch Lost and ABC brings in $40 million in advertising revenue for every one hour episode. That's $2 per person watching for that hour. Anyway, two dollars makes sense because you can purchase the commercial-free episode on iTunes for a $1.99 and you can go buy the DVD set of the hit show 24, also commercial-free, for about $50. Let's see, that's 24 episodes for $50 dollars, or about $2 per episode. The market has set the price that it's willing to pay right now, and it's reasonably close to what ABC makes off each person if they added them as a viewer of the full ad supported version. Viewers have said that $2 per one-hour episode is approximately the price consumers equate to the negative externality of having to watch ads and have broadcast time being dictated to them.
TiVo technology relieves both of these negative externalities for far less than $2 per one hour show and has so many other value-added features that we have begun to lose count. Why aren't TiVo-like technologies plugged into every home that watches more than 1.5 hours of television per week? Because content producers, distributors and advertisers need to understand how to play in the New Media Value Chain before TiVo technologies can be pushed out to consumers.
As we mentioned earlier, TiVo is only the tip of the iceberg. The nightmare scenario is a Napster-like trading of content and a decline in revenue similar to the record industries. But there is no need for any of this to happen. The New Media Value Chain presents opportunities to reduce the negative externalities of advertising, while increasing overall content monetization, and will likely be the new battle ground for competitive advantages in media. It all comes down to a couple of simple key factors behind which are any number of infinitely complex scenarios. Let's start (and end) with the simple factors:
Relevancy of Advertising
Increasing the relevancy of advertising to each individual content viewer can increase the amount an advertiser is willing to pay per ad viewed. This, in turn, will allow the content owner to show less "push" ads and still monetize his/her content at similar rates. There is no reason why we should see the same ads as a college kid watching the same show. Once you are requesting the content, rather then simply another viewer of a broadcast, than they should be able to serve you more relevant ads. More relevant ads not only means that less total ads are needed, but that each ad carries a reduced negative externality because it is specifically applicable to me and my interests. The aggregate effect of serving relevant ads to viewers is a substantial decrease in negative externality.
Integration Up the Value Chain
The second concept, and perhaps far more important, is increasing the integration of advertising further up the media value chain into the production and creative stages. This includes product placement, but goes far beyond. It implies that brands and their agencies will play an active role in the creation and production of content. This presents great monetization opportunities, but just as many challenges and risks. Brand integration at creative and production stages runs a very real risk of compromising the integrity of the content. This would create the same negative externality that was attempting to be avoided by removing the "push" type advertising. This is solvable, but brands have to work with, and within, the content. At the Madison + Vine Conference in Beverly Hills the point was made: Is Aston Martin a cooler car because James Bond drives it or is James Bond cooler because he drives an Aston Martin? What this demonstrates is that the right brands can enhance the content and the right content can, in turn, enhance the brand, but the right situations need to be found.
The issue then, regarding advertising integration, is that there isn't an easily accessible market for pricing this type of advertising. With the increasing fragmentation of audiences comes the need for more scalable distribution methods. The online titans (Google, Yahoo!, Microsoft) are looking for answers. For example, MSN Originals is looking to understand the value chain from creative to display and where all of the advertising opportunities are. Microsoft isn't looking to replace NBC or ABC, but it would certainly like to figure out where technology is going to play a role in the new advertising market that is required to support the new media value chain. And we'd bet they really want to understand it before Google does.
Another classic example of stakeholders figuring out their place in the New Media Value Chain was Mountain Dew funding the production of a snowboard documentary which supported its brand-a natural fit. But how much content production can Mountain Dew fund before it's spending too much time focusing on what was once the studio's view? How small or big should they be willing to fund? What if more than one brand is involved in funding? What if the content explodes all over the internet; how would the content creators extract value beyond the initial funding? Should they be able to? More issues the online titans all want to solve first.
What is certain is that innovative and appropriate integration into the creative and production stages of content can greatly increase the monetization of content and further decrease the negative externalities of advertising. Done in a marketing utopia, negative externalities could approach zero. The end game of effectively leveraging the new media value chain for content producers is that it could allow them to truly free their content, to be shared, altered and viewed whenever consumers may want. Let's make another prediction then: The first major content producers to effectively free their content will have a substantial competitive advantage over those needing to control distribution to achieve monetization.
So like we said, NBC and ABC aren't competing to make the best medical drama anymore; they are competing to make and set free the best medical drama. This is going to increase the importance of agencies as more relevant ads mean more forms of creative for the segments targeted and building brands that can enhance content can not be done in the content alone. It is also going to increase the role of technology in creating efficient markets for buying. Finally it is going to fundamentally change the relationship between advertisers/agencies, studios/content producers and the online community.
There is so much more detail to go into. Sentences in this post can be discussed for pages but it's a good place to get the conversation started.
Bainbridge OMPG is dedicated to the understanding and formulation of competitive strategies in and around new media. This blog will be a weekly look at what the strategic implications of particular stories are across markets.
How does convergence affect media buying? What roles will Microsoft, Google et al play in the coming media landscape and what does that mean for traditional companies? How are the roles of various players in the media value chain changing to adapt to consumer demand and technology shifts?
Our hope is that ideas surrounding possible media futures and the implications of those futures will be openly discussed here. Along with Bainbridge's OMPG analysts, we will use this blog as a sounding board to post thoughts regarding current market events or situations. From time to time a big idea might drag for a couple of posts.
We Look forward to adding Bainbridge OMPG's thoughts to the blog community, and to hearing from all those with an interest in online advertising and media.