SpotXchange Joins Casual Games Association

WESTMINSTER, CO August 20, 2008 Online video advertising network SpotXchange has joined the Casual Games Association.

“Given the overwhelming success our video advertisers have experienced with casual gaming ad inventory, we felt SpotXchange would benefit from being involved in the industry’s leading organization,” said Michael Shehan, CEO/President of SpotXchange. “Our participation will allow us to increase our knowledge and understanding of the industry’s needs and enables us to act as more of a conduit in bringing advertisers and casual gaming publishers together through our network.”

The Casual Games Association is an international organization with a paid membership of more than 4,000 gaming executives, publishers and developers. Dedicated to promoting casual games for general consumers and providing educational resources for game development, the association hosts annual conferences in Seattle, Kyiv and Amsterdam, publishes a magazine three times a year, and issues research reports on the industry. The association was founded in 2005 by members of the casual games industry.

According to eMarketer in the next five years video games as an ad medium will grow significantly. Spending will increase from $692 million in 2006 to $1.9 billion in 2011 with half of the spending expected to take place in the U.S. This will be spurred by a growing audience, heavily women and older gamers, and a need for game developers to offset larger production costs. The SpotXchange network is already seeing powerful network stats that illustrate these trends. The marketplace reaches over 60 million unique gamers each month, 90 percent of in-game ads are viewed in full and CTRs are coming in at one to five percent.

“The increasing interest in casual games has created a powerful opportunity for advertisers to get involved. Companies like SpotXchange make it easier for publishers, developers and advertisers to work together,” said Craig Holland, marketing director of the Casual Games Association. “We are pleased that companies like SpotXchange are using the Casual Games Association as a resource to expand their presence in the industry.”

Based in Colorado and launched in November 2006, SpotXchange reaches over 60 million unique gamers across the world through its partnership with over 50 casual gaming networks, social gaming networks and casual gaming portals. SpotXchange is a video advertising network that provides sophisticated targeting, a hands-on client services team, reporting, and a transparent marketplace for publishers and advertisers’ online video advertising needs.

About SpotXchange
The SpotXchange patent-pending online video advertising platform received the 2007 Streaming Media Readers’ Choice Award for BEST VIDEO AD PLATFORM. The company was spun off from Colorado-based digital marketing and technology company, Booyah Networks in March 2007. Booyah Networks ranked 23rd on the 2006 Inc. 500. Clients and partners include eGames, Gamesville, iWin.com, FreeRideGames.com, NeoEdge, Real Arcade, Slingo, TryGames, WorldWinner, and more.

###

Contact:
Valerie Quintanilla
303.345.6623
Valerie@spotxchange.com

MediaPost: Local Advertising: Lessons for All Video Advertisers

Local Advertising: Lessons for All Video Advertisers Posted August 18th, 2008 by Michael Shehan

Just how in the world will local online video advertising become a $1.5 billion industry (according to The Kelsey Group’s US Local Video Forecast - 2007 - 2012 Report) in just a few years after only generating $11 million in 2007? Local advertisers are generally not the most sophisticated brand marketers on the planet. Most don’t know what CPM stands for, and fewer would agree to pay on a CPM basis. Therefore, one would seemingly conclude that local video advertising, largely billed as a branding medium, would not grow as quickly as projected. However this was roughly the same argument when search marketing began to reach critical mass. Local advertisers surely weren’t going to pay per click to drive visitors to their site; and yet, local search marketing has become one of the most competitive and largest segments of sponsored search. If history is any guide, local search offers some very important lessons that can be applied to all forms of video advertising - from brand to direct response campaigns.

First Lesson: Engage Everyone, Measure Everything

Small to medium-sized businesses (SMBs) typically use marketing companies, like Dex Media and Reach Local, for online and sometimes offline promotions. These companies employ sophisticated campaign management practices and technologies that allow them to arbitrage traffic from large search players like Google and Yahoo. These players can often justify the cost of paying per click by providing every means possible to engage the consumer and to measure such engagement. It’s not about brand recall, although that is a major benefit. It’s about interactions, whether it’s a phone call, an email, a filled out form, a coupon or a visit to a dynamic Web site. It’s foolish to assume all consumers want only one way to engage with a business. I hate talking on the phone, so I order online. My mom hates to order online, so she calls a live person. And my dad prefers to go to the store. Knowing that, local advertisers provide every opportunity to interact with the consumer. In addition to typical impression and post click behavioral tracking, online video advertisers might also want to consider the following tactics:

• Unique Phone Tracking Numbers - We have found that overlaying the video ads and companion banner units with unique phone tracking numbers is a remarkably effective way to not only generate call volume, but also to track the quality of your traffic sources. You can obtain call tracking numbers from companies like Ingenio, Marchex, and Telmetrics. Most of the time, these providers will report the caller’s name, address, phone number, time of call, length of call, and some even record the call for you so you can measure lead quality.

