Comcast Goes Hyper-Local

Summary

Comcast has begun to serve coverage of local events on its on-demand programming menu. This includes things such as high school sports, local parades and local interest news stories. This is an interesting move for Comcast, and one that further brings out some of the local strengths it has traditionally held. This also brings local video content into more of pull-based delivery mechanism, akin to the development it is seeing online. The next step could be to integrate small-business video advertising to on-demand menus, which would make them more directional and pull based than they have traditionally been in local cable advertising.

Analysis

Comcast is still testing the waters of on demand, in these early days of the medium. At the same time, it is also testing user preferences in local markets for viewing hyper-local content in an on-demand fashion (some examples of this programming are described in this AP article).

This would take the place of local newspapers and local TV news. The difference here is that Comcast itself is producing the content, which is somewhat of a departure from its traditional position of a content distribution service. It has already taken on this production role to a certain extent with its Spotlight classified ads.

It’s the right time for the development of this new distribution medium given the popularity it has shown for cable programming. In 2006, 54 percent of digital subscribers watched an on-demand program, up from 35 percent in 2004, according to the Cable & Telecommunications Association for Marketing. Meanwhile Jupiter reports that about 35 million U.S. households subscribe to digital cable. For local on-demand content specifically, Comcast reports 2 million views for the first quarter, compared with 3.7 million views for all of 2006, according to the AP article.

The next step could be the integration of small-business video ads in an on-demand fashion. Local cable has traditionally been the medium through which local merchants can advertise with video. Comcast and others even have sales channels already in place for this. But the growing adoption and exposure of local video advertising, thanks to Citysearch, TurnHere, Spot Runner and others, should increase demand among advertisers for video.

Traditionally, car dealerships, real estate and some restaurants have utilized this ad medium. But given lower cost production and distribution from the likes of TurnHere, this addressable market should expand to new segments and verticals (such as legal).

Furthermore, this brings an additional dimension to what is possible for Spot Runner, which utilizes cable advertising as the primary distribution medium available in its self-serve video advertising dashboard. The next step could be to also bundle video distribution to small businesses in the on-demand environment.

This would bring Spot Runner’s value proposition from push-based cable advertising targeted by geography and demographic to search-based video advertising that is more directional in nature. This would, of course, require partnerships with Comcast and other cable providers, but you can begin to see the possibilities.

What’s Next?

To fully develop such a local search portal through the on-demand interface would also require cable providers to build more robust on-demand menus with better search capability. They have already begun to go down this path, as evidenced mostly by Comcast’s Spotlight program.

There would also have to be Web-based capability to view inventory, after seeing, say, an auto dealer ad. It might also be beneficial to tie these together with national brand advertising, especially in the case of autos. The integration of all these types of advertising both online and in the on-demand environment was in fact forecast by Vehix.com CEO Derek Mattsson in the recent TKG White Paper “Online Video: A New Local Advertising Paradigm” and in this blog post.

Developing this into something more user-friendly, directional and search-based could meanwhile be driven by the looming threat of competitive telco-delivered IPTV offerings, whose switched video architecture will allow for much more pull-based (on-demand) consumption of both programming and advertising (the dynamics of this architecture and what it could mean for local are explored in a past post).

This will bring video content closer to the benefits of search in its ability to target advertising (see Google AdSense leader Kim Malone sound off today on the need to make video ads more targeted and pull-based). And as pointed out in TKG’s most recent User View study (Wave IV), online pull-based video advertising showed a strong response rate, and reaching consumers in this manner increases the likelihood of reaching attractive and buying empowered users (true for both broadband and digital cable subscribers).

TKG User View Results (click image to expand)

Lots of questions still remain though. Will we have keyboard and mice in the living room to control a search interface or rely on the less cumbersome but less robust remote control? What will be the play-off between the ever converging PC and TV? And what role will networking devices such as Apple TV play?

There is likewise lots of partnering that needs to happen to bring better search capability to cable TV, and to bring small-business video advertising into the on-demand fold. Comcast and Spot Runner, in other words, should be talking to each other right about now, among many other conversations that need to happen.