Web video aggregator Veoh thinks it has cracked the elusive video advertising code with a behavioral targeting system based on their recommendation engine.

Veoh founder and CIO Dmitry Shapiro stresses the difference between targeting the behavior of viewers against targeting the shows they watch. For instance, while it may seem like a good idea to advertise Alpo on a video about dogs, Shapiro would recommend that you market Alpo to individuals who have been known to watch a lot of videos about dogs. If a viewer watches ten straight videos about cars and then one about dogs, that person should still be served an ad related to their previous viewing rather than based on one individual view.

It seems so simple and so obvious, but true. What if television were the same way? Let’s suppose, for the sake of argument, that I like to watch Gossip Girl sometimes even though most of the time I watch baseball, football, and other extremely masculine content. Wouldn’t advertisers love it if instead of feeding me a bunch of ads for makeup and clothes, they were giving me ads about trucks and beer–even during a show marketed at younger women? It would revolutionize TV advertising.

Veoh and Shapiro claim their behavioral targeted ads received double the click-throughs that non-targeted ads received.

One huge problem with video advertising is that marketers are wary of associating their products with UGC (user generated content). This is big trouble for YouTube and explains the fact that while UGC accounts for a huge portion of the total online video views, it generates only a fraction of the revenue of other content. Veoh presents a mixture of professional content and UGC.

Another problem is ad inventory. Is there enough variety of ads to really make an elaborate targeting scheme worthwhile? This has been a roadblock to other targeting attempts in the past.

We shall see, but it’s a start and it makes sense what Veoh is doing. Behavioral targeting will be happening, if not now, then later. Might as well get in on the ground floor.

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