• Push to Talk - This nifty feature allows consumers to request that the business contact them. The consumer types in their phone number in a form and they hit the ‘push to talk’ button. The business is then notified to contact the interested customer. As always, the push to talk lead is tracked back to the traffic source.

• Dynamic Sites - Many local advertisers have dynamic Web sites that change elements of the site, like phone numbers and tracking ID, based on who is sending the traffic to their site, once again allowing them to track the lead source. For instance, the unique call tracking number found on the video ad and banners will match with the phone number on the dynamic site.

• Request for More Information Forms - Many local advertisers’ Web sites encourage consumers to fill out a form to receive more information. Again, all is tracked back to the traffic source.

• Coupons - To drive foot traffic and orders, local advertisers are masters at offering up an incentive. For video advertisers, it can be as simple as saying in your ad, “mention this ad and you’ll get…” or having your companion banner direct people to a printable discount coupon.

Second Lesson: Optimize, Re-optimize, Then Re-optimize Again

Local search advertisers employ a constant cycle of measurement and optimization. Better performing sources of traffic get prioritized, while wasteful sources are automatically pruned from the plan.

While video advertising isn’t as automated as some would hope, some networks and exchanges will allow you to optimize your campaign on the fly as you measure conversions. For instance, one company did a campaign for an auto parts store in a small suburb of Minneapolis. After targeting the Minneapolis DMA coupled with contextual targets of local news, sports, and automobiles, the campaign did OK, but the performance would not justify a sustained campaign. The advertiser optimized the campaign to target only automotive content and to target the neighborhood where the auto parts store was located. This dramatically lowered the number of video impressions served to just 1,000 in one month. However the campaign drove a significantly higher percentage of Web site visits, filled-out forms, and calls to the store at a lower cost to the advertiser.

Third Lesson: It’s the eCPM, Stupid!

The arbitrageurs of local advertising are remarkable in that they will work with any traffic source regardless of the payment model-CPM, CPA or CPC. By understanding and attributing a value to certain interactions with their consumers, whether they are phone calls or filled-out forms, they can always assess the value of a traffic source to quickly determine if it’s worth it to them. If a cost per click campaign doesn’t offset the cost to generate their desired engagement metrics, then they will shift ad budget somewhere else that can, even if it means paying on a CPM basis.

We’ve found that local video ads can even outperform branded campaigns paying on a CPM basis when these campaigns are properly targeted, measured and optimized. For instance, in the above auto parts store example, those 1,000 impressions generated 40 visitors to the site and four phone calls, thereby generating traffic worth over $50 eCPM to them.

So what can brands learn from local video advertising? No, not to move to performance-based advertising. I don’t think anyone is going to buy a box of mac and cheese online. However inviting consumers to interact on multiple fronts can help easily quantify which traffic sources are most engaging and cost effective. For mac and cheese, potential measurable interactions could be downloading a recipe, printing a coupon, or participating in a survey.

Perhaps if the industry were to more widely adopt the sophisticated tactics found in local search advertising, one could actually argue that local online video advertising could be much larger than the Kelsey Group has projected!

Link to article

Mashable: What YouTube Needs to Do Now to Turn Things Around

This week I took part in a panel with fellow Internet video execs at the RBC Conference. Everyone on the panel was in agreement that brand advertisers want to sponsor “safe content”–professionally produced content that runs on reputable sites. Having said that, I don’t think that is YouTube’s only solution–there are other monetization models currently in the market such as display ads and overlay ads that can be priced on a CPA (performance) basis that could be used to monetize UGC. There may also be other monetization models not yet developed that may be used to cash in on YouTube’s massive volume of UGC inventory. At the end of the day, although the content is primarily UGC, it represents a significant volume of traffic and (as Blinkx CEO Suranga Chandratillake pointed out during our panel discussion, but not quoted in the article below), more than anyone, Google can afford to lose a little money on YouTube as it figures this out. After all, Google didn’t monetize search through advertising AT ALL during its first few years, but they ultimately figured out how to do that pretty well.

