Video

The world of online video has grown up dramatically from the days of seemingly endless buffering and choppy playback. This improvement can be attributed, in large part to adaptive bit rate (ABR) streaming, technology first pioneered by Apple. ABR breaks large video files into smaller (typically 10 second) segments, choosing the feed quality to match the available network speed, and then instructs the video player to reassemble these segments on the other according to specifications outlined in the video “manifest.” 

While ABR streaming has allowed video consumption to thrive in a mobile environment where signal quality is in constant flux, the technology also opened the door to additional technologies looking to piggyback on the proliferation of premium video.

Smart Streaming startup mDialog has benefitted as much as any company, as it developed a method of inserting dynamic ads into streaming video and targeting those ads based on information like location supplied by user’s mobile device. This means that ads don’t need to be determined prior to uploading a piece of content, and can be changed at a moment’s notice based on new information or changing advertiser relationships. The company’s clients include The Wall Street Journal, Fox News, and NBC Sports, as well as several other “three letter name broadcasters” that can’t be mentioned publicly, according to founder and CEO Greg Philpott.

Today, mDialog announced that it has been granted two patents covering its core technologies: “System and Method for Delivering Content to Mobile Devices” (patent no. 8,539,523) and “Method and system for dynamically inserting content into streaming media” (patent no. 8,495,675). Both patents were filed initially in 2009.

It’s not immediately clear how competing dynamic ad solutions will be viewed under these new patents. But Philpott describes them as both broad and foundational to the category, adding that mDialog plans to aggressively defend its intellectual property.

Dynamic ad serving works by through a bit of creative hacking in the ADR streaming manifest. Traditionally, the manifest contains URLs that instruct the player which video segment files to cal.l, in what order, and how to reassemble them. MDialog replaces these URLs with its own “mURLs,” which are empty placeholders pointing back to its servers. In this way, when an IP-connected device like a smartphone, tablet, set-top-box, or smart TV cues up a video, the company can sell that ad inventory to brands in real-time.

“Streaming manifests today are a lot like HTML was 15 years ago,” Philpott says. “But we’ve made it possible to make on-demand modifications, and to manipulate playback after a video file has been published to the web.”

Step two in this process is gathering additional data from mobile device sensors to provide rich targeting to these advertisers. For example, and retail or fashion brand is likely to pay extra to serve an ad to a consumer who is viewing a video while walking through a shopping mall.

Some of this may seem “obvious,” but in the US Patent Office’s estimation, mDialog was the first to invent and apply for intellectual property protection for these methods of dynamic ad serving. Others who wish to play in this space will need to license the company’s technology, or innovate around its patents, neither of which is a guaranteed path.

Further, because dynamic advertising is a new frontier and mDialog’s patents are so newly issued, there are no standards essential patents instituted in the category today. Such classifications would require the patent holder to license their patent to competitors on “fair and reasonable” terms. This is something that could change in the future, Philpott concedes, but as of today mDialog appears in the driver’s seat. In that way, today’s announcement may represent a barrier to innovation in the dynamic advertising space.

MDialog has raised$8.15 million to date across two rounds of funding from Relay Ventures and other investors. The 25 person company with offices in Toronto and San Francisco is generating revenue, but according to Philpott, it remains in “hyper growth mode” and is not yet profitable.

We are entering the era of “TV everywhere,” where broadcasters like Comcast and Time Warner Cable, and networks like ESPN, HBO, and Disney are all striving to deliver content to consumers wherever they’re located and on whatever devices they have with them. A central challenge to be solved in this transition is how to effectively monetize this mobile consumption.

Highly-targeted, on-demand ads would seem to offer a compelling answer to this question. And, at least for the moment, mDialog appears to own this answer.

[Image via PopShifter]