Measuring the Video-on-Demand Audience

JUNE 19, 2006
I Know What You Watched Last Night
By Ben Macklin - Senior Analyst
The emergence of video-on-demand (VOD) and digital video recorder (DVR) functionality means that TV viewers are more likely to watch TV outside of scheduled times and to avoid commercials in increasing numbers.
Recent announcements fromNielsen Media Research on their ability to measure on-demand, time-shifted and Internet TV viewing, indicates that advertisers may now have the tools to take advantage of the changing TV consumption patterns.
eMarketer predicts that by the end of this decade over half of all US households will be using advanced TV services such as video-on-demand and digital video recording.

This implies that, by 2010, 50% of households will avoid 50% of all TV commercials, equating to tens of billions of dollars worth of TV advertising. A recent survey conducted byANA and Forrester Research reveals that advertisers are aware of the changing TV environment, but are yet to fully embrace alternative advertising mediums.
Key findings from the survey:
--Almost 70% of advertisers think that DVRs and video-on-demand will reduce or destroy the effectiveness of traditional 30-second commercials
--When DVRs spread to 30 million homes, close to 60% of advertisers say that they will spend less on conventional TV advertising; of those, 24% will cut their TV budgets by at least 25%
--While 55% say that their top executives are closely watching changes in TV advertising, most advertisers have not experimented with advertising on DVRs (49%) or video-on-demand (44%)
--Eighty percent of advertisers will spend more of their advertising budget on Web advertising and 68% of advertisers will look to search engine marketing
--Advertisers are also looking at alternatives to traditional TV advertising and will spend more of their advertising budgets on: branded entertainment within TV programs (61%); TV program sponsorships (55%); interactive advertising during TV programs (48%); online video ads (45%); and product placement (44%)
--Ninety-seven percent of advertisers agree that the TV industry will need new audience metrics, other than reach and frequency, to report commercial ratings, not just program ratings to effectively measure TV advertising
--Better tools to measure the VOD audience, targeting ads to specific VOD households, and the addition of "unskippable" ads in VOD programs, are two advertising possibilities that have emerged as a result of the new medium

While increased use of VOD and DVRs undoubtedly pose challenges to TV advertisers, the new digital TV platform also provides a host of targeting and real-time measurement possibilities that present significant new opportunities for advertisers.
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