A little under two years ago, Inside Digital Media predicted that sponsors would ultimately demand they only pay for video ads that actually get watched. (Thinking the Unthinkable About Video Ads – September 18, 2009). We reasoned the success of the cost-per-action pricing of Google AdWords would force change. Since sponsors only pay Google when viewers “click on” AdWords text, they would ultimately apply such a cost-per-action standard to banner and video ads as well.

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Last week a YouTube executive provided confirmation at WPP Group’s Global Video Summit. WPP Group is a leading advertising and media management company. YouTube’s Product Manager for Video Monetization, Baljeet Singh, was a Summit guest where he forecast half of video ads by 2015 would be cost-per-view. He explained how it is starting on the Internet.

YouTube is offering “TrueView Video Ads” permitting viewers to choose the ads they want to watch. There are two options. In one, after the ad plays for five seconds, viewers get a choice to skip or watch the ad. The advertiser is not charged unless the viewer lets the ad play to completion, or for at least thirty seconds. A second option gives viewers a choice of ads to watch during regular commercial breaks. Sponsors are only charged when their ad is selected.

YouTube reports that sponsors like the format so much they’re willing to pay ten-to-forty times more for them. Such ads are not about merely being funny or clever; they’re about delivering the right message to the right person at the right time. They also provide a wealth of tracking data enabling advertisers to measure accurately what commercials are working best with which demographic. Since YouTube accounts for about forty percent of Internet video streams, it has sufficient market share to influence the entire industry. 

Nonetheless, most of our video watching remains on the TV. Although an increasing number of connected devices allow us to get YouTube and other Internet Video on television sets, we still need a remote control unit at the sofa in order to interact with the ads. More importantly, we still spend most of our time watching conventional TV shows. While a growing percentage have been time-shifted by prior recording on a DVR, they’re still ordinary TV shows and not Internet Video streams.

The CATV industry has promised interactivity as a future innovation ever since it wired urban markets in the early 1980s. But it’s been like Waiting for Godot. The latest industry version is three-year-old Canoe Ventures which has had negligible impact. Thirty years of boasting about a gift it does not give puts the industry in a position of the proverbial clouds and wind that bring no rain. 

While the cable industry has delayed, two readily available innovations have emerged that can be adapted to enable interactive TV commercials right now.  One is content identification made possible by digital fingerprints and watermarks. The other is the class of app-centric portable products represented by the smartphone and tablet computer.

Consider watermarks. Currently nearly all domestic network TV programs include an identifying digital watermark in the audio component. The technology was adopted in order to permit Nielsen to provide automated audience measurement by installing sensors in the homes of panel members. The sensor detects the mark automatically thereby improving the efficiency of audience measurement.  

However, there’s no reason why TV commercials themselves couldn’t also contain such marks. Not only could they identify the ad, but their payloads could contain additional information such as discount coupons, or calls-to-action for loyalty programs, among other interactive features.

The role of detecting such marks can become one of the many app-enabled functions of smartphones and tablet computers. According to IDC, worldwide smartphone manufactures shipped over one hundred million units in the fourth quarter of 2010 alone, exceeding for the first time the number of computers delivered. Prompted by the milestone, Google’s Eric Schmidt proclaimed “the smartphone is the new PC.” Similarly, Yankee Group predicts over sixty million tablet computers will be in use by 2015.

The key is to provide a television-watching app which is valuable to consumers but also incorporates content detection; something like the Shazam song recognition app except for TV Shows. To date, little has been done to integrate the two, although Yahoo acquired IntoNow which is among the pioneers of the concept. Nonetheless, consumers are showing interest in apps that augment television viewing thereby implying that innovators who add detection to such apps can enable interactive TV commercials.

On example of a TV-watching app attracting significant consumer interest is the Peel TV remote control. TiVo has a similar one. While we aren’t certain if the specific app examples cited are able to incorporate digital detection, there’s no theoretical reason why functionally equivalent ones produced by others cannot.

Social networking is another potentially attractive app that could benefit from content detection. Over half of us surf the Internet while watching TV. Two of the most popular sites visited are Facebook and Twitter. In this context, an app that identifies TV shows might be useful, like the “Ping” function on iTunes. Such an app could show us what TV programs are popular with our friends. Upon finding a new show we like, such apps might provide a one-button link to share the show on Facebook. Similarly, we might tune-in to the middle of a TV movie, but want to watch it from the beginning. Such apps might include a one-button link to put the movie in our NetFlix cue. If it is available for NetFlix Watch Instantly, we could view the entire show from the beginning presently.

Earlier this year ABC Grey’s Anatomy experimented with a social networking iPad app as demonstrated in the video below. It uses the digital watermarks for content identification and illustrates social networking functions other than those noted above.

Grey’s Anatomy Social Networking App for iPad
(content identified via digital watermark)

 

Interested developers may use the Digimarc Discover portal as a means of getting familiar with using digital watermarks instill photos. (The portal does not yet support implant watermarks in video.) Digimarc is a leading watermarking patent holder and the Discover platform is available for a nominal fee.

Once TV watching apps settle on functions consumers find compelling, the apps will move into the mainstream. At that point, digitally identified TV commercials will have a decisive advantage. Since they will enable consumers to interact with them, they can segue into online merchandise transactions, calls-to-action, and even let viewers choose the ads they want to watch.

In short, the era of interactive TV commercials will be ushered in by content detection on popular multi-function portable devices such as smartphones and tablet computers. The CATV industry is no longer part of that picture.