While marketers and ad buyers in the U.S. are wringing their hands over how to make addressable advertising part of the TV-viewing experience, their counterparts in the U.K. are also trying to figure out how to harness the decidedly mass devices to reach specific niches.
U.K. broadcaster Sky has developed the technology to dynamically insert ads into recorded programs and target those ads to specifically desirable demographic niches.
The pioneering satellite broadcaster, part-owned by Rupert Murdoch, is beginning trials for its new targeted advertising platform, AdSmart, next year, with plans to take it to market in 2013. Sky has already written to its 10 million customers to tell them about the service, promising that it will result in more relevant advertising.
Here's how it works: Sky will store a library of ads on its set-top boxes, creating an ad server of sorts that can feed content to the TV screen when a desired ad break begins during a show being played back on a DVR. The challenge, executives say, is to stream the ads in a seamless way, so the viewer doesn't notice.
The technology will allow Sky to update the ads that appear in recorded programs to make them more timely and potentially derive revenue from every ad served during subscribers' DVR playback sessions. At present, Sky doesn't get credit or payment for ads in shows viewed more than seven days after they were recorded.
One potential concern: tripping alarms about consumer privacy.
"Many consumers find the whole concept of personalized and targeted advertising creepy and strongly oppose the concept of 'big brother' registering what they are watching," said Martin Olausson, director at Digital Media Strategies. "AdSmart is less invasive than some other solutions, but it will still seem intrusive to some people."
Sky is well aware of the scaremongering that will no doubt ensue. "We have an army of lawyers and data-privacy experts climbing all over this," said Jeremy Tester, Sky Media's brand and strategy director. "We're not about to upset our customers. Our guiding principles are consent and transparency."
MediaCom has been working with Sky on AdSmart's online version, which is already up and running on Sky's catch-up TV service, Sky Player.
Rhys McLachlan, managing partner of futures and implementation at MediaCom, said, "Consumers are very favorable toward the idea. Completion and click-through are up dramatically and opt-out is in line. Weirdly enough, getting the right ads in front of the right people gives positive results."
For marketers, particularly those in the film and retail sectors or those that have time-sensitive campaigns, the benefits of targeting are obvious. Sky also claims that AdSmart could bring in premium advertisers for whom TV has always been too scattershot.
"Clients don't care for demographics, they care for customers," said Mr. McLachlan. Another possible example cited by Sky could be a Ford campaign that shows different ads for different models simultaneously.
Sky is polishing AdSmart to make the experience seamless so the viewer won't know if it's been in the program all along or inserted at that moment. It also wants to have the measurement capabilities down so it can start to judge just how much more effective targeted advertising can be.
How will Sky share revenues with other broadcasters using the Sky platform? The model demands a radical change from the "station average price" model currently used. Mr. Edwards said, "This is a very different model to buy against, but we could see a swift shift when all three parties [marketers, agencies and Sky] pull together."
Sky is available in 10 million of 26 million U.K. homes, so the reach is not comprehensive. But Jean Paul Edwards, executive director, futures at Manning Gottlieb OMD, said, "Sky is a big platform. Certain programs have 10-20% of viewing. If it's the right show and the right brand, it's a big deal. There are no guarantees but this has the potential to be transformative."