Addressable Ads Could Reinvigorate TV

Advertisements are still the key to profits in the broadcast television model... but more and more people are finding ways around them, and it's always been debatable how effective they may actually be for a select product. When times are changing, the industry needs to find ways to adapt in order to survive. This is just one of the ways they're trying to adapt the advertising model. Personally, I'm not sure if I'm any more likely to respond to "personalized advertisements", as I tend to plan exactly what I want to purchase far in advanced... but then again, I don't yet have money to toss around either...

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Better Targeting Would Improve Efficiency, but Scale Remains a Major Hurdle

By Brian Steinberg

Published: November 17, 2008

NEW YORK (AdAge.com) -- Satellite-TV firm Dish Network and ad-tech firm Invidi struck an agreement last week that involves "advanced receivers," "targeted advertising delivery" and "dynamic commercial insertion." Behind the tech talk is something media executives such as Group M's Rino Scanzoni believe is nothing short of "the renaissance of the TV business."

The Dish-Invidi pact calls for developing of the ability to sell ads that can be sent to specific households based on geographic and demographic information.

Rather than bombarding millions of TV viewers with the same ads for things many of them may not be looking to buy, marketers could in the next two to three years send different ads to different households -- making certain, for example, that Procter & Gamble wouldn't have to pay for Pampers ads watched by a couple with no wee tykes and General Motors wouldn't have to show ads for its Hummer vehicles to a house full of Prius enthusiasts.

Addressable TV ads -- which many believe are the simplest solution for advertisers wringing their hands over ad skipping and DVR viewing -- are currently being buoyed by developments on several fronts. Canoe Ventures, a consortium of the nation's biggest cable providers, will soon be able to offer advertisers the ability to digitally tweak their commercials so they can send one version to one audience and a different execution to another. The group expects the technology, known as "creative versioning," to be available to advertisers in 60 million homes in the first quarter of 2009. Earlier this year, Microsoft acquired Navic, a technology firm that helps media buyers buy local cable ad time based on the behavioral characteristics of audiences.

The progress is encouraging to those trying to figure out what can replace the beleaguered 30-second TV ad. "We believe that if you increase the relevancy of the advertising, you can reduce the tendency to avoid the messages," said Mr. Scanzoni, chief investment officer for WPP Group's large Group M consortium of media-investment firms.

Scale
These are small steps, to be sure, and don't solve the one hurdle advertisers face when it comes to beaming an interactive ad to the TV screen: scale. Setting up an addressable ad that can be seen by a majority of U.S. TV viewers remains nearly impossible because of the various cable, satellite and other intermediaries that control the devices that make the commercials work.

Still, the audience is there. Interpublic's Magna forecasts that more than 17 million U.S. households -- at least 15% of the total -- will be able to receive addressable ads by the end of 2008. The worldwide market for addressable advertising will pass $680 million during 2011, according to In-Stat. But that's still a far cry from the more than $64 billion annually spent on TV overall.

With DVRs expected to be in more than 36% of TV households by 2012, according to Interpublic Group's Magna, marketers have to find a way to thwart the desire to avoid commercials. And while consumers still will be able to blast past ads, an emerging school of thought posits that consumers will want to watch ads for products and services they really need or in which they have a deep interest. "We believe it's the best hope for television to reinvent itself," said Tracey Scheppach, senior VP-video innovation director at Publicis Groupe's Starcom USA.

Here's the theory: On the computer, surfers are often enticed by ads that carry entreaties specific to their needs and likes, such as a Google search ad for fish food that pops up when someone seeks information on nutrition for fish, or a Facebook ad for a new CD from an up-and-coming band that sounds an awful lot like the musicians the user has listed in his or her profile. Those ads can sometimes make people stop and click, and advertisers take those responses as proof their commercials resonate with potential customers.

This line of thinking has its detractors, and with good reason. Results of earlier tests have not demonstrated overwhelmingly that a particularly relevant commercial will defeat the urge to channel surf for a majority of the audience. In a test started in December 2006 and conducted by Comcast and Starcom MediaVest Group in Huntsville, Ala., ads from marketers including General Motors, Discover Card, Hallmark, Kraft Foods, Mars, Miller Brewing Co. and Procter & Gamble were delivered across eight popular cable networks. The spots were addressed to different anonymous groups of households based on general characteristics selected by the advertisers. Comcast and SMG found that, overall, homes receiving addressable advertising tuned out 38% less of the time available than homes that received nonaddressable advertising. Ms. Scheppach noted that viewers did not have DVRs recorders available to them in the trial.

Limited applications
Technological limitations also will keep addressable ads from holding sway, at least in the short term. At present, much of the inventory available comes from the two minutes an hour cable- and satellite-TV providers have under their control. "If only a small percentage of inventory is enabled with addressable capabilities, then if you're a brand who can survive and thrive on reaching a small segment of the market, then this is a great thing," said Brian Wieser, senior VP-director of industry analysis at Magna. "If you need to use network TV and broadcast TV to accomplish the bulk of your objectives, this is nothing more than an experiment."

For now, of course. But the day when viewers watch the bulk of their TV during prime time has begun to wane. If marketers can use TV to mine demographic niches, there might even be room for a discussion about whether those ads should come at a higher cost, according to media buyers. This technology is in its embryonic stages but certainly opens the door to larger thoughts about how TV ads are bought, sold and deployed. "This is really, we believe, going to change the television landscape and, clearly, make ... television much more competitive with the digital platforms," Mr. Scanzoni said.

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Contributing: Andrew Hampp


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