The inspiration for the above picture comes from my post about Les Moonves and VOD. I recalled that while reading Charlene Li's blog today, specifically her entry entitled Google Video potentially offers business model options. She wrote:
"I want to propose another business model option — advertising. What if instead of charging consumers [they] could get advertising dollars…? Hmmm, Google has this little thing called AdSense that it could easily tap for advertising — I've written in the past how they could expand their text ad networking into rich media and video."
I state without hesitation that advertising is inevitable business model for this type of platform/service. People do not want to pay more money for their video on demand. One could argue that there are a number of people will not pay anything — micro-payments not withstanding.
Heck, around 25% of the television households in America still don't pay for either cable or satellite hookups. Of the other 75%, how many think their monthly bills are too low or reasonably priced?
Comcast and Time Warner determined that many people were unwilling to pay 'per viewing' or pay additional subscription fees (SVOD). I remember early on when one Comcast official discussed the vital role the UI played in customer acceptance of VOD. When VOD first appeared, many people would not click to the free content because they were worried that each click meant a larger cable bill and they were not taking any chances.
People understand that advertising is the necessary annoyance that keeps their bills lower. Ideally, the advertising model that would work best for non-linear video is similar to the ROI based models used throughout the Internet today (with a few twists). A VOD ad model could possibly carry themes from Google's AdSense: that is, context sensitive placement.
This posting is not intended to convey the details of the ad business. Instead, the point is to state that VOD's ultimate business model will have a strong advertising component to it.
Posted by martino on July 15th, 2005 :: Filed under IPTV
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