Rovi Corporation is launching a new 'cloud-based advertising platform' technology that will enable consumer electronics manufacturers and TV platform operators to deliver video advertising to IP-connected TVs and adjacent internet-connected devices.
Rovi has been active in the advertising space by selling and inserting banners in EPGs for nearly ten years. With this new solution, called 'Rovi Advertising Service', Rovi is diversifying from the EPG environment to embrace the entire interactive connected TV ecosystem, and diversifying from TV sets and set-top boxes to other living room devices. These can be connected to TV sets or directly connected to the internet (retail set-top boxes, DVD players, DVRs, game consoles). The solution can run on those devices regardless of any other embarked Rovi product.
Rovi has introduced its new solution at IBC trade show earlier this month (September 2010). It has not mentioned early adopters or clients so far. Ad-serving represents a relatively small part of Rovi's $484m global revenue in 2009, compared to its core business with EPGs, but it has been identified as a major growth engine. Through deals with 200 consumer electronics and TV service operators, Rovi claims to be already delivering ads to 15.8m homes. In terms of advertisers, Rovi's biggest clients include entertainment brands (Fox, ABC, MTV, NBC) as well as mainstream advertisers (Budweiser, Ford, Unilever).
In terms of delivery, the new service will transmit advertising assets over the open internet so that the reach will no longer be dependent on and limited by subscriber bases or set-top box installed bases that are relatively static but only by the spread of connectable devices. Screen Digest predicts that 618m internet connectable TVs will be installed globally by 2014 of which 116m in Western Europe and 120m in the US, from 48m in 2010 (13m in the US).
In terms of format, the new product and the 'Rovi Advertising Network' are still aimed at inserting web-style banners or branded microsites - like the one already delivered through existing Rovi EPG systems - and not linear spots. However the advent of over-the-top (OTT) TV suggests more non-linear propositions and usages (widgets, apps) are likely to develop beyond EPG and microsites in the future. Rovi hopes that internet-connected living-room TVs will continue to offer a different experience requiring a different interface than laptop or handset-based internet. In that specific ecosystem there will a market for ad creation and insertion systems specifically optimised for a '10-foot entertainment experience'. Nevertheless this new environment is likely to be much more competitive than the walled gardens of EPGs and TV VOD, with lower entry barriers, bigger scale effects and competitors from various backgrounds, including internet giants such as Google and Microsoft.
In terms of business model, Rovi will continue to work on an ad revenue share basis with consumer electronics manufacturers and TV platform operators adopting its technology. Rovi has an in-house ad sales force, based mostly in New York, and provides a turn-key solution for advertisers (design, sales, campaign management, media, measurement and reporting). From a platform operator perspective, the service allows an operator to unlock ad revenues generated by eyeballs without the upfront cost of ad serving infrastructure or the variable cost of a dedicated sales force.
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