Emerging Solutions for Contextual and Behavioral Video Advertising

By Michael Gordon, Chief Strategy Officer and Co-Founder
Limelight Networks

Even as online video explodes, content producers are still looking for the best ways to monetize content on the Web. Paid downloads have had some success and Netflix has proven the value of a subscription model. But by and large, the market has settled on free streaming video as the online format of choice.

The result of all this free content is that companies are dependent on advertising to bring in revenue. That’s difficult for two reasons. First, in a tight economy, advertising dollars inevitably fall. Second, the economics of online video mean that content providers don’t get nearly the same returns on Internet advertising as they do on commercials for traditional television. Audiences are significantly smaller, and cost-per-thousand (CPM) rates are significantly lower.

All in all, the challenges for online video can be daunting. But the Internet does afford some advantages, and emerging solutions are beginning to make use of the benefits that come with the online territory.

Online Benefits

The easiest way to target advertising to the right audience is to serve up commercials that meet the demographic of the feature presentation. Companies have been doing this for decades on TV. If you watched The Cosby Show, you likely saw ads for family and household products. If you watched Knight Rider, you probably saw ads targeted toward young males. Likewise, TV time slots have always contributed to what commercials are being shown, with ads for finding employment appearing in the middle of the day on weekdays, and ads for top sneaker brands showing up during prime time.

The easiest way to target advertising to the right audience is to serve up commercials that meet the demographic of the feature presentation. Companies have been doing this for decades on TV. If you watched The Cosby Show, you likely saw ads for family and household products. If you watched Knight Rider, you probably saw ads targeted toward young males. Likewise, TV time slots have always contributed to what commercials are being shown, with ads for finding employment appearing in the middle of the day on weekdays and ads for top sneaker brands showing up during prime time.

On the web, targeting by demographic gets even easier. Setting aside the added advantages of online data-mining for a moment, the very fact that the Internet hosts so much content means that there is niche video available for any demographic you can conceive of. It’s part of the theory of the long tail, and it means you can sell advertisers viewership from the exact targets they seek.

There is an audience for videos of urban skateboarding, and, no matter how small it might be, that audience is the perfect target for someone selling personalized skateboard design services. In addition, because it is so much cheaper to produce and distribute video online than it is using the television medium, advertisers can create their own branded content that again targets a very specific audience. Selling house paint? Create a home improvement mini-show that sits alongside a HowStuffWorks.com online special.

Currently, contextual video advertising is used primarily for driving brand recognition. Unlike with keyword text and display advertising, which is finely targeted after years of industry standardization and ROI evaluations, advertisers are still using a more scattershot approach with online contextual video spots. However, even that broad attempt at reaching audiences is paying off. Recent studies show that embedded advertising in online shows and podcasts drives significantly higher brand recall rates among listeners and viewers than advertising in more traditional media.

There is a gap between what advertisers believe to be the value of contextual video advertising and what they believe to be the value of running commercials on broadcast television. That value perception gap is destined to narrow as more studies show how effective contextual video advertising can be.