April 14, 2007
Creating a System of Monetization for Digital Video

Even when viewer interest proves a new media format is driving changes in audience behaviors, the question remains how the advertising model that we have created to support video production will catch up to those consumer behaviors. Such was the case with the discussion at the 2007 TV Upfront Summit, in which professionals in the television advertising world got together to debate the future of advertising in relation to online video.

According to a story by Abbey Klaassen with Advertising Age, Merrill Lynch has estimated that about 5 percent of the television upfronts this year will be spent on digital video, a rise from 2 or 3 percent last year.

The networks, of course, emphasize that YouTube is not the answer but that there is a way to find strong models for ad-supported video on the Web. They are searching for a space which can easily port the existing advertising structure into a new media form.

Klaassen writes, "There's the question of where that money goes. While projects such as MTV Networks' Virtual Hills sounds intriguing, the jury's still out on how monetizable--at least through advertising--things such as virtual worlds are."

Executives point out that, even if behaviors are driving viewing in the direction of digital video, progress will likely be slowed considerably as long as there is no set process of measurement and structure for online video.

Klaassen writes, "When there is a good idea for monetizing something online, the question of how well it scales remains difficult--especially when it comes to big integrated ideas, which everyone on the panel touted as having value."

Boiled down, the point is that, until such digital video distribution systems become normalized and organized, there is no clear and easy way to funnel advertising dollars into them. The time drain involved in trying to negotiate a different deal for every project, with no clear understanding of how this project scales, is complicated.

But what makes it even more complicated, perhaps, is that the TV industry is debating how to port over a model set up on impressions and quantitative analysis of viewers into a medium that is much more about pull media and about the qualitative engagement viewers have with these video properties. The question at the root of all this is what to do with behaviors that cannot be as easily understood as whether someone has their TV set on a certain channel or not, based on a small sample of TV homes.

The conference was hosted by Advertising Age and TelevisionWeek in New York this past week.



As undesirable as it may be, it's very likely that we will dive into a dark age of video advertising before we actually develop a successful model. In a sense, this tendency to "dive into" the prospect works since we know exactly what we are doing wrong. So one wouldn't be surprised to see a video avatar of Punch The Monkey.


Aayush, good point that it's sobering to just admit that the industry is going to move the wrong way first, precisely because it will both use old modes of thinking for a new technology and also becuase there is no proven path, so it is likely that the first cautious moves are not going to be the exemplar for a lasting model.