BT launches ad-funded video downloads

BT has announced a three-month trial of an advertising-funded film rental service through its BT Vision Download Store. Consumers will be able to watch three films from FremantleMedia Enterprises free of charge in return for viewing targeted advertisements. Once downloaded, each film will be available for one month and, providing the viewer is online, different ads will be shown at each viewing. Viewers can also send the films to friends via email to be viewed on the same terms. To date the Download Store, accessed via the Internet, has operated on a paid-for basis, with users downloading film, television and music to PCs and portable devices, at prices starting from under £1.00.

This tentative step into the online advertising world is all about the longer-term dream of developing a new revenue stream for BT; a dream shared by many an operator around the world. Advertising represents a new and untapped revenue stream for telcos, the chance to shift away from a reliance on end-user subscriptions, and the opportunity to capture both online and TV advertising spend.

BT says it will use this online initiative as a learning experience, assessing consumer take up and reaction to advertising-funded downloads, and experimenting with the targeted advertising format. It will then be able to draw on this knowledge when building advertising packages for its BT Vision IPTV platform, which it expects to establish within the next 12-18 months.

In theory, advertising on the IPTV platform should be a winning approach for advertisers. It provides the facility to mix classic TV advertising (and the immersive qualities that video and the "lean-back" environment entail) with the accountability and targeting capabilities of the Internet. In practice it is still very difficult for IPTV operators to break into the advertising supply chain - most, at least in Europe, do not own any advertising slots, and most still lack the audience scale that really puts them on the radar for advertisers.

This trial is important because it allows BT to begin building those relationships, both with agencies and brands in order to gain a real foothold in the advertising supply chain. BT says it has a number of advertisers in place and that the service will include adverts provided by isobar (the digital advertising agency) from the AA, Norwich Union and Territorial Army, amongst others.

It is also important in developing the ability to target advertisements. At the time of rental, consumers will be asked to download free video software from Hiro Media, a developer of Internet ad-supported video-download technology. Viewers will then be asked to fill in a questionnaire providing anonymous demographic information allowing the software to select adverts dynamically that are most suited to the answers provided.

And it won't be only BT and its advertisers that look forward to these results. There will be wider industry interest in the trial, especially with regard to how tolerant consumers are of advertising inserted into their video downloads, how much advertising can be incorporated and when.

Annelise Berendt, senior analyst at Ovum

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