Welcome to the On-Demand Future

There’s been a lot of coverage about online video and online video advertising lately here on ClickZ (and just about everywhere else). And for good reason: online video has risen to be the hot Web topic in 2006. Driven by the meteoric rise of YouTube, Google Video, highly successful TV network forays into online programming delivery, and the revitalized entry of Yahoo into the online video market, advertisers, marketers, and consumers everywhere seem to have gone nuts about online video delivery.

But I’m not going to write about online video today. The real story is much bigger. The real story about the rise of online video isn’t about the fact consumers seem to really like to watch short low-res video clips on their computers. Nope. The real story is that consumers are starting to take control of their media, and they really seem to like it. Control, not video, will have huge implications for advertisers, publishers, and marketers in the future.

Welcome to the on-demand future. Prepare for major disruptions.

The on-demand future isn’t about just video; it’s about all media. The signs are all around us: podcasts changing the way consumers listen to audio, social news sites (e.g., digg) changing the way people get information, the number of automated aggregator sites (such as GoogleNews and popurls.com) increasing. Paradigms about how media are created and published are radically changing.

The publisher’s role of content creator, editor, and distributor is being usurped by networks of consumers who tag, post, and aggregate content based on their own interests. In the video and audio world, networks are now providing the content that gets ripped from its programmed context by consumers and placed online, recorded on PVRs (define), and carried around on portable video and audio devices. Far from being passive recipients of preprogrammed content streams as they were in the past, people are consuming the content they want, when and where they want, effectively becoming their own network programmers and publication editors.

Right now, this trend is being led by the early adopters. But it’s starting to take hold, especially among younger consumers. A recent Forrester study shows blogs and newspapers have the same audience share among 18-24 year olds, a fairly amazing statistic. You can bet younger kids will tip the scales even further. At some point in the not-so-distant future, the idea of sitting down to watch (or read) a prepackaged stream of content (or publication) will seem as alien as having only four TV channels is to most of us today.

For publishers, marketers, and advertisers, this power shift from publisher to consumer has and will continue to have some major effects on the way we operate our businesses. Publishers must come to grips with the fact fewer and fewer people have any loyalty to a particular publication. Instead, they graze on content that’s been aggregated on blogs, social news sites, or automated content aggregation sites from many different sources. Reader loyalty disappears when most readers don’t come to a publication but to a particular article (or video or audio clip) through a third-party mediator. Readers follow articles, not publications.

Marketers and advertisers must recognize these new consumption patterns and understand how they’re changing — and will continue to change — the whole concept of media placement. Individual publications and networks will become less attractive as advertising vehicles because consumers will spend less time on them as a whole. Instead, they’ll look at individual content chunks in the form of articles, videos, and audio downloads.

Media is becoming decoupled from its source. We’re looking at a future of free-floating content that can and will be consumed on demand and separately from the network or publication that published it. Sure, there are technological ways of thwarting this trend (including draconian DRM schemes and proprietary formats), but these have always proven to be temporary solutions that alienate consumers (see Sony’s rootkit debacle for a prime example).

The future media landscape will be a free-floating meritocracy where the best, most controversial, most creative, most relevant, and, sometimes, most shocking content rises to the top on its own merits, separated from the container (publication or network) that produced it.

What can advertisers and marketers do? First, advertising as we know it will have to compete for audience within the free media market economy. Advertising will have to become “advertainment,” interesting and creative enough for consumers to choose to see it for its own media value rather than to be forced to see it. This is happening already. Some of the most popular videos on YouTube are commercials, and there’s a plethora of viral content that’s proven effective. In the future, advertisers will compete for attention, not just be placed in the attention stream.

Second, we must think of advertising as tied to content, not to publications or networks. Contextual advertising as we know it now is one example of how this works, but the future of advertising will be one in which content and ad are much more closely linked so they can survive their trip together through the blogosphere or aggregator clouds. This can be done manually or can rely more on user-directed tagging (such as what goes on with content posted to YouTube, Flickr, and del.icio.us) to contextually link ads with content.

Embedding advertising also will work. Product placement and advertorial content have already accomplished this, as is the practice to embed the commercials in the online video content so they can’t be skipped over. Consumers don’t seem to mind. Witness the traffic ABC got when its episodes first went online. The advertising effectiveness wasn’t so bad, either: the ads in the streams showed 86 percent recall.

Welcome to the on-demand future.

Join us for our Online Video Advertising Forum in New York City, June 16, 2006.

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