Over time, as technology has created one new medium after another, one of the thorniest issues has been which business model to pursue. Each medium has resolved it in its own particular way. Now, as the broadband video medium continues to mature, the same question arises: which business model will be most prevalent?

There are really only 3 business model choices: either the consumer pays through subscriptions and/or a la carte payments, the advertiser pays, or both pay through some type of hybrid model. Surveying the media landscape, it’s possible to find examples of each of the three models.

For example, broadcast TV networks traditionally relied solely on advertising and still do. Yet cable TV networks derive both subscription payments (in this case from their customers which are cable TV, satellite or telco providers) and advertising revenues. Many newspapers also generate both subscription/newsstand revenues and ad revenues. Magazines follow a similar model. Conversely, in the entertainment business, movies tend to follow a premium model, with little-to-no reliance on advertising.

With so many different choices, it’s admittedly hard to say which model will prevail in broadband video. Yet researchers already expect broadband advertising to generate over $1 billion in revenue this year compared with just a fraction of this for the paid model. This and other evidence suggests that for the foreseeable future, for most broadband video, (movies are an important exception), the dominant model will be advertising-based. Following are 5 key reasons:

1. Consumer adoption of broadband is still relatively early
Though consumers viewed a record 11.5 billion video streams in March ‘08 according to comScore, on a per viewer basis, consumption is still relatively low. For many millions of early users, today’s broadband experience amounts to little more than watching random, funny clips that were emailed along. Though entertaining, most consumers could not envision paying for this type of content. As the medium matures and video quality improves, this will change. But for now, as with the Internet itself, many see “free” as the appropriate price point.

2. Broadband video is an extension of the booming Internet advertising model
In a sense, video is just a new format to be delivered online, following text and graphics. The good news for broadband video advertising is that the online ad industry (encompassing banners, search ads, etc.) is booming. Marketers from the biggest multi-national corporations to the smallest mom-and-pops now recognize and value the interactivity, targetability and measurability that online advertising uniquely offers. Broadband allows all of this as well, plus the emotional impact that only video can convey. As a result, broadband benefits from the tailwind that online advertising is creating.

3. Marketers looking for alternatives to TV
The benefits of the Internet and broadband coincide with a growing determination by the biggest brands to branch out beyond TV as their primary ad medium. Marketers are frustrated with the traditional TV ad model due to digital video recording and the subsequent ad-skipping it enables, time-shifting brought on by Video-on-Demand and rampant fragmentation, primarily fueled by the Internet and the social networking craze. Broadband’s benefits, as described above, plus its growing adoption, means brands can find their audiences and deliver far more engaging experiences to them.

4. Broadband still has significant limitations
When trying to get a consumer to pay for something new the value proposition must be at least equal to existing choices; to really succeed it needs to offer further distinctive advantages. The ubiquitous DVD format has raised a high competitive bar as the incumbent choice to broadband adoption. Though broadband delivery of premium content offers key convenience differentiators such as immediate gratification, significant downsides remain. These include limited devices on which to play the video, proprietary formats that limit viewing options, rights-related issues that hamper unlimited usage and lack of portability. None of these will be fully solved any time soon. As such, the DVD market will remain a strong incumbent for some time to come, limiting growth of the paid model.

5. Content providers familiar with the ad model
Last but not least, outside of movie studios, most media companies are familiar and comfortable with the ad business. It’s very natural for them to extend its use into the broadband medium. They already have ad sales teams which can be augmented to sell broadband ads. They can now offer multi-platform bundles to their clients which creates new value and differentiation. For some, such as print publishers (newspapers, magazines), broadband offers a whole new revenue opportunity, which capitalizes on their editorial skills. And as mentioned earlier, going the ad-supported route does not foreclose the chance to make some content available as a premium service, though at this point hybrid models have not yet gained much traction.

Summary
The broadband video industry is still in the early stages of its development, yet there are already clear signs that advertising is going to be the dominant revenue model for the foreseeable future. With countless firms developing and deploying the necessary infrastructure, the broadband video ad model will rapidly mature in the next few years.

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Start: 12/20/07
End: 2/20/08

Campaign Goal: To reach stay-at-home moms seeking career options.

