Has Rich Media Advertising come of age?

Following on my comments on the future of ITV and their multimedia future post Friends Reunited, I thought I might take a look at the state of rich media advertising and how it is developing.

On a recent assignment I was tasked to develop a revenue model that would support a free-to-air Internet TV service.  Most of the models in place utilised versions of Google’s Adsense, but I felt that the user would be unlikely to click on such ads and so I started to look at rich media advertising such as ad-rollers of various types such as this pre-roller ad for the Jaguar XF.

Future revenue will be as a result of a user driven addressable advertising model whereby income is derived from the advertising model powering the Internet today.  Rich media addressable advertising is a new class of advertising currently being deployed across the internet and it makes extensive use of video traditionally associated with the TV and Cinema advertising and extends the capability of the internet to enable users to interact with the advert offering numerous opportunities for advertisers to extend the contact with an interested party.

Rich media advertising provides addressable, accountable television advertising solutions that enable the delivery of targeted messages and engage viewers through interactivity. This advertising solution improves the overall effectiveness of advertising campaigns while providing true accountability through real-time reach measurement.

The New Advertising Model

Consider the advertising model from simple pre-roller advertisements which are shown whilst applications are loading and simple pay per click advertising for the purposes of building the revenue model.  Pricing for rich media vary, but ads such as a 20 second pre-roller ad is approximately £12.50 CPM. 

The IPA TouchPoints Survey in July 2008 indicated that the current consumer usage of broadband access is 34 hours per month in the UK per subscriber and according to a May 2008 Report from Forrester, typical online video viewing is achieving average levels of 4 hours per month per user.  Over a 4 hour period a Internet/TV viewer is forecast to view ten 20 second pre rollers.  For 100,000 users, this would equate to £50,000 in advertising income per week.  Pre-rollers are the cheapest form of video rich media ads available.  Longer 30s and 60s linear ads, mid-rollers and end rollers generate higher levels of CPM income.  In the US, Microsoft is experimenting with running 60s mid-roller ad breaks for every 15 minutes of video viewed.  High advertising rates are being generated by the likes of Navic Networks (recently acquired by Microsoft) who are providing a range of interactive TV ads powered by web capabilities enabling users to respond to ads and make requests and provide feedback on content.  Internet/TV advertising pricing is currently at a higher level than corresponding standard Internet advertising as it is being treated as an extension of TV advertising which is historically very expensive per viewer compared to the Internet.

Pay per click (PPC) advertising provided by Google has been tried with internet video applications such as RooTV.  These PPC ads currently attract and average click price of around 40p per click on Google and 29p per click on Yahoo!  Click through rate (CTR) is dependent on subject matter and targeting. However, I would suggest that for the purposes of modelling use a CTR of 2% which is equivalent to current run of site rates across PPC advertising and the lower Yahoo! rate of 29p per click.

Addressable Advertising solutions help advertisers to reach the full potential of television advertising and improve the overall effectiveness of campaigns. These solutions allow advertisers to target groups of viewers using overlays on 30-second, 60-second, targeted video, or long-form advertising using any or a combination of the following: Request for Information (RFI), Telescoping, Viewer Polls, or Targeted Information Overlays.

Request for Information (RFI) & Fulfilment

RFI overlays are targeted, interactive enhancements that invite viewers to elect to receive more information on a product or service. RFIs generate highly qualified leads and provide the most targeted and direct connection with digital cable viewers. Advertisers are able to send coupons, product samples or brochures to self-selected viewers.

Telescoping

Telescoping is also known as linking to long-form advertising and bridges both linear and on-demand advertising by connecting customers with enhanced product information and enabling direct ecommerce.  Interactive overlays allow viewers to link directly to long-form VOD content such as the Jag ad above.  Telescoping combines the reach of linear advertising with the one-on-one nature of interactive on-demand content.

Telescoping brings together targeted interactive overlays with 30-and 60-second roller ads pushing viewers into longer more in-depth information about the advertised product or service.  Telescoping to VOD solution addresses one of the biggest challenges facing advertisers today that of implementing VOD advertisements without having viewers’ access content through a complex click through process.  By clicking on an interactive prompt, viewers are linked directly to the long-form video advertising content without the risk of them losing interest while navigating menus.

Viewer Polling

Poll overlays are graphical, interactive enhancements that are designed to engage viewers while obtaining their interests and opinions through viewer self-segmentation. Viewers use their existing remote controls to respond to questions posed in the overlay. Poll results are recorded, compiled, and electronically communicated back to the advertiser and can then be used to define targets for subsequent advertising campaigns.

Targeted Impressions/Spot Tags

Targeted Impressions are non-interactive overlays that enable advertisers to update their spots with time-sensitive information, address or phone number of the nearest location, product/service specials, etc.  Using targeted impressions, advertisers can customise a single spot for different groups of targeted viewers.

