Advertising in the airBy Heidi Dietrich

Puget Sound Business Journal (Seattle)

Updated: 8:00 p.m. ET May 22, 2005A little-known Seattle company has suddenly put itself in position to become a global leader in the fast-changing field of in-flight advertising.

Aeromedia Network, which produces video advertisements shown on Alaska Airlines flights, has just signed a deal to provide advertising content for in-flight entertainment provider DMX Inflight. DMX is a dominant player in its field, and its relationships with virtually every major airline around the globe give Aeromedia access to a wide market.

``Our contract with DMX gives us more airlines than anyone else,`` said Dan Bean, founder and president of Aeromedia, and a 30-year marketing and promotions industry veteran.

Aeromedia, with just six employees and $1 million in revenue expected for this year, remains a small company in a nascent industry of very few players. But its opportunity reflects the dramatic changes airlines are trying to make to the in-flight experience.

The entire industry of screen-based advertising produced no more than $30 million total before Sept. 11, 2001, the last time statistically significant data was available, said Wale Adepoju, CEO of Derby, United Kingdom-based Inflight Management Development Centre.

But the potential of in-flight advertising is catching increasing attention from advertising companies and airlines. Advertisers see airline passengers as a captive, upper income audience, and airplanes are beginning to offer passengers handheld entertainment devices. These all-in-one devices sit atop seat trays and can provide more complex forms of advertising.

Aeromedia Network, which has provided 30-second ads before feature films on Alaska Airlines flights for the past year, is now introducing longer informational ads. Using Alaska`s handheld entertainment devices, airline passengers can scroll through menus and select short video segments on a destination city`s hotels, restaurants, shopping and entertainment. Advertisers such as Seattle-based MacKay Restaurant Group, owner of El Gaucho, pay to be featured in the two- to four-minute informational ads.

``The future is content advertising,`` predicted Greg Latimer, director of brand and product marketing for Alaska Airlines.

For in-flight advertising to really take off, the industry will have to overcome several hurdles, including an inability to measure whether passengers are paying attention to the ads. In addition, most advertising agencies run national campaigns and don`t have global budgets, Adepoju said. This is especially significant because while international airlines have used handheld entertainment devices for some time now, domestic airlines are only beginning to implement the technology.

Another challenge is that the informational ads developed by Aeromedia require users to have their own devices. The traditional 30-second spots can be played on a single large screen.

Some airlines have been reluctant to adapt the technology because of the possibility that passengers could steal the portable equipment and because the devices need to be recharged, said John Caldwell, managing director of Airline Advertising Bureau Worldwide.

``It`s still a little early to know what the future is for handheld flight entertainment,`` Caldwell said.

But clearly some airlines are moving toward handheld devices. Alaska has already outfitted all of its cross-continental airplanes with them, and American Airlines and Northwest Airlines are beginning to introduce the systems, too. Personal entertainment systems are popular with travelers and typically save the airline money. The devices weigh less and burn less fuel than fully embedded traditional systems, and they can be implemented without wiring the entire aircraft.

The flying demographic is desirable, to say the least. Among frequent fliers, 79 percent are college educated, 25 percent are owners of luxury cars, 27 percent are early purchasers of new products and services, and 33 percent are top business decision makers, a 2003 J.D. Powers Money Associates study found.

The products best suited to airplane advertising are automobiles, high-end cosmetics, wine and spirits, credit cards, and other upper-end products, said Rob Brookler, public relations manager for the World Airline Entertainment Association.

Airplane passengers are also a captive audience. Unlike television viewers, who can now record programs in order to fast-forward through commercials, travelers are stuck in their seats and far from their TiVo machines.

``You`ve got people with nothing to do,`` Bean said. ``We`ve got them.``

For advertisers looking for a bargain, airline advertising can cost as little as $2,000 a month and is almost always cheaper than print or television ads. But each airplane audience is much smaller, of course. Caldwell said the value to advertisers is great if all passengers are tuning in, but if only a small percentage actually watches the ad, value drops.

Bank of America, a longtime partner with Alaska, is paying for 30-second spots before feature films. Bank of America Vice President and Product Manager Karen Geyer noted that the ads will reach only the people who select the movie with the Bank of America ads.

``When this came up we didn`t see it as a huge account generator, but this was an up-and-coming thing Alaska was doing and we wanted to support that,`` Geyer said.

Bean, who worked as a marketing contractor with Alaska Airlines for over 20 years, became involved some time ago with the marketing of digEplayer, a handheld entertainment device developed by an Alaska employee. When Alaska decided to implement the system on its planes in 2003, Bean realized he could capitalize on the burgeoning market of in-flight advertising. That`s when he launched Aeromedia.

Though Aeromedia entered the in-flight advertising market with traditional 30-second spots, Bean`s vision has always been informational ads that would be a resource for travelers. Traditional spots are somewhat limited, as Alaska Airlines, as of July, will allow no more than one commercial before a feature film.

``Advertorials are where we`re going,`` Bean said.

Launched in 2003, Aeromedia moved into South Seattle offices at the beginning of this year. The office is the place where Amazon.com got its start, so ``hopefully it has good juju for us,`` Bean said. Aeromedia staff members include a senior producer who works on and hires contractors for the filming, scoring, animation and editing of ads.

This year, Bean expects revenues will be just under $1 million. He aims to increase that to $3 million for 2006.

Aeromedia`s primary competitors are Greensboro, N.C.-based Pace Communications, a magazine, video and audio content provider, and Encinitas, Calif.-based Media Associates, a video and radio programming company.