Internet ads are becoming one of today’s fastest growing advertising segments.
Internet advertising has grown at annual rates in excess of 30 percent during each of the past three years, and it is estimated that the Internet will remain the fastest growing advertising medium with a projected 18.3 percent compound annual increase to $73 billion in 2011. Even with this dramatic growth, the Internet will represent only about 13 percent of global advertising, compared with less than 3 percent in 2002 (Global Media and Entertainment Outlook: 2007- 2011; Price Waterhouse Coopers 2007).
Television, on the other hand, will expand at a 5.1 percent compound annual rate, boosted by advertising on new channels supported by expanding digital platforms. Television is the largest advertising medium, at $154 billion in 2006, and will rise to a projected $197 billion in 2011 (Global Media and Entertainment Outlook: 2007- 2011; Price Waterhouse Coopers 2007).
Why the huge growth in Internet advertising? The popularity of online video is one of the reasons. Intel media researchers, including a few members of DHG’s Strategic Planning and Content Group who are evaluating advertising-related initiatives, are taking a careful look at the impact of interactive Internet content such as video and IPTV on consumer electronics and advertising trends.
You would be justified if you ask why the world’s leading silicon supplier is exploring online and interactive advertising trends.
The world of consumer electronics is evolving rapidly as Internet-based distribution models for online video, IPTV and online games migrate from the desktop to the living room.
Consumer Electronics 3.0 represents the third stage in the evolution of consumer electronics – from its analog beginning, to digital technology, to the emergence of Internet-based services and connected devices.
The interactive applications needed to power the transformation will demand breakthroughs in media processing performance in set top boxes and other connected CE devices. This is exactly the performance and headroom Intel has on its consumer electronics roadmap. The small team managing the advertising initiative is focused on making Intel-based PCs and consumer electronics devices the best platforms for new Internet-based advertising models.
“Intel® architecture delivers a great Internet experience. We’ve done it on PCs and we will do the same for connected CE devices,” says William O. Leszinske, Jr., General Manager of the Intel Consumer Electronics Group. “We are interested to learn what Intel can do to design our CE platforms to enhance the interactive ad experience. Content owners, advertisers and service providers need to monetize IPTV and other Internet services. Exploring innovative advertising models starts with asking the right questions.”
To find the answers, Intel’s advertising initiative team is working with leading advertising agencies, advertisers and broadcast networks, looking at how the convergence of the Internet and consumer electronics will drive changes in interactive advertising.
While much research remains, one fact is clear: online advertising will change dramatically over the next five years, and many of the changes could be driven by interactive capabilities in Internet-connected CE devices.
The current online sites with the highest traffic tend to fall into two categories:
- Vertically integrated services with premium content, such as popular music download sites
- Ad-supported free sites, such as popular Web video sites and Web sites operated by major TV broadcasters that are visited by millions of viewers
Many of the most popular free sites include streamed video, with the cost of bandwidth provisioning, hosting and content covered by banner ads. Will free sites be equally successful on a TV in the living room? This question will require more research, but the short-term answer is a qualified ‘yes.”
Providing content that is both compelling and free may enable both advertisers and service providers to make profit as online media arrives in the living room.
Service providers, advertisers and content producers are looking at variety of unique advertising formats:
- 15, 30, 60-sec ‘pre-roll’ and ‘post-roll’ spots that appear before or after media programming
- ‘Interstititial’ advertising that embeds product and brand messages within the program
- Separate panes for ads and program content, such as the familiar banner ads on the Web today
- ‘Minisodes’ of advertising content in short vignettes of about five minutes in length
Since advertisers naturally insist on vehicles that are proven and measurable, the industry will need to develop standardized ad formats that rate high for effectiveness, backed by solid metrics.
Interactive applications may help provide the answer by providing ads that deliver more value to consumers. This can happen at least two ways:
Placing interactive control in the hands of viewers allows service providers to provide interactive ad windows. A viewer could see an interesting product embedded in a movie, sports event or other free content and then use a button on the interactive ad pane to pull up an online ad, vignette or e-commerce portal for that product.
Interactivity also opens the door to advertising targeted to consumer preferences, which could significantly heighten the effectiveness of ad messages. While data derived from online viewing patterns is one way to target ads, this technique can also raise privacy concerns. Consumer opt-in programs, where consumers are simply asked to indicate their interests, can target ads, and theoretically boost viewership and response rate. Ads with a higher ‘hit rate’ can command higher revenues.
Content aggregators who deliver special-interest content, such as home improvement products or European vacation travel, to name just two possibilities, could offer ads of compelling interest to the right consumers. Of course, if you are a fan of niche programming, online games or special categories of video content, you want a tool that lets you get to it rapidly.
Intel researchers are working on intelligent search capabilities within advanced user interfaces that can help viewers navigate their way to preferred content.
Call to Action for the Industry
Consumer Electronics 3.0 couples rich choices of Internet-based programming, IPTV, on-demand video, music, games and other content
with a new dimension of consumer control – including interactive advertising. The revenue potential of such applications can help
maximize traffic to free popular entertainment sites. Interactive advertising based on user preferences can help mitigate
the audience fragmentation caused by the growing availability of niche content available on IPTV.
The availability of Internet content and services delivered through a consumer electronics device such as a set top box will enable new direct-to-consumer distribution for ads as well as program content. Effective mechanisms for content protection, as well as standardized advertising formats, will be needed to deliver a new generation of ads that generate revenue for TV broadcasters, broadband service providers, content owners and aggregators and advertisers.
Creating standardized solutions calls for an alliance of major advertisers, advertising agencies and marketing companies, broadcast networks, franchise holders such as sports leagues, content producers, media companies and consumer electronics companies.
Many in the advertising space believe that such industry alliances and working groups will enable entertainment and advertising technology companies to test the effectiveness of new Web-based IPTV advertising in controlled environments. By working together, these entities can learn which kinds of online advertising work best in the new world of Consumer Electronics 3.0.