• by Erik Sass  @eriksass1, September 26, 2006

Betting on new ad models for on-demand digital content, research firm ABI predicts that ad-serving and ad-splicing technology companies will boost revenue from $284 million to $1.8 billion by 2011. Although the technical details of ad-serving hardware aren't central to media planning, ABI uses the market as a bellwether for ad-supported media--and is optimistic about its prospects, particularly the demand from large markets.

According to ABI analyst Michael Arden, studies have shown that "VOD viewer numbers increased dramatically when the service became advertising-based instead of fee-based." Cable companies are already driving demand for equipment that delivers ads. Arden notes that one cable television operator, Sunflower Broadband, is already delivering ads into on-demand programming for MTV Networks.

Arden says likely winners include established ad tech firms like SeaChange, C-COR (nCUBE) and Concurrent Computer Systems, as well as new IPTV tech firms, like Bitband and UTStarcom.

The latest generation of ad-serving technology allows delivery of targeted ads, based on demographic information gleaned from subscription data or other sources with permission from users. ABI notes it may even be possible to target individuals within households, holding out the promise of demand for multiple ad-splicers per home.