ONLINE VIDEO

For almost two years now, broadcast networks have been putting their shows online, beginning with ABC's 2006 launch of popular content such as Desperate Housewives and Lost. Once viewable without much advertising, the episodes now are shown with ads that can't be skipped interspersed between show segments.

Many analysts believe the business models will continue to evolve as content producers and advertisers try to find one that works.

“Largely speaking, they don't have any [return on investment] mechanism in place, but the reality is most of these people didn't have an ROI mechanism in place when they were just doing broadcast TV,” said Robert Passikoff, founder of Brand Keys, a company whose research produces customer loyalty metrics. “The entrance into the area is being fueled by a fear that [content providers] are going to miss something. It's an act of technological desperation to [put their content online], but everyone's doing it so we have to do it, too.”

There may be value in putting content online for a variety of reasons, said Brad Adgate, senior vice president of research for Horizon Media, an independent media services company.

“I do think it is in its fledgling stages,” Adgate said. “There are advantages — the less clutter, the less advertising messages in a show, the higher the recall score is, and that's something marketers like. It can be to the point where the consumers can't control the ad exposure — they can't zap it or fast-forward it — that's another appealing component of broadband video. Plus it's younger viewers, and that's always a very desirable market.”

Qwest Communications is eschewing its own IPTV platform and content in the belief that many younger viewers will choose to buy a very high-speed broadband service and obtain their video content from the Internet.

“We believe very much in video, and we also believe in the power of the Internet,” said Pieter Poll, chief technology officer for Qwest. “We are trying to look a little ahead. The young consumers of the future will want broadband-on-demand, and they are more interested in interaction and in the symmetry of the service. They not only don't want a wireline phone, they also don't want to have a TV because they use video-on-demand.”

Mobility adds yet another layer of complexity because not only is it a different platform, but it may require content to be offered in a different way for a much smaller screen and potentially in smaller pieces.

“Advertisers and agencies are going to be really challenged to address standardization issues,” said Yankee Group's Taylor. “What types of ads do I want online, or for Verizon's FiOS or AT&T's U-verse, or for a mobile phone? Are they going to start doing different creative for each platform? That's not going to fly. What are the standards, what are the formats, how will advertisers be able to buy?”

Web publishers, who have been selling online advertising for a decade now, are still struggling with how to measure an audience, or even what to measure. According to The Associated Press, advertising executives even speculate that the estimated $20 billion spent on online advertising in 2007, up 25% over 2006, would be much higher if there were a consistent way of measuring online audiences.

“There is no single decent predictive integrated model out there,” said Passikoff of Brand Keys, which has developed its own. “It's not a matter of consumption. You need a reaction and a brand engagement model in order to be able to know what is happening.”

Next page: TARGETING ADS