As the Internet continues its development as a delivery medium for video, the race is on for marketers to find the most effective strategy to monetize content.
While currently, the majority of streams are delivering short, to-the-point clips focused on news, comedy, sports, special-interest or user-generated content, major television and movie studios are entering the marketplace.
The current big idea in Web TV uses flash-based video players streaming directly from network Websites. Aggregators like NBC Universal’s Hulu combine multiple studio content into a single, easy-to-use interface. The video is of high quality, has the capacity to access large catalogs and is ad-supported. In general, one or two advertisers own three to five 15- or 30-second spots.
But few people want to sit in front of a computer to watch TV. Sitting on the couch in front of a plasma screen has undeniable appeal.
The Internet has the unique quality of making it easy to get a finished product directly in the hands of viewers.
The parties with the best strategy to combine the volume and accessibility of Internet video with the experience of traditional TV will have the most clout in defining the viewing and, in turn advertising, landscape. Crystal balls and anti-trust suits aside, here’s my take on a possible distribution model for TV on the Web:
Microsoft, which has aggressively entered the online advertising business, has an opportunity to apply its unique resources, and strikes a deal with a major TV manufacturer and a TV studio. Let’s imagine a hypothetical strategy involving Sony and NBC Universal.
In part one, Microsoft offers Sony a no-risk deal to develop an easy-to-use and intuitive Web browser to integrate into its televisions. Microsoft assists in integrating wireless Internet hardware into Sony sets, and designs an operating system to bring the new technology together. This TV operating system will also have the ability to communicate with its Windows PC operating system.
There are products in the marketplace that offer things like this through the combination of different hardware and software. But response has been underwhelming, mostly due to the fact that integration has been less than seamless, and somewhat expensive. And none has managed to develop a relationship with the ad industry. That’s Microsoft’s opportunity.
In part two, Microsoft and Sony shop their new product to a number of networks, because they need a launch partner to provide content. However, they know NBC is putting a lot of dollars behind Hulu, so the pitch would be especially attractive to NBC: a hybrid broadcast/Web-based TV product that consumers could use to watch ordinary television and interface directly with Web-based on-demand video. The user experience would be seamless.
So what’s in it for the network? Internet TV will offer the golden geese of hyper-targeting and granular reporting. LPMs? Gone. Diaries? Please. Individual impressions will be measured, set by set. The technology would be in place for direct response and interactivity. And it opens the door for behavioral targeting, which allows users to be tracked while on certain Websites and to be identified by consuming certain types of content. Integration with a PC operating system would allow this information to flow seamlessly from a traditional computer to that Sony television (and vice versa).
Because Microsoft would have designed the entire system, behavioral information can be compiled with relative ease (given the user provides permission). Research shows that consumers are far more receptive to ads for products they think are relevant to their lives. This new device could eliminate much of the waste associated with broadcast, and generate exceptional demand from advertisers. As supply would be limited to one network, the cost of CPMs would go up.
Picture the applications: A family thinking about buying a minivan searches Yahoo Autos. As they browse, their computer is cookied (identified) twice; once for the auto site, again for the minivan section.
After some searching, they decide to watch some TV. Meanwhile, the computer is sending the behavioral information to the TV over their wireless network. The computer runs Windows, and so does their TV; everything is in the same language. The family members head to the living room, turn on the Sony TV, navigate seamlessly to Hulu and pick an old episode of The Office.
As the episode loads, the advertiser is selected on the fly from a group of rotated buys. Their behavioral target is matched, and the ads are put in place within milliseconds. Tonight’s episode is sponsored by Ford Windstar. Because impressions levels can be monitored and controlled, frequency caps can even limit over-exposure. Exclusivity deals (product segment takeovers) could also be put into place.
The winners in the new-media landscape are companies that can make it profitable for content providers to utilize developing technology. Organizations that can deliver those eyeballs—maybe Microsoft, maybe someone else—will dominate ad budgets for the next quarter-century.