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1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
1433 catalyst   beyond the browser
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1433 catalyst beyond the browser

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  1. Cory Treffiletti Founder and President Catalyst SF LLC Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age
  2. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 2 CONTENTS INTRODUCTION.......................................................................................................................................3 SUMMARY...............................................................................................................................................3 TERMS AND DEFINITIONS........................................................................................................................5 THE DOWNLOADABLE MEDIA MARKET AND OPPORTUNITY ....................................................................7 ESSENTIAL COMPONENTS OF A DOWNLOADABLE MEDIA PROCESS MANAGEMENT SOLUTION .............11 MANAGEMENT..................................................................................................................................12 MEASUREMENT.................................................................................................................................13 MONETIZATION.................................................................................................................................13 CONCLUSION.........................................................................................................................................14 MORE INFORMATION............................................................................................................................14 Copyright 2008 Catalyst SF LLC. All rights reserved. Catalyst SF and the Catalyst logo are trademarks of Catalyst SF. All other companies and brand names referenced herein are trademarks of their respective companies.
  3. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 3 INTRODUCTION This white paper has been written for executives at media publishing and content companies interested in learning about the exploding “non-streamed” or portable video market and finding out about best practices for driving revenue through advertising in this medium. First, we need to describe the terminology we’ll use to explain different technology approaches to digital media. In the past, most consumers have viewed or listened to content on the Web via a live stream that is not stored locally and requires a live network connection at playback time. “Non-streamed” media encompasses video delivered to a variety of devices and platforms – via download or progressive download. Many use the term “downloadable media” as shorthand for non-streamed media, but in our view the term misses the essential consideration that, unlike streaming video, non-streamed media is not device-dependent – non-streamed media can be delivered to any device or platform given broad support for various media formats. Because what makes “non-streamed media” so different is both delivery method (download) and versatility (ability to be delivered to any platform or device,) we sometimes use the term portable media for clarity. As you will see in this white paper, we will usually employ the term “downloadable media” for simplicity, except where the term may cause misunderstanding. At those times we will use the term portable media. In this document, we provide background on the evolution of digital audio and video, outline the opportunity that ad-supported downloadable media represents, and then provide a framework for identifying a comprehensive solution to making downloadable media advertising a robust revenue source. After reviewing the white paper, the reader will have a concrete understanding of the challenges and opportunities of publishing ad-supported downloadable media as well as a context for identifying and evaluating the players involved in creating the solutions for ad management in this arena. SUMMARY One of the most profound changes in the media environment over the past decade has been consumer demand for content portability – an insistence that they be able to consume content whenever and wherever they please. In the digital media industry, these are often referred to as “consumer control” and/or “consumer assertion. “ A number of devices have been introduced that allow the consumer to be in control of when and where they will interact with their media, especially video media. This is a revolutionary change; no longer are consumers required to view video content at the time that network television and other publishing agents first make the content available. A key consequence of this trend has been an explosion in multimedia devices including iPods, MP3 players, Portable Flash Players, PSPs, and media-enabled mobile phones. All of these devices transfer the capability to view professionally generated video content away from the television and away from the living room and shift it to other locations. But, again, location shifting generally requires that the