What YouTube Needs to Do Now to Turn Things Around 

YouTube hasn’t been able to monetize videos of eighty-year old men mooning a crowd of onlookers? It hasn’t been able to monetize someone lip-syncing “I Kissed A Girl?” Who would have thought that?

At a recent meeting of Internet videoSelling-Entertainment-Online Jan-08 executives at the RBC Capital conference, the panelists told those in attendance that user-generated content simply doesn’t provide any real monetization value and Google needs to find new ways to turn things around if it wants to turn a profit.

Later on, the execs said that the key to Google’s success has nothing to do with user-generated content and everything to with professional content, which can be controlled, analyzed, and properly determined to appeal to the key demographics advertisers are looking for.

“What we’ve found is that advertisers and agencies are only interested in professional media, so professional content providers are having a good time finding extremely high demand because they have a lack of video views,” Blinkx CEO Suranga Chandratillake said.

And for once, we’ve finally heard what YouTubeYouTube ’s business model should be. It needs to forget about user-generated content and trying to monetize that and actively seek ways to entice more people to its professional content and make it a greater value proposition for its advertisers.

Of course, Google has already taken significant steps in that direction as of late with deals between YouTube and Seth MacFarlane that will see the “Family Guy” creator working on a series of short cartoon spots designed exclusively for Google.

But the company’s initiatives need to go far beyond just that. It needs to keep user-generated content on YouTube because that’s what people are looking for most when they go there, and try to support that section of the site with display ads. On top of that, it needs to coax more companies to bring professional content over and actively sell advertising on that content, which is not only controlled, but user demographics can be analyzed and advertisers will be able to determine if the site is worth spending money on.

YouTube is an extremely expensive endeavor for Google that has yet to bear fruit. But if Google is smart, it will listen to what the execs said at the RBC Capital conference and start to actively seek out professional content that will entice more companies to spend money in the space.

If it doesn’t, look for YouTube to look even more like a bloated waste of money.

Link to article

MediaPost: 10 Questions For RFPing A Portal Or Video Ad Network

Great checklist! SpotX has you covered on all points!

MediaPost Online Video Insider Posted August 5th, 2008 by Tod Sacerdoti

Having served over 3 billion video ads in the last couple of years, we have learned a few things about the business. Whether you are buying video ads from a portal, publisher with multiple sites or a video ad network, there are 10 questions we recommend that you ask before committing to the buy.

1. Can I select the specific sites (or URLs) within your network that my ads will appear on (or can I select sites not to be included)?

Controlling your video buy means understanding the content quality of the inventory. If you are not offered the ability to add or remove sites it is because:

a) You are likely to remove the site/s where the portal/network intends to send the majority of your ad budget.

b) The vendor doesn’t have the technology to segment their inventory (this should be a red flag)

2. Can I see my campaign performance broken out site by site?

Even though you selected the sites that your ads should appear on, your ads will not necessarily appear on those sites or be spread equally among the selected sites. Make sure you ask for sites based on site performance as it is now offered by many players. I always recommend asking for a screenshot from every site agreed upon.

3. Can I optimize my campaign based on performance during the life of the campaign?

Many companies selling video inventory are forcing agencies to run campaigns regardless of performance. Many sites outperform the industry averages, based on CTR or attitudinal measures so make sure that you can optimize when you see the performing sites. You must have the above-mentioned performance breakdown to optimize against this data.

4. Will you guarantee that you will serve the entire allocated budget?

Video publishers are notorious about over-committing to inventory allocations and then under-delivering. In fact, many publishers have budget minimums and further under-deliver against that minimum! Be sure to make large sites or networks commit to budget fill, and put penalties in your terms for under-delivery.

5. Can we use my existing ad server (Atlas, Doubleclick) for billing purposes and to track impressions/clicks?

Discrepancies are a real issue when you use online advertising, but are nowhere more prevalent than in online video. It should be mandatory for any large budget that the agency’s ad server is the source of truth for billing and tracking purposes.

6. Will my ads be served on any syndicated content or embedded video players off the approved sites?

Syndicated content and embedded video players are the single easiest way to waste a video ad budget. Most publishers and ad networks that offer syndicated content or embedded video players do so primarily as a way to generate a large volume of cheap inventory and, therefore, increased margin. It is not offered because it adds value to the advertiser’s campaigns.

