Niche VOD and targeted ads could help monetise on-demand

VOD’s time may be approaching, according to ABI Research analyst Paulhwa Lee, who has highlighted the potential of movie content targeting niche communities, combined with targeted advertising and free VOD to deliver the eyeballs needed to generate advertising revenues. ABI Research also takes heart from the way the viewing population is growing more accustomed to acquiring media content online.

 
Paulhwa Lee says service providers want more profitability from each title accessed and the answer looks to be bundling of customised, tightly targeted advertising with the programme content.

“VOD providers have two sources of revenue,” says Lee. “End-users pay for ‘a la carte’ and subscription fees, while sponsors pay for advertising. The goal is to tailor interactive advertising to the individual viewer. Progress has been made towards that goal, but it is by no means perfected yet.”

Reflecting the increasing division of consumers into ever-smaller niches, VOD can offer providers another level of customisation and differentiation: so-called targeted verticals. ABI Research uses the example of Canadian cable operator Rogers, which offers content specifically for Bollywood movie fans and films aimed at speakers of Cantonese and other multicultural groups.

“To achieve critical market mass for targeted advertising, the VOD delivery system must be able to scale up to meet demand, and ‘concurrency rates’ – the number of subscribing households that can watch on-demand at any given time – are a crucial metric,” the research company explains. “In the United States, providers are adding video servers at a rapid rate, ultimately aiming for a concurrency rate of 100 per cent. US operators are trying to reach critical mass by offering the majority of VOD content free. They are hoping that once they get the broad subscriber base, they can cash in on the advertising.”

While targeted advertising is a common goal for VOD providers, it is closer to widespread deployment in North America, ABI Research notes. The New York-based company has just released a report called ‘Video on Demand and Ad Insertion Markets’ addressing on-demand services.