  4. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 4 consumer download the media they want rather than getting it streamed to them through a live connection. Downloading, first made mainstream by web sites during the dial-up days, is now a well understood approach to consuming media. Content owners – movie studios and cable TV channels to name but two – have seen this growth and are scrambling to make as much of their content as possible available in this manner. But they also expect to earn revenue from downloadable media, especially through video advertising. They recognize that this opportunity encompasses, but goes beyond, PC-based downloading and viewing. The great news is that marketers want these eyeballs – billions of impressions in which a consumer appears more likely to be paying attention to what they are watching than in the classic broadcast TV model. In fact, advertising in downloadable media is widely expected to be among the fastest growing sectors of digital advertising for the next several years. The primary challenge facing advertisers in this environment is that when the content is viewed in an offline environment the traditional connection to the Internet is inaccessible and therefore the conduit through which to deliver targeted ads is also lost. For a company to successfully manage advertising in downloadable media they must follow one of two primary methodologies: 1. They can own the player environment where the content is viewed. 2. They can attach the advertising content prior to download and tie the ad to the content permanently. If the publisher can control the player environment then the player can act as a proxy for an ad server and read the preferences of the viewer in order to deliver the advertisements to the viewer from a catalogue of ads included in the background of the player itself. This model can be applied and is currently being applied to Peer 2 Peer environments (P2P such as Azureus and the Vuze video player). Other opportunities similar to this exist in other P2P environments as well as in the iTunes environment. If the publisher cannot control the player environment, which is the case for most publishers whose media is being viewed on other devices such as video MP3 players and iPods, then the publisher needs to attach the advertising directly to the content and create a single unit for play in the remote environment. This represents a new paradigm in media ad management. See below:
  5. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 5 This process is not one that is supported by the existing online ad-servers; it is not supported by their existing toolsets. There are a number of solutions which have begun to be developed in the marketplace by utilizing existing infrastructures to apply standard ad serving and delivery methodologies to downloadable media; however, these solutions have not been successful. Publishers need one solution that maximizes revenue and minimizes ad operations complexity. The solution must master the challenges of management and monetization. As in other advertising mediums, measurement is also a key requirement in this arena. TERMS AND DEFINITIONS In the most basic sense, digital video and audio are delivered in a couple of ways: • Downloadable Media: Refers to media that can be requested, received, and saved by a user. • Progressive Download: Refers to media that is delivered in Flash format and viewed in a new generation of media players, such as the Adobe Media Player. These players allow a user to consume video content in real time by providing a progressive download of portions of the content as it is being viewed. We use the term portable media in addition to downloadable media to encompass these progressive downloads because there is a clear industry trend toward allowing users to store files they’ve viewed locally if they choose, which is a different dynamic than user-initiated downloading. • Streaming Media: Refers to audio and video that are delivered in a stream of packets and rendered in real time by a player. This model assumes a consumer is connected to the Internet and requires a specific set of infrastructure to facilitate the stream. In many cases, current video players are not, in fact, streams, but progressive downloads that cannot yet be saved on a local device. In terms of content, we distinguish between professional- and consumer-produced content.
  6. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 6 • Consumer Generated Media (CGM): This is content that is produced by non media professionals. It is also sometimes referred to as User Generated Content (UGC.) An example is a homemade video that a user uploads to her MySpace page. • Professionally Produced Media (PPM): This is content that is produced by professional content developers. An example is a Network TV program episode, or a movie. While both CGM and PPM can be very meaningful to those that download them, the distinction is important because advertisers tend to prefer sponsoring high quality professionally produced content versus consumer generated. With professionally produced content, advertisers are more comfortable that their ads run in high quality environments that do not contain content that people may find inappropriate. For audio and video downloads, there are three major advertising formats: • Pre-Roll: Video or audio ads that run before the main content. • Mid-Roll: Video or audio ads that run at some midpoint of the main content. • Post Roll: Video or audio messages that run at the conclusion of the main content. All three formats are also known as “in-stream” advertising in the audio and video spaces, though in the case of downloadable media they are not actually streamed but rather integrated into the content. In addition to these formats there are a number of overlay formats being tested, wherein a graphical or text unit “pops-up” over the bottom portion of the video - intrusive but not detrimental to the viewing of the content itself. Finally, in order for sites to deliver multimedia to end users, they typically work with: • Content Delivery Networks (CDNs): A network of servers hosting and delivering content on behalf of a publisher. A few of the largest CDNs are Akamai Technologies, Mirror Image Internet, and Limelight Networks, among others.