7. Will my ads be served on UGC sites?

Let’s be honest, there is a lot more bad video inventory on the Web than high-quality video inventory. Not surprisingly, most of the bad video inventory is user-generated content. Unless your campaign target specifically includes UGC, I would avoid it at all cost. It under-performs on every performance metric we track.

8. Will there be any rich-media fees or ad-serving costs in addition to the media cost?

You are likely already paying ad-serving fees for your ad server, so you don’t want to double your fees. Many vendors use rich media fees or ad serving costs as a way to extract additional budget out of agencies. The reality is that there are many vendors with enormous distribution that do not charge either of these fees, so make sure you do your research before you buy.

9. Can you handle all file conversions and technical implementation issues?

If your campaign includes mostly standard video ad units, then your media partner should bear the technology costs of converting your video files for every implementation. Put simply, all you should need to do is send the vendor the video files and any accompanying banners - they should be willing to handle the rest.

10. After we deliver campaign assets, how fast will the campaign go live and how fast can we pause the campaign if there are any issues?

Video ad execution often takes a bit longer than traditional display advertising, so you need to know what timelines you are dealing with. A reasonable timeframe is roughly three business days. Anything over that for starting or pausing a campaign should be reason for concern.

Link to article

TVWeek: Digital Dealmakers

Digital Dealmakers
August 3, 2008

Mike Shehan, CEO of SpotXchange

The player: Mike Shehan, CEO of SpotXchange

The play: SpotXchange is an online video advertising network that brokers deals for ads against online video content. Ads can be pre-rolls, overlays, banners and pre-game ads in which a video advertisement plays before a casual game starts. SpotXchange is the sister company to Booyah Networks, which builds technologies and provides solutions for sponsored search.

The pitch: Because of parent company Booyah’s work in search, SpotXchange can allow advertisers to tweak their campaigns on the fly based on real-time Web results, much like advertisers can do with search campaigns. “We provide a lot of transparency to allow advertisers to see exactly where their ads are being placed. They can load and launch campaigns within minutes as opposed to 30 days,” Mr. Shehan said. “The biggest thing our advertisers appreciate is the ability to optimize campaigns based on performance, just like you would with search.” Advertisers can pick and choose the sites and inventory they want.

In the mix: SpotXchange reaches 84 million people per month across its network of publishers, including Blinkx.com, ClipSyndicate.com, Pando.com, Videojug.com, Voxant.com and Vuze.com. Advertisers have included big brands like the U.S. Army and Ford, agencies like Universal McCann and direct-response marketers like Netflix. SpotXchange also works with local advertisers such as attorneys, retailers and restaurants because SpotXchange can target by city. “It’s a powerful marketing tool because it does drive phone calls and leads to them. For every local video ad, we overlay with a unique phone tracking number,” he said.

The backstory: Mr. Shehan founded parent company Booyah in 2001 with proceeds from selling his house. That company is now profitable.

The money guys: SpotXchange was funded by Booyah Networks at launch in 2006 with $6 million. The company also has raised an undisclosed amount of strategic investment money. SpotXchange makes money from selling ads and expects to be profitable in 12 to 24 months.

The pros: Online video advertising is a fast-growing business and revenue should rise from $471 million last year to $7.2 billion in 2012, according to Forrester Research.

The cons: Competition is stiff from online video ad networks like Tremor Media and Broadband Enterprises.

Background: Mr. Shehan was born in Westchester, Pa., and grew up in Baltimore. He graduated with a degree in biology from Vanderbilt University. Before founding Booyah in 2001, he was CEO of an image search technology firm and founded e-commerce company Logex. He lives in the Denver area with his wife and four children.

Who knew? In 2001 Mr. Shehan and his wife sold their dream home in Boulder, Colo., to fund Booyah Networks. Three months after they moved the house was featured in Better Homes & Gardens, with the couple in front of the home on the cover.

Posted on August 3, 2008 8:50 PM | Permalink

Link to article

Vote for SpotXchange!!!

Voting just opened for the Second Annual Streaming Media Readers’ Choice Awards <http://www.streamingmedia.com/readerschoice/>. Last year SpotXchange proudly took top honors in the online video advertising platform category <http://www.streamingmedia.com/article.asp?id=9730&page=4&c=31>.

