Why Is Streaming Video So Difficult To Monetize?

The 2014 FIFA World Cup has provided ESPN and BBC Live with a massive boost in online video traffic, but these gains may not be monetized to their full potential. "I haven't seen the golden road where everything is done seamless in a way that's both non-intrusive and you still get the ad results," Dan Sahar, co-founder and VP of Product Marketing at Qwilt, told Benzinga. "It's doable. There is something missing there. Some video content providers, you watch one episode of some show, and you have the same commercial five times out." Hulu is notorious for having repetitive ads, but network-specific sites (such as CBS.com and ABC.com) offer little variety in this area. "Consumers are going there," said Sahar. "Now the ad dollars have to follow, and technology has a lot of things at its disposal to find that golden path to use the online capabilities and make it really great for the consumers."

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Time To Experiment The online format may be challenging for advertisers, but Sahar said that it creates "a lot of different opportunities that you did not have in regular TV." "I think soccer is a good example of that," Sahar explained. "Soccer, in the TV world, is pretty bad for advertising. You have to stay through 45 minutes, and sometimes nothing happens, and you can only put ads at half-time or before and after the game. In basketball or NFL, you can put ads every five minutes." Streaming video gives broadcasters more options, which could be good for sports and shows (or movies) that are less ad-friendly. "You can do split-screen or allocate, from time to time, a third of the screen and run ads over there," said Sahar. "Maybe you can do some…product-placement stuff. If one player is wearing Nike shoes, you can introduce a link to where you can buy that." Viewers may be willing to accept a degree of product placement (especially if it means that a sport or TV series stays on the air), but they are less likely to support split-screen viewing. That could tarnish the experience and send consumers right back to cable. Who's Really Watching? Broadcasters, advertisers and pay-TV companies use Nielsen's TV ratings to determine the success of every series and sporting event. This system is far from exact; Nielsen's ratings are comprised of national estimates that are based on a small number of viewers. With online video, advertisers have the opportunity to better understand exactly who is watching each program. "The guy or girl that is watching is signed in to their, let's say, Google account or Facebook or Twitter or whatever," said Sahar. "You already know a lot of things about them, so you can target the ads a lot better than you can on the TV." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.