Why NBC Is OK Having Google Sell Cable TV Ads

History in the Making? Peacock Sees Potential in Outsourcing Some Sales

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NEW YORK (AdAge.com) -- It's one of those deals that might one day be marked on a timeline of historic moments in the TV industry.

With NBC Universal's alliance with Google, the Peacock appears to have let the fox into the henhouse. In inking the pact, one of the nation's best-known media brands and a giant of the broadcast and cable worlds has decided to allow a third party to sell some of its ad inventory -- and not just any third party, either. This is Google, which -- despite its repeated demonstrations that it's a technology company that can help monetize other companies' ad space and time -- is still perceived as a huge threat by many in media.

Mike Pilot, NBC Universal's president-sales and marketing

Five years ago, such a deal was more or less unthinkable, and even today networks tend to resist any kind of situation where an independent company gets to broker its ad deals. Several attempts to start an electronic ad-sales auction with eBay lacked the support of major players; the thought was that such a system could undermine a network's own sales process. Indeed, the issue of control is so touchy that NBC's rival broadcast networks were reluctant to even offer comment for this story.

But the fact remains that this represents the first time Google or anyone else has managed to eke out even a small commitment from one of the big guys. That's a victory for the crew from Mountain View, even if the deal is only for the cable TV networks at this time. But with the TV business beset by new technology, trying to zig where others zag might be as good a strategy as any.

"Although the amount of national inventory is likely to be small and relatively unattractive -- mostly nonprime and inventory sold to direct-response advertisers (infomercials) -- if Google can sell the inventory more effectively and cost-efficiently than the current sales force efforts, we believe that it could set an important precedent that other cable networks may follow," wrote Bernstein Research analyst Michael Nathanson in a Sept. 9 research note.

Possible precursor
So what persuaded NBC Universal to make this deal now? For one thing, it gives the company access to new viewer research and, potentially, a broader array of advertisers. The media company has demonstrated a proclivity for testing new ideas even as it broadens its cable holdings and tries to reignite its flagging broadcast network. And the Google test could help NBC Universal blow the dust off the slow-to-modernize world of TV ad sales, which isn't keeping pace with how technology is changing media.

"This is just a continuing effort to try to find ways to take the transactional burden out of the mix, so that we can, all of us, focus on making advertising more effective for our clients," said Mike Pilot, NBC Universal's president-sales and marketing. "That's what they care about at the end of the day."

In this case, NBC Universal has recognized that not all ad time is equal. Rather than simply buying a flight of 30-second spots, marketers increasingly are seeking broader promotional ideas that surround a piece of content, including weaving products into shows, creating customized ads that reflect that placement and devising digital components viewers can spend time with when they aren't watching TV.

"The marketplace over time is going to evolve into multiple models," said Pam Zucker, who monitors emerging ad formats and technologies as exec VP-marketplace ignition at Publicis Groupe's MediaVest. "The auction model will serve a role for a certain type of inventory at the bottom tier of the market, and the top tier of the market is about customized solutions that demand personal interaction."

Understanding that different categories of advertisers need different kinds of ad inventory -- and that each transaction requires a specific sales process -- is Mr. Pilot's strong suit. Before arriving at NBC, he made his mark at GE Commercial Finance's Equipment Finance Group. As a September 2005 profile in the Harvard Business Review demonstrated, he used statistical analysis of potential clients to determine which would be the best prospects and grew assets and net income. Earlier this year, under his aegis, NBC Universal established a relationship with NextMedium, a company that identifies and markets product-placement opportunities.

"It would be irresponsible not to experiment with these ways to try to employ some of these new technologies to take the burden away from the human beings in the process so they can devote their time and talent to value-creating advertising," Mr. Pilot said.

Data access
Opening some ad inventory to Google's system also gives NBC Universal access to second-by-second viewer data Google obtains via its relationship with EchoStar Communications' Dish satellite-TV network. NBC Universal and Google intend to collaborate on custom marketing and research projects using Google's TV-advertising initiative.

NBC Universal and Google's strategic partnership gives the search-advertising giant access to TV-ad inventory on NBC cable channels Sci-Fi, Oxygen, MSNBC, CNBC, Sleuth and Chiller, with potential to expand to NBC properties in the future. The deal, which NBC Universal views as an experiment, gives Google's effort to broker TV advertising a broad new platform and allows NBC to see if it can attract new kinds of advertisers, including local players that use Google's search advertising as well as web-based marketers that may be looking to use TV advertising to build brands.

Under the terms of the three-year deal, NBC sets a floor for pricing, as well as standards of quality, and has control over its inventory, so that if a Google TV ad were to pose a conflict with another advertiser on air, the Google ad would have to run in a different fashion.

The alliance has its limitations, media buyers caution. They say NBC Universal won't be making its best inventory available via Google and they see the system luring in a narrower band of clients. "It's very labor intensive, and you don't have control over the right mix of networks. You don't know what bids are going to be accepted," said Rino Scanzoni, chief investment officer at WPP's Group M.

Attracting Google's buyers
Online retailers with national distribution may turn to the Google system, but "you're not going to see a flood of local small businesses purchasing time from the cable networks via this system," said Chris Geraci, managing director-national broadcast Omnicom Group's OMD, who is familiar with the Google system and views it as a useful tool. "Perhaps this is a way for them to monetize some area of their networks with regard to the kind of advertising" that hasn't sold well in other ways, "and perhaps advertisers that have relationships with Google are going to be attracted by this."

Google has for some time experimented with the sale of TV advertising, particularly on the Dish Network. Google acts as a middleman of sorts, helping advertisers upload video advertising so that it can be played on networks that the marketer picks.

The concept, if successful in a more widespread fashion, could lead to giving advertisers a greater ability to customize their ad plans, and select media outlets based on more precise data that are a better indicator of a consumer's willingness to receive that message.
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