Local Ad Insertion: Smaller Ops Need Different Tools

The cable industry has long been led by a small group of operators. The precise number changes over time, but certainly is less than 10. They are aggressive and entrepreneurial companies that employ brilliant people and create amazing platforms. They set the tone, take the arrows in the back and end up putting the rest of the industry in position to succeed.There is a catch, however: The big operators are big. As much as they want to aid the industry as a whole, there are areas in which their size simply differentiates them from tier 2 and tier 3 operators.Local ad insertion is one of those areas. Though the goals clearly are the same, the financial equations, procedures and in some cases even the technology differ. Digital ad insertion on mobile devices is a complex and confusing business. As advertising on second and third screens comes into focus, that chasm will do nothing but grow.The key is monetization opportunities, wrote Denise MacDonell, the Vice President of Product Management for This Technology in response to emailed questions. "For tier 2 and 3 operators, while DAI is of high interest, strategic investments must be weighed carefully against their ROI and ensuring that the basics are in place to support those investments (i.e. program rights, critical mass subscriber base). Advancing deployments in this market will mean improving the cost economics for the tier 2 and 3 operators, which is something This Technology is very focused on."Thus, there are interrelated issues: Making local ad insertion financially viable and amassing the people and technology that make such initiatives feasible.On the technology side, it's not surprising that the biggest difference is in matters of scale.All operators, said Venkat Krishnan, the vice president of advertising products for SeaChange(NASDAQ:SEAC), must process schedule files, transcode the content and do verification after the spot runs. Big operators, however, are in position to go further. They have the ability to share capabilities - such as storage - in their metropolitan and regional architectures. They can perform content manipulations off-site.Thus, it is an uneven playing field. Small systems owned or operated by tier 1 operators have advantages over systems of the same size that are independent or associated with tier 2 or 3 operators.Of course, there is nothing stopping small operators from building elegant local insertion platforms. The reality, however, is that they have long lists of things that need to get done, fewer people and less collective expertise with which to do those jobs. Krishnan said smaller operators are more likely to be using home-grown software and jerry-rigged platforms. SeaChange sees the opportunity. Last month, the company introduced the AdFlow Core, which is aimed at helping tier 2 and 3 operators confront those issues. The platform prepares and ingests spots into program streams.Ad insertion, from its earliest days, has been difficult and complicated. There always has been a split between large and small operators. The challenges can mount quickly as operators enter the multiscreen world. "It becomes difficult [for smaller operators]," Krishan said. "What happens is that [systems don't] scale. The problem is scalability. The problem is when it comes to multiscreen, it is not as simple as file-based transcoding. It gets fairly complex for them to manage the operations."Randy Lykes, the CTO of cable advertising agency Viamedia, agreed that second and third tier operators are in a more difficult place than the tier 1 operators when it comes to local ad insertion in a three-screen landscape. "The big guys have the infrastructure and the capital to throw at all the parts and pieces needed to launch an ad sales business," Lykes said. "The tier 2 and 3 companies don't have that easy access to capital nor the expertise .... The traffic and billing systems are costly and take experienced people to make them work."The cloud could be the key for smaller cable operators seeking to equalize the playing field with the bigger operators - and, more importantly, with video competitors in their market. The advantage of the cloud is that it can take many of these time-intensive and specialized tasks and have them performed elsewhere on behalf of the operator. In this way, it can mimic what the tier 1 operators do for the systems under their control.In a lot of ways, an intensive and varied set of tasks such as ad insertion is perfect for outsourcing. "I think that some of the components may be packaged up for the small operators," said Chris Hock, the senior vice president, product management and marketing, for BlackArrow. "They may be packaged into more of a cloud service or a hosted service that is run by the vendor as opposed to the operator. We certainly see that possibility on the horizon."Carl Weinschenk is the Senior Editor of Broadband Technology Report. Contact him at [email protected].