Friday, October 24, 2008

SeaChange tests local London VOD ads

By Efrain Viscarolasaga

Targeted advertising has become the de facto model in the monetization of online content, and Acton-based SeaChange International Inc. is betting it will work in the world of television, as well.

Last week, SeaChange announced a three-month trial of its targeted video-on-demand ad-insertion product called AdPulse in Europe with Virgin Media Inc. The test represents the first deployment of AdPulse in Europe, and the first time the technology has been used in conjunction with major, multinational brands, such as food giant Kellogg Co., British retailer John Lewis and U.K. postal service the Royal Mail.

Executives at SeaChange said the deal represents a milestone for AdPulse, but is also a harbinger of things to come in the video-on-demand (VOD) world, where operators have seen a jump in viewership over the past year, and are looking to generate increased revenue from that growth.

“We see this as a considerable learning opportunity to give advertisers a comfort level with inserted ads and the data surrounding who is watching what and where,” said Alan Hoff, senior director of on-demand solutions at SeaChange, adding that the company expects the VOD industry to watch the deployment closely.

The trial will be focused on North London, and last for three months. The SeaChange system will insert ads before and after on-demand content in real time, testing ad lengths and placements. The ads will be updated weekly, and a limit on the number of ads (mostly 30-second spots) in a given placement will also be in place.

While the project is the first of its kind in Europe, SeaChange has deployed similar trials at smaller multiservice operators in the United States, using local advertisers. In one trial in Kansas (executives would not name the service provider), the customer has sold every single ad spot for the next calendar year, according to Hoff.

The future of VOD lies in advertising, according to analysts. In a report from ABI Research, analyst Paul Lee said service providers are seeking the “grail of higher profitability from each title,” and that grail is increasingly being found in the bundling of targeted advertising.

In a related report, Lee predicted the global VOD usage will multiply tenfold between 2007 and 2013, with a compound annual growth rate of 45 percent.

SeaChange has been working on its television personalization products for more than two years, and its domestic trials have already bolstered the publicly-traded company financially. In its last reported quarter, the second quarter of 2008, the company reached a net income of $1.5 million, up from a $7.9 million loss over the same period last year, and surpassed $50 million in quarterly revenue for the first time in company history. Executives also said SeaChange’s annual income is trending to be 10 percent higher this year, over the $180 million it reported last year.

Targeted ads are just the beginning of SeaChange’s plan to personalize the television experience. The company has also developed two additional applications, which are also in trials — ReStart TV and Affinity. ReStart TV allows viewers to watch a particular program from the beginning, even if they tuned in late. Affinity, on the other hand, links the VOD guide to a web interface. Affinity also includes some social networking features, allowing viewers to share favorites with friends, mimicking some of the features seen in online social networking environments.

“We want people to have as close a relationship with their TV as they do with their computer,” said Hoff.