This year we are excited to be nominated for two categories,

Video Advertising Platform
Video Advertising Network

SpotXchange has accomplished a lot in just one year. We can honestly say we’re the largest exchange of video ad inventory. We have established partnerships with over 400 publishers who globally reach over 100M people every month. Next up, we have our sights set on the casual gaming industry-an excellent source of high quality video ad inventory. SpotXchange has signed over 50 casual gaming publishers in the past year. Notable gaming publishers include Real Arcade, Slingo, iWin, NeoEdge and Lycos/Gamesville, to name a few.

On the advertiser side, we have run hundreds of campaigns-from large brands like US Army, Propel, Kmart, and Colorado Tourism, to local businesses like Maaco, Poconos, attorneys, auto dealers, etc.

We also opened a NYC office; expanded our sales bench; created a dedicated client services department; built a dedicated RFP response team for writing proposals to agencies; and we have dramatically expanded our publisher business development and account management team. Oh, and we filed for our patent.

Many analysts are expecting video ads to generate $4B+ by 2012. Kelsey projects local video ads will generate over $1.5B in 2011. And Gartner projects that online games will generate close to $1B in advertising by 2011. I’d say SpotXchange is poised to capture a large portion of the sector’s expected growth.

Please help us continue our march towards greatness by voting for SpotXchange on the Readers’ Choice Awards site - <http://www.streamingmedia.com/readerschoice/>.

Thanks so much for your support!

- Mike Shehan

ClickZ: Forecast: In-Stream Ads and Video Banners to Dwarf Overlays

The good news here is that the SpotXchange network isn’t soley dependent on the overlay ad unit. We can do overlays, but also do in-stream with companion banners.

Forecast: In-Stream Ads and Video Banners to Dwarf Overlays

By Zachary Rodgers, The ClickZ Network, Jul 23, 2008
Articles | Contact Zachary | Subscribe to Newsletters | RSS Feeds

Video overlay ads of the sort offered by YouTube will command just $184 million in ad spending by 2013, according to new research from JupiterResearch.

While that represents a significant rate of growth over the estimated $20 million marketers will spend on overlays this year, it’s tiny compared to the nearly $1.9 billion Jupiter believes they’ll sink into their in-stream buys, and the $1.3 billion it says they’ll invest in video banner ads.

“Advertisers aren’t very interested in [overlays] yet, and maybe won’t be,” said Jupiter analyst Emily Riley, who presented the findings at ClickZ’s Online Video Advertising Forum in New York yesterday.

YouTube continues to dominate video consumption. According to Jupiter, Google sites represent 34.8 percent of all video views on the Web, while none of its contenders command more than 7 percent. Yet, Google faces continued obstacles to monetizing YouTube’s vast audience and repository of clips. That’s partly because marketers prefer pre-roll to overlays and partly because they’re not comfortable with user-generated content environments, Riley said.

About half of advertisers feel comfortable with user-generated content, and many of them seem to be uploading content and creating branded channels on YouTube and other sites — as opposed to buying media. Also at the Video Ad Forum, Starcom USA Video Innovation Director Chris Allen indicated many of his agency’s clients have created branded channels, while few have placed in-video ads.

In the same panel, YouTube sales manager Brian Cusack acknowledged the site needed to do a better job explaining its value proposition to users. He said the company had seen improved acceptance with some categories and agencies.

Riley and other panelists suggested spending growth is coming from ads placed in professionally-produced content. Hulu VP of Sales Kevin McGurn noted the site is serving ads against “the vast majority” of its streams. Hulu’s content is all professionally-produced. YouTube on the other hand, serves ads on a maximum of 3 percent of its streams.

Meanwhile, semi-professional video content produced exclusively for the Web, such as Wallstrip and RocketBoom, have attracted loyal audiences but will likely need to pool their ad inventory into vertical networks to appeal to advertisers. “We do see this maintaining its niche appeal,” Riley said. “The better you can aggregate this content, the better advertisers can get access to it.”

AdAge: Most Say Ads a ‘Reasonable’ Cost of Free Online Video

AdAge covered an interesting study on the acceptance of ad-supported online video content.

