On Friday I had a chance to meet with and get an update from Waikit Lau, COO/President and Co-Founder of ScanScout. They had given me a heads up earlier in the week about this morning's announcement of a strategic investment by Time Warner and new board member appointments, so I wanted to get a closer look.

ScanScout is among a group of companies that are trying to improve monetization of broadband video by using analysis techniques (e.g. audio, visual and metadata) to deliver highly contextual ads that go beyond conventional pre-roll ads. This group includes, to one extent or another, Digitalsmiths, Yume, Adap.tv, blinkx and Nexidia. ScanScout's format of choice is the "overlay", subject of much recent rabble following YouTube's decision to jump on this format's bandwagon.

Waikit explained that ScanScout sees its secret sauce in "extracting signals" (or descriptive data) from video streams, identifying semantics and correlations of like data and enabling "brand protection."

ScanScout first analyzes video content to characterize it so that scenes can become valuable in a way that today's keywords are. This is done though speech recognition, visual analysis and meta-data collection. Next, ScanScout technology is crawling the web each day to find all nouns and pronouns to determine how they relate to one another. By understanding these correlations and the underlying semantics, ScanScout's system becomes smarter, in turn enabling its advertisers to optimize their targeting. Finally, ScanScout's "brand protection" allows advertisers to de-select certain kinds of content and keywords so that their ads don't run in those offending videos.

The company is focusing on a network business model, so it's trying to sign up as many valuable publishers as possible to build its inventory, while also enticing advertisers and agencies to allocate some budget to its platform. Certainly having Time Warner in its corner will help the company gain access to the trove of TW content. However the company isn't focusing solely on big branded content. Waikit favors "torso" video (in Long Tail-speak, content between the head and UGC), that is monetization-challenged. And the company is focusing now on the entertainment vertical and on shorter form content, which Waikit sees as ideal for the overlay format.

It's a pretty cool model, but still needs time to be fully proven. Big brands love the CPMs they're getting for pre-rolls, so overlays are going to be less appealing for now. And for ScanScout and all its competitors, the proof of their wizzy technology will be tangibly improved targeting leading to higher user click-throughs and engagement. It's still too early to know whether the science leads to actual results. But with broadband content providers large and small scrambling for improved monetization, ScanScout and the others are playing in very fertile ground.