London, UK, April 17, 2008 (XTVWorld.Com) -- The broadcast sector is evolving. Growing broadband penetration, transforming consumption habits, service convergence and the rise of multiple service operators (MSOs) is creating a diverse landscape for entertainment consumption. Advertising continues to play a significant part in revenue generation for the sector, but as the aforementioned drivers challenge traditional paradigms, there is considerable pressure to adapt to new business models using advanced technological solutions.

Datamonitor's recent report, "The Advanced TV Advertising Market, 2008",addresses technological evolution, emerging business models, the competitive landscape and developing implications for advanced advertising in the near term. This report highlights the business case for investing in an on-demand addressable advertising solution, and assesses potential return on investment (ROI) for digital cable and IPTV operators in developed pay-TV markets.

Chris Khouri, Media and Broadcasting Analyst and author of the report, says:
"As traditional forms of advertising begin to lose some of their effectiveness due to multi-platform distribution and audience fragmentation, there is increasing pressure to create effective solutions to combat these challenges.

"One method is through addressing channel mediums (the use of the distribution network) as being just as important to target the correct audiences as the content itself. This involves boosting the effectiveness of advertising (producing higher ROI Positives) in order to charge higher cost per thousand (CPM) premiums to raise net advertising revenue (NAR). Home addressable advertising is a potential method to tackle this issue by targeting specific households with relevant advertising spots," he says.

Broadcasters are not expected to need to make large CapEx investments for home addressability

VOD, both free-to-view and pay-per-view (PPV), is a pivotal service in a cable and IPTV operators product portfolio. Furthermore, most major tier 1 and tier 2 operators are expected to be making, or have budgeted to make, the transition towards newer enhanced DPI solutions, such as switched video broadcast (SVB). Bearing in mind these developments, capital expenditure (CapEx) into specific hardware and software solutions has, in many cases, already been made. Addressable on-demand advertising uses much of the same software and hardware solutions (excluding campaign management etc) of traditional VOD services.

Considering this, the use of addressable commercials does not involve a high degree of capital investment. In fact, the use of enhanced DPI solutions and addressable advertising is outlined as having the potential to lower operational expenditure (OpEx) and improve bandwidth efficiencies through a greater return on bandwidth (ROB).

Flash-based on-demand servers could lower OpEx for broadcasters
A further development that is set to be particularly attractive to the on-demand ad insertion players is the emergence of Flash-based rich media servers. Flash-based servers benefit from having no moving parts and are outlined by vendors as being around 100 times more reliable, having 10 times lower power consumption demands as well as allowing for easier upgradeability and scalability. As broadcasters strive to reduce OpEx in as many ways as possible, lower power consumption and greater reliability have a definite resonance in lowering total cost of ownership (TCO) of an on-demand server.

Despite this, challenges remain with the widespread implementation of Flash-based on-demand solutions. Due to the inherent nature of Flash-based approaches, questions arise with regards to write cycles, particularly with the movement towards dynamic ad-insertion solutions. As the transition towards dynamic ad campaigns continues, on-demand ad server vendors will need to outline solutions to combat the potential for failures in overworked Flash memory.

Assessing the addressable market: the necessity of business models and quantifiable ROI

It is important to outline that addressable and VOD advertising is an emerging solution, with only one commercial launch at present. Despite the lack of actual deployment, it has been a significant topic of discussion for the past few years. As audiences fragment, consumption habits evolve and VOD solutions become an integral service offering, broadcasters are expected to begin to heavily invest in providing addressable and on-demand advertising in order to boost NAR. The challenge will be, however, establishing effective business models. Technology vendors and broadcasters will need to outline quantifiable and specific trial results, demonstrating ROI in 'real terms' in order to attract players and advertisers to the solution.

Note to Editors:
Datamonitor's report "The Advanced TV Advertising Market, 2008" outlines the trends which will challenge the broadcasting sector over the coming year. The report describes the market issues, strategic implications and technological adoption for players in the broadcast advertising sector. The inflexion between what issues these players are facing, how they intend to deal with them and what technology they will use is critical.

Chris Khouri, Analyst for Media and Broadcasting, is available for comment.

About Datamonitor:
Datamonitor is the world's leading provider of online data, analytic and forecasting platforms for key vertical sectors. We help our clients, 5,000 of the world's leading companies profit from better, more timely decisions. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for seven industry sectors: Automotive & Logistics, Consumer Markets, Energy, Financial Services, Healthcare, Retail and Technology. Datamonitor maintains its headquarters in London and has regional offices in Frankfurt, New York, San Francisco and Sydney. See www.datamonitor.com for further details.

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