Conclusion

Rich media advertising combines with Internet TV content now offers a powerful new advertising medium for traditional broadcasters to extract a whole range of new advertising revenues to support their transition away from declining broadcast advertising.  The increase in efficiency of TV based advertising for delivering relevant messages to targeted viewers has huge additional benefits and allows the broadcaster to target new advertisers who have not traditionally tried TV advertising due to the high cost and unaccountability.  Rich Media Advertising has clearly come of age and so will the major Broadcasters be able to move from the dying big budget ad spend to this form of accountable advertising?  Time will tell and probably very soon!

Friends Disunited! Breaking up is so expensive……

It was reported in the weekend papers that ITV is to sell Friends Reunited.  ITV bought Friends Reunited back in December 2005 for an eye-watering £175 million ($280 million).  According to the story in the Sunday Telegraph, “Analysts believe that Friends Reunited is now worth significantly less because of intense competition from rivals such as MySpace and Facebook” or just maybe they overpaid in the first place.  Back in 2003, one of the major accountancy firms, BDO Stoy Hayward, was looking for a buyer on behalf of the original founders Steve and Julie Pankhurst and co-founder Jason Porter.  I was asked by a client to review the business and come up with a valuation.  The business was hugely profitable although there was obviously need for significant investment in their infrastructure.  However, the most “toppy” valuation I could come up with was in the region of £30 million which was higher than market sentiment suggesting a £25 million price tag.  In the event, Friends Reunited decided not to sell and brought in former Financial Times chief Michael Murphy as part of a global expansion plan.

This was a phenomenally successful move since Murphy increased the business’ valuation from £30 million to £175 million in just over two years.  The spirit of 1999 seemed to be in the air again!  Heady days indeed and at the time ITV said that the Friends’ team would have a leading role in developing ITV’s online and broadband strategy.

Sadly it hasn’t worked out as everyone had expected and yet another smart internet business failed to develop into a major force within the big company corporate world of ITV.  Now ITV will pay the price in what is likely to be a fire sale of the asset at a knock down price.  I wouldn’t be surprised to see Steve and Julie Pankhurst looking to use the money ITV paid them to buy back the company for a much lower figure.

I wonder whether ITV is still using the same analysts that thought £175 million was a good deal!  Well it would seem they maybe since today ITV is suggesting that the downturn in TV advertising revenues is temporary and is just down to the deepening recession.  Sadly anyone who follows new media with more than a passing interest will know that Google had their lunch last year and recession or not I just don’t see the Internet juggernaut altering course from taking a greater share of the converging TV and Internet advertising markets.

However, one potential future of TV lies not in traditional broadcast, but in the selective world of view-on-demand via the broadband Internet and content will be the key to its success.  Whilst we are all happy to catch an amusing 30 second clip of a cat flushing a toilet on YouTube, it is hardly compulsive viewing and unlikely to attract advertisers.  In reality, view-on-demand of quality content available at the user’s convenience is an attractive offering and one ITV is well placed to deliver.  ITV is content rich with access to a significant back catalogue and a continuing, although diminishing, commitment to developing new content.  Content will make Internet TV and IPTV fly.  As for the advertising model that is evolving for video content such as pre-rollers and mid rollers etc, the pricing level will be fundamental different from the millions of pounds once paid for a 30 second slot during Coronation Street and far closer to the Internet pricing model.

So as traditional broadcast advertising continues to decline, ITV must act quickly to build a content rich Internet based future.  The recent Kangaroo controversy is just a side show and quite frankly a waste of money for ITV as I believe was the development of the iPlayer a waste of licence payers money when there exists many fully developed home grown alternatives such as Vividas.  ITV should use some of the funds they get for selling Friends Reunited to look to develop content in collaboration with some of the current alternative Internet TV channels such as Joost, Blinkx or even Wii TV.  ITV could get into these areas with a much lower level of investment than the grand gestures of 2005 and they have the potential to offer a much more interesting future than managing decline!

Internet TV - Is it a viable alternative to Satellite?

With the advent of 20Mb Broadband service, Internet TV is beginning to look like a viable offering compared to costly satellite services such as Sky or Cable alternatives such as Virgin. 

In my definition of Internet television, the combination of digital TV and seamless Internet based TV services such as on-demand Internet services such as the BBC’s iPlayer or web based sites such as Joost, offer a credible alternative to the competitive products allowing viewers to choose the show they want to watch from a library of shows as well as a broad range of conventional TV.  With the fall in PC and TV prices the opportunity to join the two together to make a credible entertainment package with a relatively low investment.  The Internet TV service can ride on the back of existing infrastructure including broadband, ADSL, Wi-Fi, cable and satellite.

