NEW YORK (AdAge.com) -- Marketers have long dreamed of a day when they can stop blasting ads out to the world at large, and instead send TV commercials for Pampers, Chevrolet and Barbie dolls only to those people in the market for diapers, a new car or a child's toy.
Though so-called addressable advertising has been proclaimed for years as their holy grail, advertisers have continued to face a host of technology issues and resistance against moving away from older ways of doing business. Now, however, as more digital media are able to run video, there's a lot more impetus for the TV industry to push the process. By providing a method to beam ads to smaller groups of consumers who are more likely to be interested in the product or service being promoted, TV networks and cable operators hope to bring back dollars to the medium that have begun drifting away from it.
Results of some recent tests are promising, despite the hurdles. And there are many: Companies are wary of making consumers feel they are giving up private data about themselves; current technology uses data from set-top boxes and demographic information to make sure the right ads get to the proper households. Creating a uniform process that would allow these ads to be distributed nationally remains a work in process, owing to the fact that the cable, satellite and telecommunications concerns whose content-distribution pipes make the technology function often have very individual ways of making things work. And there's still no set way for advertisers to purchase this new format from TV networks.
"If the long-term goal is reinventing broadcast advertising, then that can't be done instantaneously," said Michael Kubin, exec VP, Invidi Technologies, one of the companies that offers technology for creating addressable advertising. He compared the timeline of making addressable advertising market-ready to being in the early days of the U.S. space program. Indeed, Comcast, one of the concerns conducting tests of the technology, doesn't see it becoming available in widespread fashion for another two to three years.
Comcast Spotlight, the ad-sales unit owned by Comcast Corp., and Starcom MediaVest Group, the media-buying unit of France's Publicis Groupe, have completed a second test of technology that delivers different ads to different households, and they say the ads in both cases have proved to be about one-third more effective in keeping audiences from tuning them out. They also believe the time is drawing nigh for discussions about creating a business model around the new ad format.
"We definitely believe that a hyper-targeted approach is going to be a big part of the future of television," said Michael Bologna, director-emerging communications at Group M, the media-buying operation whose parent, WPP, has stakes in technology concerns that are helping to develop addressable technology. "There are many different definitions in the industry of what addressable is and how it should work, and there are a bunch of trial initiatives that are going on, and there are some other initiatives that will become available within the current year." WPP has a stake in Invidi Technologies Corp., which assisted Comcast and Starcom MediaVest.
The Comcast test, performed in Baltimore, sent different ads -- all during the same commercial break on specific cable networks -- to different groups of households, all based on demographic data and a particular advertiser's desired audience. About 60,000 households were reached, and Walgreen's and Walmart, two SMG clients, took part in the trial.
The parties determined that viewers who see ads directed to a specific group of households were less likely to change channels. Homes that received these addressable ads tuned away 32% less than homes that saw a normal group of commercials. The parties also say that sending ads only to relevant groups of consumers is 65% more efficient in terms of eliminating undesirable audience than sending ads en masse, citing their analysis of costs for purchasing both addressable and non-addressable ad inventory.
The Baltimore test follows one Comcast and SMG conducted that began in Huntsville, Ala. In that trial, homes receiving addressable advertising tuned away 38% less of the time available than homes that received non-addressable advertising. Comcast and SMG say the test also demonstrated that sending ads only to relevant groups was 56% more efficient than sending regular ads out to the whole population, based on the costs per spot for addressable and non-addressable ads.
The trials have helped their backers learn a great deal of information about making the ads palatable to consumers. In order to get viewers to respond, said Andrew Ward, VP-president of strategic initiatives, Comcast Spotlight, "You need to have a well-defined segment of audience and you need a creative unit that matches up to that well-defined segment." With consumers concerned about privacy -- after all, set-top box data and location-based demographic information play a role in this technology -- Comcast notified all consumers in the trial area in advance and offered multiple ways to opt out, including mailing a form in a self-addressed, stamped envelope; calling a dedicated, toll-free hotline; or completing an online form.
When it comes to consumer privacy, "we need to proceed cautiously," Mr. Ward said, adding that approximately 6% of subscribers in Baltimore notified of the trial asked to opt out of it.
And while addressable ads can be used by say, Ford, to reach a person when they are in the market for a car, it's not actually being done yet. "The technology is designed to be able to overlay any database, proprietary or public, onto a market and target accordingly, much in the same way as it's done by direct-mail advertisers," said Mr. Kubin. "So if a database lists households whose auto leases will expire in the next six months, automotive advertisers can target those. But remember, and this is very important, that this capability is not currently being deployed anywhere."
Nor is another widely discussed capability of addressable ads yet being employed: the ability to target spots to individual household members. "The technology is designed to 'infer' or 'guess' who is interacting with an individual set-top box. These inferences can then be used to send the appropriate TV spots to each set-top box," said Mr. Kubin. "So if a male is watching football in the living room and a female is watching the same game in the bedroom, and the inference engine does its job properly, the male will see a truck ad while the woman will see one for perfume."
Addressable ads are becoming all the more important to advertisers as web and mobile technologies become easier to for marketers to track from initial push to an actual purchase. "We do need to get smarter about how we use TV, because, at least for me, it is still the majority of my media spend," said Jeanne Hanahan, senior media director at Mattel. "There's an awful lot of room for us to get better at how we spend that money. Addressable is very attractive to me. If I can specifically get to households with moms with children, that's a huge win."
Costs and savings
Advertisers are starting to come up with ways to solve some of the issues raised by this new technology. Ms. Hanahan believes addressable ads may require marketers to pay a premium, but thinks there could still be a cost savings as advertisers spend less overall, knowing their commercials are reaching more likely purchasers of their goods. She also sees a need for increased production; advertisers will likely have to create a range of spots for the different audiences they will be pitching.
Look for addressable-advertising proponents to work with bigger swaths of consumers and larger content distributors in the days ahead, as well as talk to TV networks about what sort of business will form around this new format. "Once we cover that base, I think you'll see a more rapid deployment," said Comcast's Mr. Ward.
Another factor at play: Comcast's coming purchase of a majority stake in NBC Universal. Owning both a means of distributing the addressable ads as well as the networks that would run them could "accelerate rapidly" the ability to deploy them, Mr. Ward said. But the deal faces months of regulatory approval. Until the deal's completion, he added, the focus will likely be on making certain the technology's functions and getting consumers to accept it.