Total Video Impressions Delivered: 4,386,313
Total Companion Banner Impressions: 1,665,010
Click Through Rate: 1.99%

How did we do it?
- Campaign demographics were identified and targeted to the inventory available in the SpotXchange marketplace.
- Matches were further narrowed by matching the publishers who accepted 15 and 30 second ads and 300×250 banners.
- Used call-to-action inside the video and the banner.
- Leveraged SpotXchange’s casual gaming publishers whose primary audience is stay-at-home moms.
- Data collected in the campaign’s early stages enabled optimization that powered the campaign’s success.

Featured Web Sites
- NeoEdge
- Clip Syndicate
- Yahoo Games
- TVU Networks
- Moola

Feature Ads Units
- In-stream pre-roll
- Clickable companion banners

When Education Connection advertises on TV our target is stay-at-home-moms looking for career options. SpotXchange’s casual gaming inventory in particular is spot-on for this demographic. We have been very pleased as casual gamers are not only clicking on our ads, but they are also converting to leads at high rates.

Todd Zipper, Chief Operating Officer, Education Connection

Since launching in September 2006, VideoJug has grown into the world’s most comprehensive library of free factual video content online. Videojug.com features professionally-produced, high definition videos covering every conceivable topic. The site is the definitive online “encyclopedia of life”.

The video content on the site takes a variety of formats that include informative “How To” and “Ask the Expert” films that guide visitors, step-by-step, through everything and anything in life.

The “How To” format delivers easy-to-follow, bite-size tutorials on a wide range of topics from cleaning tips and sport, to relationship advice and recipes.

VideoJug searchs the globe to find leading experts in their respective fields, for the “Ask the Expert” format – be it celebrities, professors, high-flying professionals, coaches, teachers, or consultants – who provide answers to common questions and concerns.

Free Ride Games is the first destination to offer consumers PC computer games one hundred percent free in return for viewing advertising messages. Games range from core video game titles to top tier casual games (i.e. quick-to-download and play games). The channel line up allows advertisers to target ads to player segments based on registration profile, behavior and game sensibility. Free Ride Games offers advertisers a variety of high impact media.

Gamook is a leader in casual games that provides the environment and community for worldwide Internet users to play, share and earn money with games. Game developers showcase their talent and games on Gamook. Web Publishers drive more traffic to their website(s) with games that keep visitors coming back for more.

ImpactGames is a pioneer in creating compelling interactive experiences around current events. ImpactGames aim is to partner with and enable organizations to change the way people consume information and understand the world around them.

Imvite.com is ultimately an “entertainment super mall” where consumers enjoy watching and listening to over 7,000 TV and Radio channels from all over the world. Users play thousands of games and search for millions of video clips from all over the Internet.

Joe Media is a cutting edge media and wireless network company focused on providing WiFi access to the ‘average Joe’ at no cost, not even to the location owner. With the ability to deliver promotional advertising in a more targeted and interactive way than any other online method, Joe Media’s goal is to provide connectivity anywhere, anytime.

Uber.com is the easiest way to create a website online. Its simple-to-use tools allow anyone to create full-featured sites in a few basic steps, all for free. Uber.com works for anyone who cares about having a good-looking and functional web presence, from first-time bloggers to veteran publishers and corporations.

Contact a SpotXchange sales rep for more information on this inventory, sales@spotxchange.com.

CareerTours is an Internet-based recruiting resource that allows career seekers to experience companies through video clips. Their solution was developed with the single purpose of eliminating friction in the hiring process and revolutionizing the way companies recruit top talent.

Earthcam is the leading network of live webcams. This premier webcam portal offers the most comprehensive search engine of webcams from around the world. EarthCam delivers real time live images of some of the world’s most interesting and unique views and events.

GluTV is the first Internet site to offer licensed, premium Indian programming, with thousands of full-length shows available on a high-quality full screen, without pop-ups, downloads, or the risk of computer viruses.

iWin is one of the leading casual game portals, reaching millions of visitors every month from all over the world. Through their downloadable games, rich multiplayer games, and Web-based games, iWin provides a multitude of exciting ways to relax and have fun.

Kuma Games is the industry leader in the new market for Episodic Video Games–rich, 3D, immersive game experiences delivered to PCs and consoles in weekly episodes. Typically distributed as free, advertising-sponsored video game “shows”, Kuma has created the game industry´s answer to broadcast TV-style entertainment.