I am interested to know if acceptance would change if survey respondents were asked specifically about retail sites who produce informational videos (WineLibraryTV comes to mind–note: I’m just using the show as an example as I’ve never seen an ad on any episode I’ve watched). For me, I would still watch Gary Vaynerchuck’s wild tastings. He’s so entertaining, I’d take an ad–even two! But, a host that wasn’t so engaging…I’d probably go another direction.

Here’s the article,

Most Say Ads a ‘Reasonable’ Cost of Free Online Video

Survey: Viewers Most Amenable to Ads in TV Shows, Movies but Not Amateur Video
By Megan McIlroy

Published: July 17, 2008

NEW YORK (AdAge.com) — Good news for the growing number of ad-supported video services popping up online: The majority of digital video consumers will find the inclusion of advertising a “reasonable” expectation for accessing free online video content.

That’s according to a new survey of U.S. internet users aged 12 and older conducted by market-research company Ipsos MediaCT in February 2008.

Give and take
“Nobody is going to tell you they love advertising,” said Adam Wright, director of Ipsos Media CT. “But the [survey] confirmed the notion that people get the give and take. That can be reassuring for many of the people who are trying to crack the code [of ad-subsidized video models].”

The percentage of internet users who found advertising to be a reasonable price of admission for free video content varies by content but, in general, respondents were more likely to embrace advertising in long-form professional programming. At least three in four digital video consumers said they would find it “reasonable” for advertising to appear in the free digital distribution of full-length TV shows and movies, while about two out of three said the inclusion of advertising would be reasonable with free access to music videos, short news or sports clips.

“If it’s premium content, people are willing to sit through ads. It’s something that consumers already expect,” said Mr. Wright.

Bad news for amateur content
But it’s a different story when it comes to amateur digital content, where viewers are much less likely to accept advertising as a price of admission. Just over half of the respondents in the survey who have downloaded or streamed a video online say they would find it “not reasonable” to have advertising embedded within free amateur or homemade video offerings.

That finding could raise an important question for video-sharing websites like You Tube that are diversifying content to include longer, professionally produced material. According to Mr. Wright, these providers will have to “carefully consider” ad-subsidized models since their current audience has grown accustomed to free streams without any advertising.

One way to approach advertising for different types of content is to use different kinds of advertising, Mr. Wright said. For instance, an amateur video might use a 15 second pre-roll or a pop-up ad, depending on consumer reaction.

Said Mr. Wright, “You have to get into what are consumers are OK with and what they aren’t, and [ask] when do you start to reach a negative impact?”

_________________________________________

Here’s a selection of responses from the Ipsos MediaCT survey:

How reasonable is it to have advertising in the following free video content?

Full-length TV show:
82% Very reasonable/somewhat reasonable
18% Not very reasonable/not at all reasonable

Full-length movies:
75% Very reasonable/somewhat reasonable
25% Not very reasonable/not at all reasonable

Music videos:
68% Very reasonable/somewhat reasonable
32% Not very reasonable/not at all reasonable

Short news or sports clips:
63% Very reasonable/somewhat reasonable
37% Not very reasonable/not at all reasonable

Movie/TV trailers or previews:
62% Very reasonable/somewhat reasonable
38% Not very reasonable/not at all reasonable

Amateur or homemade video clips:
48% Very reasonable/somewhat reasonable
52% Not very reasonable/not at all reasonable

For Now the Advertising Model Will Dominate in Broadband Video

By Will Richmond, Editor/Publisher, VideoNuze (www.videonuze.com)

Over time, as technology has created one new medium after another, one of the thorniest issues has been which business model to pursue. Each medium has resolved it in its own particular way. Now, as the broadband video medium continues to mature, the same question arises: which business model will be most prevalent?

There are really only 3 business model choices: either the consumer pays through subscriptions and/or a la carte payments, the advertiser pays, or both pay through some type of hybrid model. Surveying the media landscape, it’s possible to find examples of each of the three models.

For example, broadcast TV networks traditionally relied solely on advertising and still do. Yet cable TV networks derive both subscription payments (in this case from their customers which are cable TV, satellite or telco providers) and advertising revenues. Many newspapers also generate both subscription/newsstand revenues and ad revenues. Magazines follow a similar model. Conversely, in the entertainment business, movies tend to follow a premium model, with little-to-no reliance on advertising.

