• by Mark Walsh  @markfwal, July 14, 2008

Veoh Networks today unveils a new behavioral targeting system that lets marketers match video and display ads with specific audiences based on their viewing habits.

Still in beta, the technology draws on data collected on its users' video watching, searching, browsing and other activities on Veoh.com to deliver targeted ads according to nine overall audience categories.

These interest-based segments encompass: action-minded; auto enthusiasts; digital youth; family-focused; information seekers; pop culturalists; socially conscious; sci-fi and anime fans; and upwardly mobile.

Within those broad groupings, marketers would be able to define a target audience even more narrowly depending on campaign goals.

"With more than a billion video views every quarter, Veoh is in the unique position to observe viewer behaviors and patterns across various forms and sources of content at an unprecedented scale," said Veoh CEO Steve Mitgang, in a statement.

That means, for instance, if an advertiser wants to target tech and gaming fans, Veoh says it can deliver that audience both when they're watching related videos as well as other types of programming. Similarly, a marketer could focus on fans of a particular show by serving ads to that audience across various forms and lengths of content.

Veoh offers both professional and user-generated video, though more recently it has emphasized the former through syndication deals with the likes of Disney-ABC Networks, CBS, and Hulu, the NBC-Fox joint venture.

User-generated material, which sparked the online video boom, has proven a tougher sell to advertisers because of its uneven quality and more unpredictable content. With estimated ad revenue of $200 million this year, YouTube will fall short of parent Google's expectations, according to a Wall Street Journal story last week.

The article suggested the company has cut back on clips it would sell ads against so as not to sell them against any copyright-infringing videos.

With its new targeting system, Veoh hopes to encourage advertisers to run campaigns that target the same audiences across both professional and user-contributed video. "Where behavioral targeting can play a very large role is in monetizing the long tail of content," said Jarvis Mak, director of research and insights at Media Contacts, the interactive agency of Havas Digital.

As video sites look for new ways to boost ad sales, he envisions behavioral targeting being more widespread in video advertising a year from now. "BT is all about adding a layer to increase those CPMs, but could also be sold on a CPA (cost per action) basis," Mak said.

Behavioral targeting has generated growing controversy as the practice has become more prevalent in other types of Web advertising. Last week, the Senate Commerce Committee held a hearing to consider whether new laws are required to protect Web users' privacy.

A Veoh spokesperson said the company's targeting system is based on aggregate user data and involves no sharing of personally identifiable information.

Veoh will charge a premium for behaviorally targeted campaigns but declined to provide pricing details. The technology will apply to a range of formats including pre- and post-roll ads, overlays and standard display units.

The majority of Veoh advertisers have already begun testing the system, which so far had led to twice the click-through rate of standard ads, according to Veoh. Brand advertisers on the site include Sony Pictures, Outback Steakhouse, TV Guide, Intel and the Mini Cooper.

With a fresh infusion of $30 million in venture financing last month, Veoh has raised a total of $69.5 million to date from backers including Intel Capital, Adobe Systems, Shelter Capital and Michael Eisner's Tornante Company.

But with the additional funding to take on YouTube and competitors comes growing pressure to develop a profitable business model.

In a report on YouTube competitors released in June, JupiterResearch grouped Veoh with Metacafe and the video sites of Yahoo, AOL and MSN as "Fast followers"--well-funded video sites competing for second place to YouTube by replicating key functions such as fast uploading, video tagging, and ratings.

While Veoh says it has 28 million users globally based on its internal logs, comScore estimated its U.S.-based traffic in May at 4.3 million. Category leader YouTube had an audience of 66 million.