LOS ANGELES (AdAge.com) -- Addressable TV ads have been held up as the holy grail ever since the internet boom of the late 1990s -- "delivering dog-food ads to dog-food owners" as Canoe Ventures CEO David Verklin famously put it. But the progress has been slow at best.
A series of high-profile trials in markets such as New York City, Baltimore and Huntsville, Ala. has helped the cable industry prep 2010 to become the first year addressable advertising could be ready for prime time. But a vast majority of the media industry is either unprepared for or unaware of addressable advertising's potential. A recent study polling 1,400 media executives, conducted by Ad Age with Visible World and Cablevision, found that 70% of respondents were either somewhat or not familiar with the concept of TV addressability.
How does addressable advertising work?
Two types of addressable technologies are available: zone addressability and household. Zone refers to a group of ZIP codes or neighborhoods that can often be bundled demographically, so a marketer can target a predominantly upper-income neighborhood or a predominantly Spanish-speaking area. Household addressability can target TV viewers based on specific data ranging from age to sex to current ownership of consumer goods. Ad Age, Visible World and Cablevision's poll found over 59% of respondents considered addressable advertising to be at least 50% more effective than a non-targeted campaign.
Cablevision recently advertised its triple-play subscription packages in New York with household addressable ads that targeted customers based on current subscriptions. Households that subscribed only to phone packages received ads offering a package that included cable, while cable-only households were offered a package that included phone and high-speed data services. David Kline, president-Rainbow Advertising Sales Corp., said the company saw a double-digit lift in subscriptions among the targeted households. Cablevison's recently launched Optimum Select allows viewers to interact with an ad to request information or request a product sample, "We've seen really phenomenal response from consumers in our first month," Mr. Kline said. "We often run out of product."
What is addressable advertising's current household footprint?
Many cable and satellite operators have declined to share their specific offerings publicly, but Visible World expects to have zone addressability enabled in 88% of the cable household footprint next year. Cablevision is selling addressable ads in 500,000 of its cable households, primarily in the New York metropolitan area, with plans to roll out the technology across its entire 3 million U.S. household footprint in mid-2010. Comcast has rolled out tests in Huntsville, Ala., and Baltimore, and has made expanding its addressability-enabled markets one of its top priorities for 2010. Other operators running addressable tests include Oceanic Cable and Charter.
Which advertisers and agencies are using it?
Starcom MediaVest Group is spearheading the Comcast trials in Huntsville and Baltimore with clients that include General Motors, Discover Card, Hallmark, Kraft Foods, Mars, Miller Brewing Company and Procter & Gamble. Cablevision has signed up Unilever, P&G's Gillette, New York retailer Century 21 and Benjamin Moore paints as launch sponsors of its Optimum Select product. Other agencies actively involved in the technology include Universal McCann and Bolt, a newly launched division of independent agency Media Storm exclusively dedicated to finding advanced advertising opportunities for entertainment clients such as Food Network, Rainbow Media and the Academy Awards.
Craig Woerz, Media Storm's co-founder/managing partner, said addressable advertising will be most valuable to the marketers who start testing out the technology now rather than waiting for it to scale. "People are going to trip if they're planning on running," he said. Already, TV networks have been able to use early learnings from trials to help determine programming schedules and where to place media buys, he added.
Which technology companies are invested in addressable advertising?
Canoe Ventures, a cable technology company co-founded by the six largest cable operators, has been heavily involved in creating a universal addressable advertising product, called Community Addressable Messaging, or CAM. The product is eyeing a mid-2010 deployment. Visible World, meanwhile, recently launched a research product called The Conduct, a partnership with Acxiom, Experian and Nielsen, that provides single-source data measurement of target demos and their viewing and purchase behavior.
How are addressable ads priced?
Andrew Ward, VP-strategic alliances for Comcast Spotlight, the cable operator's local advertising sales division, said addressable ads are sold at a premium that is often double the typical TV CPM. "If only half the country is your prospective audience and you have a $20 network CPM, that $20 is really a $40 CPM because half the country is your target audience. If you're able to reduce your overall ad spend but concentrate your [gross rating points] in the minority of the geography that represents the majority of your target audience, you're able to generate a more consistent presence on your communication plan throughout the year."
When will addressable ads become the norm?
Addressability is still years away from coming out of what Canoe Ventures' Mr. Verklin characterized as the industry's "pipe-cleaning phase," but Ad Age's poll suggests that marketplace awareness and readiness for the technology are often at odds with each other. The study found 70% of chief marketing officers and 47% of media buyers wanted easier access to data, while 41% of media buyers and 61% of CMOs wanted more scale from addressability to drive further adoption of the technology.
Advertisers are also looking to take addressability to other platforms. "We're getting requests right now from advertisers asking if we can take the same tool they're using for accessing data to target at a zone or program level to optimize broadband [video]," said Visible World President Tara Walpert Levy. "Next year is when you'll start to see how addressability gets sucked into a more core marketing strategy."
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CORRECTION: An earlier version of this story incorrectly referred to Cablevision's recent advanced advertising test in New York households as an experiment for just its Optimum Cable product. The test included Cablevision's phone and high-speed data products as well, but not wireless as previously reported. The company's test for Optimum Cable included interactive overlays, but not zone addressability.