Online Video Advertising: Time Warner Gets in the Game

ScanScout, a company we wrote about two weeks ago, announced a strategic investment from Time Warner today. After speaking with CEO Doug McFarland, here are three points that summarize TW’s role.

Strategic: It isn’t fully determined yet, according to McFarland, all the ways that ScanScout’s contextual ad placement software for video will be used across Time Warner’s extensive online network. However, it is clear that this universe of content gives ScanScout a much bigger sandbox in which to apply and advance its product. In addition to a financial investment, the ownership also positions ScanScout as the platform of choice for what will be an increased effort on the part of Time Warner to monetize large volumes of video content. Currently, ScanScout powers about 30 CPC ad campaigns for online video content across about 15 sites.

Financial: Though the investment amount is undisclosed, clearly this brings financial advantages to ScanScout, which will be able to further advance the platform and to continue to experiment with ad formats and delivery. Part of this goal, according to McFarland, is to do more CPM and CPA advertising, to extend its range of offerings, and to gain appeal among large national advertisers, which will be increasingly interested in getting in front of this growing medium.

“Our business model from the beginning, even though we’ve gone out with a CPC model, was to support CPM and CPA as well,” says McFarland. “You have to do that because that’s the marketplace and those are the three means of online advertising. Time Warner through Ad.com has CPA capabilities and also the top CPM brand companies within their portfolio such as CNN and Turner.”

Marketing: The investment can also be seen as a vote of confidence in ScanScout’s platform. This will provide a key point of differentiation in a nascent field where there are a few players vying for positioning and media and investment attention. These include Blinkx and Adap.tv, and each has different ways of solving what will continue to be a challenge and a gating factor in the monetization of online video: determining context and meaning.

In this differentiation battle, ScanScout got a huge boost from this investment, and it will also open the door to relationships and possible partners through Time Warner’s existing affiliations with advertisers, content developers and publishers. For McFarland, in other words, it is more likely than before that people will take his calls.

“Just having somebody that big with that many assets that you have access to is a great endorsement for a company of our size,” says McFarland. “We’re a small company so it’s good to see an established media company validate the direction in which we’re going.”

Video Monetization: Still Question Marks

Coming just weeks after YouTube’s announcement that it will integrate contextually relevant inline video ads to its content, this ScanScout announcement likewise sheds mainstream light on the area. This should continue to spur advertiser and publisher interest.

The one thing that isn’t totally clear, however — like it wasn’t in the early days of pre-roll — is how consumers will react in large part. This will be a key factor in deciding the fate of this ad delivery method, and the experimentation that will have to continue in order to arrive upon the most favorable format and contextual targeting formula.

 

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