• by Paul Gough , August 30, 2002

Imagine a media landscape where planners can send tailored ads to specific demographics using the same video-on-demand services that are starting to take off for television programs and movies.

Video-on-demand advertising is poised to explode in the coming years and change forever the $53 billion TV ad market, according to a report in the September issue of American Demographics. The report says these new marketing approaches would provide advertisers with finely detailed data about consumers and would even allow the video-on-demand customers to customize their profiles. A family could even let the VOD provider know they’re shopping for a car and receive automobile ads via their TV.

Video-on-demand technology is becoming more popular, with the rise of personal video recorder services like TiVo and the efforts of digital cable providers. But this popularity has come at a price, with some wondering whether the ability to choose content whenever it’s needed will spell the end of advertising as we know it.

Seemya Nayyar, editor of American Demographics, said the same technology that brings video on demand will also allow ads to be custom designed and sent to subscribers. And that’s a good thing for advertisers who have been looking to circumvent PVRs and are always looking for a way to target their demographics. TiVo has already experimented with advertising on its service, with advertainment surrounding new releases by Counting Crows and Sheryl Crow and the Mike Myers’ film Goldmember.

The technology isn’t there yet, however. The report says that the VOD technology will be perfected within the next two or three years and available nationwide, allowing advertisers to start to develop techniques to reach them the VOD audience. By the end of 2002, 8%-10% of the nation’s households are expected to have VOD access. And the number of VOD-capable households will jump from 5.5 million in 2002 to 14.4 million in 2004, the report says.

American Demographics describes several types of advertising models that could flourish with the VOD technology: pre-roll commercials; infomercials; opportunities for more information; and even commercials that roll after the VOD movies have been played. Companies like SeaChange International of Maynard, Mass., and Everstream of Cleveland, are pioneering ad technologies for video on demand.

”Now the cable operators and the content folks are getting together to implement this,” Nayyar said. “That’s what was missing before.”