The primary models for Internet television are streaming Internet TV or selectable video on an Internet location, typically a website. The video can also be broadcast with a peer-to-peer network (P2PTV), which doesn't rely on a single website's streaming.

It differs from IPTV in that IPTV offerings, while also based on the IP protocol stacks, are typically offered on discrete service provider networks such as that from Tiscali in the UK or BT Vision.

Specialised PC/TV solutions like that offered by the  Sony VGF-HS1E, an all-in-one home server for total control of your multimedia entertainment.  Alternatively, there are a range of downloadable solutions which offer the opportunity to run a menu of services on a diverse range of equipment such as PS3 PlayTV  and Wii Games stations or even via your iPhone (see my blogcetera comment).

As we see traditional TV viewing habits fragment, the opportunity to create your own schedule to fit your life style will undoubtedly see the rise of a broad range of both equipment and software solutions that will drive new media options.  The key issue for content providers will be - how they make money from the punters of these new usage models?  Nintendo reckon that 18 million of their 40 million Wii are connected to the Internet and they can create a viable TV channel and delivered credible internet based advertising.  The key will be creating a viable programmable programme guide which the users can set-up and is easy to use and allow simple navigation both of digital TV offerings with Internet offerings.  We shall be following these developments in the Internet TV space, which clearly offer the user huge potential offerings from a boundless Internet and a powerful competitor to expensive satellite and cable services.  Whatever method you choose to view your TV content, the Government will still expect you to pay the licence fee!

Will 2009 be the year of the Dongle?

With the global market for 3G dongles set to grow from 20 million units in 2008 to 26 million units in 2009, the dongle is set to become a standard accessory for the “mobility”.  Fuelled by subsidized access from the major mobile networks such as Vodafone and 3, the dongle is grabbing an increasing share of the internet access market.   Nokia was reported in December to be launching a new Nokia dongle which has been unofficially christened the “donkle”.

This is all very bad news for traditional fixed line ISPs and Cable operators who with one or two notable exceptions have failed to capture any significant numbers from the IPTV developments.  Now plain utility broadband (PUB) is about to be squeezed by the major mobile companies aggressively moving on to their turf.

With 3G Broadband dongle service costing as little as £10 a month and you get a free laptop offers, ISP’s PUB service is going to find it hard to compete.  As we have seen with the growth of the mobile telephony market, the market has seen the entry of all manner of players from telcos to supermarkets, all seeking to tie their users in with some very low offer just to retain customers for a broad range of services.  ISPs look like a threatened species and will need to evolve very quickly if they are to survive.

Whilst Europe is seeing double digit growth for the major mobile players, the US market which is traditionally slow to adopt mobile developments is just beginning to see the dongle develop a small market share.  The entry of Nokia and the proof of success in Europe will undoubtedly see the likes of Vodafone and T-Mobile seeking to capitalise on their European experience in the US.   This will undoubtedly drive some of the middle rank ISPs to the wall.  2009 will be a very interesting year.

Is Watching TV on Your Mobile Worthwhile?

With 3G now the de-facto standard across a whole range of mobile phones, one of the apparently most attractive applications is broadcast IPTV. It is now possible to watch the range of BBC content and Sky content over the mobile networks. The only problem is likely to be your download limit which could make “free” TV seem very expensive.

BBC iPlayer is available on the Nokia's N96 and it is possible to use your iPhone or iPod Touch to pick up the latest BBC re-runs. The BBC is aiming to deliver TV to an increasing number of mobile devices. Take a look at Freebe TV and you will find a incredible range of TV that can be viewed on you mobile. So there is no shortage of content and it is increasing daily.

However, is watching TV a realistic option on your mobile. The largest mobile screens tend to be limited to a maximum of 12 cm by 6 cm or about the same size as a packet of 20! This is considerably smaller that most portable DVD players. Sport has been one the most promoted services particular football, but it does tend to turn into a video version of that old standby the “Spot the Ball” competition.

Using Laptops terminals such as the latest Sony Vaio Z Series or the ASUS EEE PC to access TV is fairly accessible, but watching a 2 inch square screen is a very different proposition.

Maybe the way to go is to use a “Personal Media Viewer” from Myvu or Vuzix, which offers both a stylish way to watch TV and a “big screen” effect. The glasses are still an expensive add on to your iPhone or Nokia from £100 to £250, but from my perspective it is the only way to go to get an enjoyable experience. The effect is to appear you are watching the equivalent of a 44 inch wide screen TV. The most expensive devices allow you to look through the screen to be aware of what is going on around you. It will come as no surprise to learn that these devices have evolved from the military industry.  

I suspect that Mobile TV is probably unstoppable, but it will be largely a gimmick unless you get a pair of personal media glasses!