  7. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 7 THE DOWNLOADABLE MEDIA MARKET AND OPPORTUNITY A variety of factors are contributing to the explosion in downloadable media, and with it the downloadable media advertising market. For the purposes of this whitepaper, we will focus on seven: 1) Massive demand for digital video advertising. 2) Growth in the number and penetration of downloadable media players and platforms. 3) Broad scale consumer acceptance and interest in downloadable media, across demographics and psychographics. 4) Growing recognition that downloadable media are high involvement, lean forward media, and relatively clutter free. 5) Burgeoning interest in the downloadable channel from major content owners and rights owners. 6) Mushrooming advertiser Interest in the downloadable sector. 7) New technologies make it possible to serve ads using advanced targeting and dynamic insertion. These factors significantly increase the revenue per ad exposure available to publishers and content owners. An analysis of each of these trends appears below: 1. Massive demand for digital video advertising. A leading industry source projects that online video advertising market will total $7.153 Billion. This represents more than 1500% growth over the current $471 Million estimated to be spent in 2007. Naturally one trend driving this growth is the rapid expansion in the number of broadband Internet households. An estimated 89% of Internet households will be connected via broadband in 2008. 2. Growth in the number and penetration of downloadable media players and platforms. Broadcast and Cable TV have lots of company today. A leading media reporting service indicates that 27% of US households now have a DVR, up from 14% just two years prior. They also report that 24% of US households have used a VOD service from their Cable or Satellite provider. But VOD is by no means the only story. New handheld portable devices are also dramatically changing what where and how America watches video. A major 2007 research study reported that 30% of Americans 12+ now own iPods/MP3 players, up from 14% in 2005. No longer exclusively the province of the under 30 crowd, iPOD and devices like it are rapidly growing in penetration in all demographic segments. And iPOD is no longer the only platform receiving heavy marketing support. Microsoft is expected to spend heavily on traditional and digital media to establish a foothold in the market for Zune. Adobe Flash players and technologies are also growing rapidly in the marketplace. The importance of gaming platforms has also served to transform the market. With each of the major gaming platforms offering DVD and/or HD playback, these devices are also transforming the way consumers enjoy video and other media.
  8. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 8 Video-enabled handheld gaming devices like PSP are also making a strong impact in the marketplace. Large sections of what used to be the DVD area in retail outlets are now devoted to selling PSP videos. The reported longer battery life in the new versions of PSP will only serve to heighten this trend. Video-enabled cell phones are an important factor as well. While the iPhone has garnered much of the hype for video-enabled phones, it is just one of the many cellular devices that now do an excellent job of displaying video content. In fact, video is emerging as a must have for the younger set, and if past patterns remain valid, we’ll all soon be expecting to watch downloaded content on our cell phones. The profound changes in the media environment have been driven both by the ascendance of digital media and the growth in downloadable content platforms. While the burgeoning impact of the Internet has been well documented, the impact of a variety of downloadable media platforms has been less well publicized. 3. Broad scale consumer acceptance and interest in downloadable media, across demographics and psychographics. All the devices in the world would be meaningless if people weren’t demonstrating a willingness to download content. Fortunately consumers are showing a deep interest in downloadable media, and are downloading billions and billions of pieces of content. Here are just two statistics about the podcast segment of this broad market: • In 2007, a leading digital research providert projected that 10.6 million Americans will download podcasts weekly in 2008, and that 30.3 million download them occasionally. • The same report estimated that 19.4 million will be weekly podcast downloaders in 2010, and that 51.1 million will be occasional downloaders iTunes was one of the early movers in downloadable movies and TV programs, but many others – Sony and Amazon to name just two – have also entered the fray. Amazon’s Unbox video initiative deserves particular attention, both because of the enormous reach of the retailer, and the broad collection of video content that they offer. Further, Unbox is somewhat device agnostic, allowing consumers to download and view video on PCs, TiVos, and handheld devices. 4. Growing recognition that downloadable media are high involvement, lean forward media, and relatively clutter free As TV audiences have fragmented, networks and cable channels have increased the number of units that they run in programs. With the program-to-ad-time ratio running at 2:1 on some shows, many advertisers are beginning to question the value of their TV buys. Can consumers really remember one: 30 commercial when it is jammed in among 15-19 others? And are consumers really paying attention to the TV in the first place, or is it background for the tasks of their lives? Downloadable media is entirely different. First, clutter tends to be very low. In many cases only one ad or advertiser will be featured in a clip. Second, we know consumers are involved with the content that they download – because they asked for it and took the trouble to download it.
