Earlier this month, streaming video distributor Ooyala raised its fifth funding round -- $35 million from Telstra Applications and Ventures Group, the investment arm of Australia’s telecom giant, Telstra. In addition to giving Ooyala a big opening in Telstra's home country, the move also signaled a new level of importance for Ooyala to try to attract more traditional TV content distributors to its streaming delivery and analytics system. We spoke to Ooyala CEO Jay Fulcher about the company's general goals and how it sees the digital video ad market evolving.
AdExchanger: The company has raised about $79 million since opening its doors about five years ago. Why did you decide to raise $35 million now?
JF: This is probably the final fundraising we’ll do as we continue to process of getting the company to scale and profitability. In particular, the funding was done to cement the work we’re doing with Telstra. The value in that deal is that not only does it help with international expansion, but they’re an important service provider and a great partner.
What makes Telstra a great partner?
They have a global TV strategy that rests on being a provider of digital TV technology and reaching people with their content, either through traditional TV distribution or IPTV. After the telephonic deal, we felt we had an opportunity to expand in that space and broaden our abilities.
This announcement was about understanding that people are watching TV in a different way. It’s not just for the living room. The commercial agreement with Telstra is putting us in a great position to help a film studio or service provider deliver content and advertising on top of it.
How does working with Telstra fit into your wider business goals and strategies?
We have 3 distinct markets we serve: we’re making progress with large media companies, particularly large online publishers like Bloomberg and ESPN. Second is continuing our work with brand marketers, relying on video as the brand medium.
The third component, where the Telstra deal fits in, is the opportunity for us to be targeting the top 70 or so service providers in the telco and cable/satellite provider arena.
Is this all part of a bid for building a business through connected TVs, as opposed to just distribution and ad delivery through the set-top box?
People want to consume digital video everywhere. As we’ve captured in our video index last month, evidence suggests that consumption of video online is growing exponentially and the engagement with customers is growing aggressively. All these companies [are] in position to reach audience through all devices and they want to be able to measure and engage that audience in the most precise way possible. It requires robust analytics. And it requires an ability to help customers in real-time [with] decisions about how and when to present content, regardless of the business model. This notion of personalization of content and advertising is an industry goal that matches what we are building.
Do you see a kind of hierarchy of screens? Are you focusing more on tablets, which seem like the perfect venue for online video, though the scale is still probably a few years away?
I don’t know whether there’s a level of priority of screens for us. But mobile is the most important for users. So many different dynamics come into play with the most personal of devices, the smartphone. For us, every single major project has a mobile strategy associated with it. All the campaigns are focused on optimizing that experience.
What about gaming consoles? When it comes to extending online video methods to the TV, Microsoft’s Xbox Live has been leading the way, since it already had terrific traction with its gaming products.
In the case of the Xbox Live, yes, it’s more than a gaming system – it’s an entertainment hub for the consumer. There’s a single device that blurs the lines between traditional TV and IP-based content. Whether it’s games and music or short- to long-form video content, there’s a greater appetite for more video. That’s also what you’re going to see coming out of Apple and Google TV, devices with a distinct software approach that will change the way people view video and TV.
As the lines between online video and TV blur, does the nature of advertising on different video platforms blur as well? Will TV ads become more like online video spots? Or will the reverse happen?
We’re excited about the evidence around consumers beginning to watch more long-form content. They’re watching more on smaller screens. And as such, the tolerance for more commercial content has also grown as well. The other thing we discovered is a “subway and sofa” phenomenon going on with individuals and video viewing. People are commuting in the morning and watching videos on their phones, while tablet usage is rising on the weekends and in the evening.
Do you think that with those divergent viewing habits, online video could employ a more formal dayparting that TV advertising is generally based on?
The jury is still out on dayparting. We do see agencies want to repurpose linear TV ads and they continue to have mixed results. Online campaigns are quite different and a different ad dynamic needs to be created for the small screen.
As I mentioned, we’ve not seen the bar being lowered when it comes to watching advertising online. A lot of it is proving to our ability to match appropriate advertising to the consumer – that’s more important than dayparting, which assumes everyone is watching the same basic things at around the same time. There’s still going to be a lot of experimentation. It's critical to be sure we're optimizing the overall experience, not just with ads, but with something that takes advantage of contextually putting content in front of consumers in a way they prefer. If a consumer abandons an ad and moves to a different piece of content, you don’t put in another ad. We can capture and model that and provide a smarter ad experience.
We’re working on providing more and more choice around the ads and the content. It’s providing more tools around content recommendation. We will be releasing our content recommendation engine soon; it will be helpful in sorting out advertising that’s of interest and ads that are not.
Even though viewers may have a higher tolerance for TV-like ads, short-form dominates and that usually means pre-roll. Any thoughts on the value of those kinds of units?
There are more sophisticated ways to advertise to people. Mid-roll will become more important. The best opportunity, unlike the way ad networks work, which try to maximize one piece of ad inventory, we’re trying to maximize the entire experience. Ads should be different than what’s applied to online up to this point. There’s no easy answer to the question, “Is pre-roll good or bad?” It all depends on the kind of content and experience the user is expecting.
By David Kaplan