Soma Management, including SomaGirls.TV, is an entertainment media company producing original lifestyles content. Their mission is to create fully developed lifestyle properties centered around original stories, imaginative visuals and empowering messages.

TownNews.com helps more than 1,500 newspapers publish interactive editions online. Member newspapers include dailies, weeklies and shoppers from groups and independents in all 50 states.

Contact a SpotXchange sales rep for more information on this inventory, sales@spotxchange.com.

Collegiate Images, LLC is the centralized rights agency managing the distribution of copyrighted media and programming. CI has exclusive partnership with over 150 collegiate copyright holders enabling CI to monetize original and pre-produced programming on multiple platforms. CI partners include premier athletic programs, collegiate conferences, bowl games, national and regional sports networks and a multitude of other collegiate rights holders.

CI’s first two programs include College Sports Minute and Race Day Daily.

College Sports Minute

In each two minute daily show, Sarah Kustok and the production crew will be providing commentary and coverage of the previous nights’ top games and highlights from around the country.

The second half of the show will focus on College Sports’ main events including the launch of the College Football season, the Road to the BCS, the Heisman, College Basketball and the Big Dance as well as updates and rankings for each pro league draft.

Race Day Daily

Race Day Daily will cover top racing stories with exclusive commentary from drivers, crew chiefs and car owners. Behind the scenes access and debates on the latest racing events and points leaders will be seen daily on RDD.

Studio analysts Michele Rahal and Rob D’Amico, hosts of the hit racing radio show “Race Day on Fox Sports Radio”, will hit everything from rankings and league point leaders to upcoming fast tracks and racing’s rising stars.

Each day, Michele, Rob and the RDD production team will dissect the top racing news from last evening and upcoming tarmac battles, inclusive of footage, photos and interviews from around the country. The crew will also focus on coverage of racing’s top events-highlighted by a countdown to America’s favorite tracks in Daytona, Talladega and Homestead.  

From the fundamentals to more advanced topics, SpotXchange is designing educational Webinars on how to effectively utilize online video advertising.

For more information please contact Valerie Quintanilla, Valerie@spotxchange.com.

Start: 9/4/07
End: 9/30/07

Campaign Goal: To reach a business to business finance and insurance audience.

Total Video Impressions Delivered: 777,441
Total Companion Banner Impressions: 1,049,607
Click Through Rate: 1+%

How did we do it?

- Campaign demographics were identified and targeted to the inventory available in the SpotXchange marketplace.

- Matches were further narrowed by matching the publishers who accepted 30 second ads and 300×250 banners.

- Used call-to-action inside the video and the banner.

- Data collected in the campaign’s early stages enabled optimization that powered the campaign’s success.

Featured Web Sites

- Voxant

- Blinkx

- ClipSyndicate

Feature Video Ads Units 

- In-stream Pre-Roll

 The best part about the SpotXchange platform is that we could see what inventory brought the best conversions and then were able to optimize the campaign in real time. In aggregate, the SpotXchange publishers were the best performing. We look forward to working with SpotXchange again for clients that want to buy online video advertising.

Gina Preziosa, Mullen

Provided by SpotXchange Publisher Big Think. 

Nina DiSesa, the chairman of McCann Erickson, New York talks about the art of effective advertising, reaching an audience, and the case study of Mastercard’s Priceless campaign.

For more from this interview please go to Big Think, http://www.bigthink.com/user/nina-disesa.

You can watch on TVU networks on your Windows PC over a broadband Internet connection. This service is dedicated to bringing you TV that you can’t get from cable or satellite, such as news and sports from around the world.

Most exciting of all, viewers can become broadcasters using TVU networks’ free Broadcast application. This application, combined with a standard-grade PC and a typical broadband Internet connection, allows anybody to become a broadcaster. This basic set-up allows any number of viewers world-wide to watch your channel.

TVU networks News…

StreamingMedia.com, TVU Showcases In-stream Video Ads for HP, Rolex and NetJets
TVU’s Live Internet Broadcast of the Sampras vs. Federer Tennis Showdown marks commercial launch of in-stream video ads.

Contact your sales rep for inventory at sales@spotxchange.com.