Highly addressable advertising has been a long-standing plan for the TV business, which wants to rival the ad targeting available online. While there's no question that marketers want to make their spending more efficient, however, the biggest beneficiary of addressable commercials so far may be the TV industry itself.
Cable networks like Starz and HBO have begun trying DirecTV's addressable advertising platform to find specific viewers who they believe would actually be interested in their shows. Cable and satellite operators, meanwhile, are taking advantage of the system to more efficiently target specific customers and get current subscribers to upgrade.
That's not to say other industries aren't using the system, but it could be the most effective for the actual TV operators, said Claudio Marcus, exec. VP-marketing and research, Visible World, which provides targeting technology to Cablevision.
That's partly because paid TV services don't want to waste sign-up ads on people who already shell out for the product. Other kinds of marketers have a greater interest in marketing to current customers -- so they'll stick with the brand for their next box of crackers or new smartphone.
It can also be laborious to match specific households with the cars or packaged goods they buy, but pay-TV operators like DirecTV know exactly which premium channels each of its households pays for.
"People are telling us they have enough TV," said Craig Woerz, co-founder and managing partner at Media Storm, where clients including WeTV and NFL Network are using DirecTV's addressable advertising. "We need to make it more personalized and break through the clutter. We don't want to break through with everyone, just the right people, who will be highly engaged."
Clients using addressable advertising are seeing a 20% to 40% higher tune in rate than those not doing it, Mr. Woerz said.
Addressable commercials let you plan a TV campaign the way you would digital, said Nancy McGee, exec VP-marketing, Starz, which has run two campaigns using DirecTV's addressable system. "Addressable makes sense in light of how people are consuming TV -- cherry-picking programming and networks," she said.
The premium cable channel tested a small campaign in March, urging viewers to add Starz, and followed up in June with a promotion for the premiere of the second season of "Magic City."
In the initial test, which ran over five days, Starz showed ads to non-subscribers who frequently bought movies on demand or who subscribed to other premium channels, groups that the network believed had a higher propensity to be won over.
The network saw a 49% higher jump in sales among viewers who saw the ads than in a control group, Ms. McGee said, adding that the system provides information on how many people were exposed to the campaign, how many watched it live and in playback, on which network they saw it and during which part of the day.
Impressed with early results, Starz is now working with DirecTV around its new series, "White Queen," which will premiere on Saturday.
HBO, too, has used the DirecTV system for a campaign pegged to "Game of Thrones," showing commercials to consumers who met criteria such as frequent VOD orders, on the same logic that Starz applied. It will run a similar effort later this year for the return of "Boardwalk Empire."
HBO is still learning, according to Gina DeSantis, director, domestic network distribution, HBO. But the network intends to increase its investment in addressable ads next year, she said.
Scripps Networks is early in its exploration of addressable advertising, using it to send programming messages to viewers based on geographic location, said Brent Scott, VP, national accounts, content and marketing group.
"There are so many shows and competitive networks, if you can pinpoint a specific customer you have a better chance of tune in," he said. "Why advertise to DirecTV's entire customer base of 20 million if 19 million of those have no interest. I'd rather reach a couple of hundred thousand that are interested."
"In a lot of ways what we are doing here is no different than what Spotify is doing, what Amazon has been doing for years," said Paul Guyardo, exec. VP-chief revenue and marketing officer, DirecTV. "They see what you like to purchase, they see the songs you like to listen to, and they serve up songs they think you might be interested in. This is curating commercials -- we are only putting the commercials in homes of people that want to know more about new cars, or a premiere of a particular show because it is a show they like to watch."
Challenges to wider use
Auto, insurance and financial marketers have also been using the addressable technology, according to Mr. Guyardo, but the limits of the pay-TV systems' reach have held back widespread adoption.
DirecTV's addressable platform is in 12 million households -- the ones with HD DVRs -- of the satellite operator's 20 million homes. Dish Network's addressable system is in about 8 million homes. And Comcast, the country's largest pay-TV operator, intends to roll out its targeted-ad system to more than 20 million homes by the end of 2014.
Some in the TV business also worry about the impact of easy, highly targeted TV commercials. "There's a fear factor," said Mr. Marcus, the Visible World executive. "The concern is if media buys become more efficient, does money come out of the marketplace because advertisers can do more with less?"
But the biggest challenge is educating the marketplace, with many media buyers and planners still thinking in traditional gross rating points, according to Mr. Guyardo.
DirecTV is trying to overcome that by pitching directly to CMOs, especially those who are data-driven. "If they value and appreciate data and analytics and they have a good understanding of exactly who they want to target, the beauty of this addressable product is it provides all of the reach that they want without the waste," Mr. Guyardo said.