  9. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 9 Further, the viewing occasions for downloadable media are also extremely compelling. Since consumers choose to watch downloadable video when it fits their lives, it follows that they are more likely to pay close attention to it when they press play. This can be an even more interesting proposition because in many cases, they choose to view video when they have nothing else to do – on a bus or subway, waiting in line, or sitting in a park. Viewed in this context, many surmise that downloadable media have the same or better noticing value as captive in-store media like Wal-Mart TV. 5) Burgeoning interest in the downloadable channel from major content owners and rights owners Content owners know a good thing when they see it, and many of the highest quality studios and networks are actively distributing downloadable media to publishers and consumers alike. The list of studios actively involved in downloadable media includes: Fox Fox Searchlight Focus Features Lion’s Gate MGM New Line Cinema Paramount Rogue Sony Warner Bros. TV Networks offering programming for download include: A&E ABC ABC Family ABC News Adult Swim Animal Planet BET Biography Channel Cartoon Network CBS CBS Sports CMT CNN Comedy Central Court TV The CW Discovery Channel Disney Channel E! ESPN Fox FX History Channel Lifetime Logo MTV NFL Network NHL Nick at Nite Nickelodeon PBS Showtime SOAPnet Spike Style Sundance TLC Travel Channel TNT VH1
  10. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 10 With all of this high quality content, consumer acceptance of the medium is expected to continue to grow rapidly. 6) Mushrooming advertiser interest in the downloadable sector Not surprisingly, advertisers have taken notice, in part because broadcast audiences are in decline. Given this trend and the continuing need to reach the population with brand messages, advertisers are looking more strongly at downloadable media. “Downloadable media offer billions of targetable consumer touchpoints annually, in lean-forward environments.” In fact, many analysts predict that downloadable media will demonstrate the highest growth rates of any digital multimedia distribution method over the next several years. And ad-supported media is truly driving this trend versus the less popular subscription-based media. Another factor driving this is the perceived quality disparity between downloadable content and much of what is available online. With UGC accounting for the majority of total streaming online video, advertisers are sometimes hesitant to engage in large buys across such content. They are understandably worried about the juxtaposition of their brand with content that some might find objectionable. Since so much of the downloadable content is professionally produced and screened for appropriateness, it makes downloadable media advertising an easy decision for advertisers. New technologies make it possible to serve ads using advanced targeting and dynamic insertion. These factors significantly increase the revenue per ad exposure available to publishers and content owners. While few have doubted the theoretically enormous monetization opportunity for both publishers and content owners in downloadable media, unique logistical challenges needed to be addressed. These challenges fall into three key areas: • Management: How is downloadable media process flow and ad serving best managed? • Measurement: What measurement solution meets both internal and advertiser needs? • Monetization: How are downloadable revenue and ad yield maximized? In order for a publisher to maximize revenue in the downloadable space, it needs a robust solution to inform decision making and make the fielding and serving of campaigns manageable across devices. Ad management of downloadable media is fundamentally different than banner or streaming video ad management because in downloadable media, the combined content plus ad must be delivered as a single file in a process that is transparent to the user. In a connected environment, while banners and other ads can be delivered independent of the content at the time of viewing. This simply cannot be the case with downloadable media – The ads are included with the content.
  11. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 11 Further, advertisers want to be able to target messages precisely, and have the flexibility that comes from real time insertion of ads at the moment of download. The old model, which required that ads be inserted long before the consumer chose the download, complicated the process with big time lags. Fortunately, new solutions are available to address these issues, but in order to fully capitalize on the opportunity, the publisher must choose an optimal ad serving and process work flow management solution. The balance of this white paper focuses on helping publishers understand what to look for in a downloadable media advertising platform so they can yield the full benefit of this burgeoning opportunity. ESSENTIAL COMPONENTS OF A DOWNLOADABLE MEDIA PROCESS MANAGEMENT SOLUTION In order to be successful, an advertiser and publisher must simplify the process flow through a seamless platform that manages, measures, and maximizes monetization of downloadable media. As with any advertising program, Ad Operations inputs campaign specifications and assets into an Operations Center. This interface makes it possible for the team to manage and track a multitude of campaigns from a single, web-based platform. But most existing systems cannot address the key challenge of downloadable media: that the publisher needs to attach the advertising directly to the content and create a single unit for play in the remote environment. This represents a different paradigm in video ad management. New systems are needed to address this. What is key for Ad Ops, though, is that these systems be