With so many different choices, it’s admittedly hard to say which model will prevail in broadband video. Yet researchers already expect broadband advertising to generate over $1 billion in revenue this year compared with just a fraction of this for the paid model. This and other evidence suggests that for the foreseeable future, for most broadband video, (movies are an important exception), the dominant model will be advertising-based. Following are 5 key reasons:

1. Consumer adoption of broadband is still relatively early
Though consumers viewed a record 11.5 billion video streams in March ‘08 according to comScore, on a per viewer basis, consumption is still relatively low. For many millions of early users, today’s broadband experience amounts to little more than watching random, funny clips that were emailed along. Though entertaining, most consumers could not envision paying for this type of content. As the medium matures and video quality improves, this will change. But for now, as with the Internet itself, many see “free” as the appropriate price point.

2. Broadband video is an extension of the booming Internet advertising model
In a sense, video is just a new format to be delivered online, following text and graphics. The good news for broadband video advertising is that the online ad industry (encompassing banners, search ads, etc.) is booming. Marketers from the biggest multi-national corporations to the smallest mom-and-pops now recognize and value the interactivity, targetability and measurability that online advertising uniquely offers. Broadband allows all of this as well, plus the emotional impact that only video can convey. As a result, broadband benefits from the tailwind that online advertising is creating.

3. Marketers looking for alternatives to TV
The benefits of the Internet and broadband coincide with a growing determination by the biggest brands to branch out beyond TV as their primary ad medium. Marketers are frustrated with the traditional TV ad model due to digital video recording and the subsequent ad-skipping it enables, time-shifting brought on by Video-on-Demand and rampant fragmentation, primarily fueled by the Internet and the social networking craze. Broadband’s benefits, as described above, plus its growing adoption, means brands can find their audiences and deliver far more engaging experiences to them.

4. Broadband still has significant limitations
When trying to get a consumer to pay for something new the value proposition must be at least equal to existing choices; to really succeed it needs to offer further distinctive advantages. The ubiquitous DVD format has raised a high competitive bar as the incumbent choice to broadband adoption. Though broadband delivery of premium content offers key convenience differentiators such as immediate gratification, significant downsides remain. These include limited devices on which to play the video, proprietary formats that limit viewing options, rights-related issues that hamper unlimited usage and lack of portability. None of these will be fully solved any time soon. As such, the DVD market will remain a strong incumbent for some time to come, limiting growth of the paid model.

5. Content providers familiar with the ad model
Last but not least, outside of movie studios, most media companies are familiar and comfortable with the ad business. It’s very natural for them to extend its use into the broadband medium. They already have ad sales teams which can be augmented to sell broadband ads. They can now offer multi-platform bundles to their clients which creates new value and differentiation. For some, such as print publishers (newspapers, magazines), broadband offers a whole new revenue opportunity, which capitalizes on their editorial skills. And as mentioned earlier, going the ad-supported route does not foreclose the chance to make some content available as a premium service, though at this point hybrid models have not yet gained much traction.

Summary
The broadband video industry is still in the early stages of its development, yet there are already clear signs that advertising is going to be the dominant revenue model for the foreseeable future. With countless firms developing and deploying the necessary infrastructure, the broadband video ad model will rapidly mature in the next few years.

Sign up for the VideoNuze newsletter at www.videonuze.com.

Case Study: Education Connection

Start: 12/20/07
End: 2/20/08

Campaign Goal: To reach stay-at-home moms seeking career options.

Total Video Impressions Delivered: 4,386,313
Total Companion Banner Impressions: 1,665,010
Click Through Rate: 1.99%

How did we do it?
- Campaign demographics were identified and targeted to the inventory available in the SpotXchange marketplace.
- Matches were further narrowed by matching the publishers who accepted 15 and 30 second ads and 300×250 banners.
- Used call-to-action inside the video and the banner.
- Leveraged SpotXchange’s casual gaming publishers whose primary audience is stay-at-home moms.
- Data collected in the campaign’s early stages enabled optimization that powered the campaign’s success.

Featured Web Sites
- NeoEdge
- Clip Syndicate
- Yahoo Games
- TVU Networks
- Moola

Feature Ads Units
- In-stream pre-roll
- Clickable companion banners

When Education Connection advertises on TV our target is stay-at-home-moms looking for career options. SpotXchange’s casual gaming inventory in particular is spot-on for this demographic. We have been very pleased as casual gamers are not only clicking on our ads, but they are also converting to leads at high rates.

Todd Zipper, Chief Operating Officer, Education Connection