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Report: Targeted Ads Key to VOD Profitability

2 Apr, 2008 By: Erik Gruenwedel



While video-on-demand (VOD) has been around for years, more than 90% is free, resulting in a scant return on investment.

With consumers increasingly accustomed to procuring entertainment online and on their time schedules via digital video recorder, a new report suggests targeted advertising could transform VOD into incremental revenue.The key, says ABI Research analyst Paulhwa Lee, is to monetize content by bundling it with ads directed at specific audiences. Lee said VOD affords programming the ability to connect advertisers with select audiences in a more qualified manner.

To reach scalability for advertisers in North America, VOD providers are attempting to establish 100% “concurrency rates,” or the number of subscribing households capable of accessing VOD at any given time.

The report cited examples in Canada where programmers targeted specific ads to connoisseurs of Bollywood movies and Cantonese-language content.

“VOD providers have two sources of revenue,” she said. “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 toward that goal, but it is by no means perfected yet.”

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