Key Takeaways from OMMA Hollywood: Day 1

I am in LA for OMMA Global in Hollywood for the first time, and it was a different experience from OMMA NY or AdTech. For one, it was much smaller. Also, the profile of the participants was very different – more creative and media types, less geeks !! Even the discussions had a different tone – no-one mentioned “machine learning” in the entire day!

Yet, there were the same intense discussions in the corridors and many great panels and keynotes. Through all of those, I took away 3 over-arching themes on day 1

On-line Video is finally here and will change both traditional media as well as drive the next wave of growth of digital advertising
Improving digital advertising effectiveness is on the agenda for most industry participants
Folks are concerned about the recession and its impact on the overall on-line advertising market and on start-up activity
The rest of this post talks each of these.

On-Line Video. Given that we were in Hollywood, it was somewhat predictable that most panelists talked about on-line video content and what it meant for old media, or what some folks in Hollywood would call “traditional” media. In addition, though, there were discussions about the opportunity to create digital content studios and about how video advertising was at an inflexion point
2007 was the year that the networks and other traditional media content developers and distributors finally responded to the threat of the web. And with some success. The streaming quality on is impressive while both hulu and fancast are a pleasant surprise, in terms of the content sharing and community features that they offer. Yet what remains unchanged is that the web is breaking down the business model for traditional media, especially the networks. Networks make their money by bank rolling large numbers of expensive pilots (i.e. playing the role of venture capitalists for content developers) and leveraging their extensive distribution to aggregate massive audiences for the 1 or 2 that succeed. With web video, both pillars are being eroded. Digital studios like National Banana are creating pilots for less than 1/100 of the cost (often less than $ 5000) and leveraging Youtube or Myspace or video widgets on Facebook to aggregate audiences. Given that environment, how likely is that the networks will enjoy the same market share on-line that have currently have on TV ? Also, what are the chances that the networks will be able to sustain their high cost content development model on the web ? And what does that mean for their future ?
In 2007, advertising spend on on-line video lagged the shift in consumer behavior, but that is about to change. Already in the last 3-4 months, the pace of pilots have accelerated – one panelist said, “I got just 1 RFP in Q4 and I have already received 12 this year”) Video advertising is at an inflexion point and over the next 5 years could grow faster than search has grown over the last 5 years. Sounds hard to believe. Well, here is what is driving the growth of video advertising
As Waikit (founder of Scanscout) put it, “Web video is a cousin to TV while search was a completely new animal for advertisers”. Another panelist told me about how many agencies are funding their video advertising pilots from their TV budgets and not their on-line advertising budgets. Once advertisers come to terms with the fact that web video offers brand advertising opportunities that are analogous to TV, then what is currently a snowball will become an avalanche.
The lack of standard formats, measurement systems, and integration with existing media tools (e.g. DFA) have hindered the adoption of video advertising. In addition, advertisers look for scale first and then targeting while video ad networks offered targeting but not scale. All this is changing. The IAB is driving standardization of ad formats while companies like Visible Measures are creating measurement systems. Also, emerging video ad networks like, YuMe and Scanscout are starting to get scale with ad products that are analogous to TV and make it easier for media buyers to buy on-line video advertising.
Brand advertisers ideally want control over the context in which their brands are presented. The idea of their brands being surrounded by user generated content is scary for most product managers. This is changing though as evidenced by the brands that are advertising on Myspace and Facebook. Advertisers are willing to settle for some sort of guarantee that the context does not hurt their brand (by association). These concerns are starting to be addressed through a combination of technologies that automatically classify video streams and filtering technologies that separate “inappropriate” videos. In addition, the growth of the mid-tail and head content is creating opportunities for even the most conservative advertiser.
(Digital) Advertising Effectiveness. Targeting seemed to be a popular topic of discussion today. Several panelists spoke about behavioral targeting and re-targeting. There was even a panel on using ISP data for targeting with panelists from Frontporch and NebuAd. In the corridors, there were discussions about how “data” will win and about how the new Google Ad Manager product offers publishers free ad serving in return for click stream data. What was missing though was a more holistic discussion about ad effectiveness – about creative optimization and how dynamic creative construction could significantly improve ad effectiveness or about offer optimization or landing page optimization. Maybe, its because this was OMMA LA and we will hear more about this at AdTech San Francisco. Or maybe, its still early days and the trend needs to become mainstream before its talked about at these conferences. Well anyway, for more about this topic, read my earlier posts on Display 3.0
The recession…and what it means for us. Given that the markets were in free fall in the morning, it wasn’t surprising that concerns about the recession were on everybody’s mind.
There was a general sense that the funding environment has changed and start-ups should make their cash last for 12-18 months (some added “at least”). Several people were predicting that venture funding for digital media will slow down in H2 ? what do you think ?
There were also lots of discussions about the impact of the recession on on-line advertising ? Will growth slow down ? Will the market contract ? Or will growth in fact accelerate as advertisers shift more money to cost effective customer acquisition channels (i.e. on-line) ?
In all, OMMA Hollywood got off to a good start. Come back to my blog for more about OMMA later this week.

About Ashu

General Partner with Foundation Capital. Areas of interest range from digital media, mobile and internet infrastructure to all things related to India. Currently on the board of TreeHouse, Aspire, Conviva, Agni and TubeMogul.
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