  12. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 12 complementary to existing platforms, and use the same CDNs as the balance of the ad operation. The entire process must only take milliseconds, so it is completely transparent to the user. The issue with existing ad serving technology is that this real time decision making process must happen within a period where callbacks are being employed and data is being served. In the case of downloadable media, the advertiser and publisher must anticipate the exchange of information and create a unified file that matches the ads to the viewer at the instant of download. For these types of tools to be successful, a solution must offer robust credentials in the following three areas: management, measurement, and monetization. We address each of these in turn below: MANAGEMENT Four factors are critical to providing a comprehensive ad management solution for downloadable media: 1. Robust content management tools to enable your Ad Operations team to direct the platform in real time. Further, these tools should let you deploy pre-, mid-, and post-roll ads in the content on the fly. 2. Best practices framework to improve decision making. 3. Built-in metrics measurement to optimize campaign delivery and maximize ad revenue. 4. A comprehensive reporting platform to deliver metrics to your team and your advertisers. While many companies promise a seamless and complete solution, very few players in the downloadable media category appear to offer the full breadth of services that will make them successful. Some of the competing solutions, particularly those from banner ad servers, are essentially retrofits of platforms designed for standard ad insertion environments. As we mentioned earlier, non- streamed media have two defining characteristics – delivery via download and applicability for any platform or device. Some companies have solved issues related to the former, but not the latter. Customers should look for a solution that maximizes reach to consumers while minimizing disruption of your current publishing processes. Further, this solution should fit seamlessly into current workflow and
  13. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 13 ad-serving strategies and, of course, remain independent of format, device and hosting provider. “You need to purpose-build solutions for downloadable media. This sector is ENTIRELY DIFFERENT from serving ad banners or integrating ads into streaming content. The challenges are different, the delivery mechanisms are different, and you can’t fully capture the revenue opportunity without a tailored solution.” Bill Loewenthal, CEO, Kiptronic MEASUREMENT Complete and accurate measurement and reporting are essential for attracting and retaining advertisers. They are also integral to profitability because they help govern the efficient fulfillment of advertiser agreements. Key attributes required for a system to be successful in this category include: 1) Accurate download counts for libraries of content to ensure precise and productive rights management relationships. 2) Campaign delivery measurement, including the means to track by geography, demographics, and day parts. 3) Content Relevance, Quality and Brand Safety measures like filters, content ratings, user-defined tags and keywords. 4) Audience profiling and surveying capabilities. 5) Third-party certification of all measures and reports through Nielsen//NetRatings. MONETIZATION There are six essential areas for publishers to consider as they assess the ability of a downloadable media platform to deliver maximum monetization potential: Time to Value: Publishers are purchasing a solution to make the organization more efficient, not to add complexity to processes. Integration and training times need to be minimized. A solution must provide a total work flow process management system that streamlines ad operations and mitigates the unique challenges of the downloadable media environment. Platform Neutrality: Consumers are demanding content on their terms, and are adopting new audio and video platforms at a truly unprecedented pace. Therefore, choosing a platform that only serves one platform, for example mobile telephones, sets them up for the need to add or change providers in the future. Your system must be capable of managing ad serving and work flow independent of device.
  14. Catalyst Reports: Beyond the Browser: Monetization Strategies for Online Publishers in the Downloaded Media Age Catalyst SF 14 Dynamic Insertion: In downloadable media, ads can be pre-integrated into programming (similar to the syndicated TV model), or dynamically integrated at the time of download. Advertisers want and expect dynamic ad insertion, and publishers can often drive higher ad yield through dynamic integration because it allows companies to better target messages to more likely responders. Scalability and Flexibility: Growth in downloadable media is so strong that it is imperative that publishers work with a solution that can manage changes in scale without bottlenecks. Targeting Capabilities: An essential element of revenue and ad yield maximization is the ability to pinpoint consumers according to key dimensions – geography, demographics, and day parts. User-Friendly Management Tools: Ad Operations team should interact via an easy to use interface. CONCLUSION The potential for downloadable media to enhance publisher revenue is clear. The opportunity has become too large to ignore. But to truly realize the potential of this space, a publisher needs a purpose- built solution for downloadable media ad management and insertion. There are a number of firms that offer a solution but you need to fully evaluate these options to ensure that they offer a holistic solution for process work flow and ad serving tailored specifically to downloadable media. MORE INFORMATION For more information about downloadable media ad serving and possible solutions, please email: Cory Treffiletti at cory@catalystsf.com.

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