As the title of this newsletter implies, there is an already/not yet aspect to today's Internet TV. We can already watch all the new shows on the Internet (we can even start watching Internet TV on our set top boxes using a few cables and adapters). But as far as the improvements to advertising, we are just on the verge of seeing these new possibilities emerge. In fact my thesis is that the current limitation of the amount of previously produced television content--all episodes of Lost and The Land of the Lost (remember Sleestaks ?)--relates to the changes emerging in Internet video advertising. I believe the current limited television available on the Internet directly corresponds to the limited implementation of these new advertising tools and techniques. I suggest that as these new advertising methods are deployed, additional television content will follow--quickly.

As it stands, if you watch a show like NBC's Last Comic Standing on Veoh, you'll have to watch pre-roll, mid-roll, and end-roll ads. In this particular case, all of these ads are the same ad. Now I don't mind watching ads in exchange for enjoying a television program. It's part of the economics of TV, and always will be. Besides, I've done it all my life. The odd thing about watching Last Comic Standing on Veoh is that every ad is AT&T announcement of it's merger with Cingular. Not five or six different ads, and not six different versions of the ad, but the very same 15-second ad every time. Or, if I watch Lost in high def on ABC's streaming Internet TV player, the entire episode is sponsored by one brand--in this case, Clorox.


When television is delivered via the air, cable, or satellite there are about 18 minutes of available advertising space to fill during a one-hour program. Advertisers line up and fill these slots. They base their ad-buying decisions on very rough estimates of total number of views and extremely generalized demographics of the audience. While I really appreciate the fact that Clorox sponsored ABC online so I can watch it for free (thanks Clorox!), my participation of viewing the ad was negligible since my wife does most of our shopping and makes the decisions about which brand of bleach to buy. (Of course here I am mentioning Clorox in this newsletter--so I guess it wasn't entirely useless in my case). But the act of broadcasting a marketing message to an entire audience in hopes of influencing a few is not necessary when content is delivered via the Internet. Internet-based television offers an environment where ads aren't broadly targeted based on a generalization of the audience, but are selectively delivered based on video content and the preferences of the individual.


Before I launch into how some of these new technologies are making this possible, it's important to see how potentially big this shift is. I've written recently about online advertising and how Google's AdWords and AdSense programs have demonstrated the amazing potential for turning the "long tail" of web content into massive and effective opportunities for advertising. Before Google, it was still pretty expensive to advertise online, and the industry was dominated by big brands placing banners on popular sites. Smaller publishers and advertisers were marginalized. But because Google was able to automate the placing of ads next to relevant search results and on related AdSense partner sites whose content was also relevant, they matched up the long tail of publishers (every blog or website that wants to participate) with the long tail of advertisers (people like me that just want to drive a little more targeted traffic to their sites). Gold.

Now, think about the current waste in television advertising. Every time an irrelevant ad is shown to an uninterested viewer, there is a wasted opportunity. But what if we weren't all seeing the same ads when we watch the same television show? What if I were ads that appealed to me as an individual--not just a resident in a certain region--during the same commercial break? This alone would drastically increase the number of advertising opportunities since wasted opportunities would be replaced with more appropriate ones. Multiply that by the amount of content we'll be able to choose from and suddenly you have a greatly expanded, more effective advertising marketplace in which almost anyone can participate.

In this light, Google's billion-dollar purchase of YouTube starts to make more sense.   next >