• by David Goetzl  @dgoetzl, August 4, 2009

ESPN is set to launch a technology where a Denny's ad for its signature breakfast immediately pops up when a player is shown hitting a grand slam. Denny's, however, might have to wait until next baseball season to plug its Grand Slam pile of eggs and pancakes.

ESPN is planning to debut the contextual advertising system next month within college football videos on ESPN.com. Its sales teams are just starting to seek out advertisers.

The Ad + Demand program -- where brief ads surface while a video continues to roll -- was developed by Australian company Demand Sport. The pop-up ads can be a banner across the bottom of the screen, or a larger "flyout" that appears to the left of the video.

ESPN is likely to avoid a third execution -- where text is overlaid on the screen -- since research shows it could prompt a negative reaction from viewers.

Ad + Demand offers advertisers a chance to match clever, relevant creative with pivotal moments captured in short-form highlight videos. Think: a Nestle Crunch spot as a player makes a play at "Crunch Time."

"The whole concept is synchronizing brand messages with a moment in time," said Luke Reinehr, Demand Sport's CEO and a co-founder. "Our vision is to go beyond the normal way of selling advertising by reach and frequency -- to add relevance to reach and frequency."

While Ad + Demand's infrastructure is complicated, execution for ESPN.com is rather simple. Producers assembling the highlight packages tag where the pop-up ads should be placed.

The video is then sped electronically to Demand Sport's nerve center in Australia. The ads are inserted there and the finished package is returned to ESPN and posted on its site.

Demand Sport has been developing the costly ad-serving system for four years. And ESPN is the first customer to license it, offering a high-profile launching pad.

For ESPN, the technology comes at a time when online video is booming and finding a way to better monetize it is crucial. Note that the redesigned ESPN.com offers an upgraded video player that can dominate the home page.

As ESPN sales executives devise a strategy for the new application, they are considering packages where advertisers can control the full inventory on a particular day. So, a we-try-harder Avis could own all pop-ups and use them during highlights of an underdog knocking off a huge favorite.

"We're trying to say that the best way to use this is to take advantage of the context," said Ed Erhardt, ESPN's president of sales.

ESPN has tested some of Ad + Demand's effectiveness at the Disney Media & Advertising Lab in Austin, Texas. The tests, however, did not evaluate the pop-ups by themselves -- only how successful they might be at improving performance for pre-roll ads.

The hypothesis: Consumers would remember a pre-roll more if it were followed by a pop-up to reinforce the message.

The findings: Pop-ups improved unaided recall for the pre-rolls by about 90%.

Yet the research did show that the pop-up format known as a "full-screen transparency" -- where text is overlaid on the video -- had a tendency to turn off consumers.

"It was too intrusive," said ESPN research executive Artie Bulgrin, and ESPN is unlikely to deploy it.

If the Ad + Demand technology proves a success, the role of former CBS Sports head Neal Pilson can't be understated. As the U.S. emissary for Melbourne-based Demand Sport, he paved the way for the ESPN arrangement.

Pilson and his impressive Rolodex linked with the four-year-old digital media company 18 months ago. A friend of Erhardt's, he contacted the ESPN executive last summer. After conversations that brought in Reinehr, the two sides had a deal.

"It gives (ESPN) another way of maximizing value in a very competitive marketplace," Pilson said.

ESPN and Demand Sport would not discuss specifics of their deal. But while ESPN has some first-mover advantages, Demand Sport can seek other customers to license its technology.

Reinehr has been in Europe this week trying to drum up interest. And he says Ad + Demand has potential beyond sports, including in financial news videos.

On days when the Dow is up and "people feel better and more wealthy," he says a financial services company could slide a pop-up into a video wrapping up the day's trading activity.

Reinehr also says Ad + Demand could be employed in live broadcasts. Demand Sport is working on a "live application" that could launch on ESPN360.com, the site that streams a slew of full-length sports events.

Going further, Erhardt says he is intrigued by the chance to use the technology on television.

Before then, ESPN.com is likely to fine-tune it with college football and expand it to other sports, including baseball. Denny's might then be on deck.