The TV Issue

Promise Is Great but Growth Is Slow for Targeted TV Ads

Hurdles Such as Tech Issues, Privacy, Lack of Urgency Combine to Stifle Broad Adoption of Addressable Advertising Concepts

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For an automaker like BMW, which makes a range of cars designed for an obvious range of consumers, it had always made perfect sense to advertise specific vehicles to the intended drivers: its much-vaunted 7-series to the deep-pocketed; the entry-level 3-series to young professionals; and the 5-series to the eternally aspiring.

A promotion for 'Black Gold' used 'telescoping ads' to offer viewers additional content.
A promotion for 'Black Gold' used 'telescoping ads' to offer viewers additional content. Credit: Jeremy Freeman

But that kind of targeting has always been hard to do on TV, where the most popular shows usually attract large swaths of the middle class. Now imagine if, in a single 30-second commercial break, BMW could show ads for each of its cars tailored to the target customers based on their income.

That kind of targeting is a reality today, but widespread adoption for addressable and other kinds of advanced TV concepts remains elusive, hobbled by technological and cultural barriers.

For years, TV executives and advertisers have looked for ways to incorporate new technologies into the 30-second spot. Whether inspired or egged on by the measurability and interactivity of internet ads, a number of formats for TV have emerged, including "addressability," where, as in the above example, a number of different ads can target different households in the same 30-second timeframe; "requests for information," where people can request a brochure about a product advertised directly from the spot; and "telescoping," where viewers can click off a commercial onto an extended clip.

Despite the promises of these new formats, they've faced a number of hurdles. Advertisers, media buyers and agencies still see them as unproven products, and it's not entirely clear if enough of them will bother getting in the game. Some think TV's success has begotten a lack of urgency to change. TV continues to dominate media, with more people watching the medium than ever before, averaging 35 hours per week in early 2010, up from 33 hours a week the year before, according to Nielsen. Despite the emergence of digital video recording and web-enabled TV, people haven't lost their appetite for good, old-fashioned TV viewing. Advertisers are estimated to spend $60.5 billion on commercials this year, according to eMarketer.

The major technological hurdle to addressable advertising is the difference in underlying technologies from each cable company. Advertisers that want to reach a national footprint would have to work with each provider separately to install their commercials. DirectTV and Dish are the only operators at the moment who can reach a national audience.

Those operators have taken advantage of their audience and offered other interactive ad strategies beyond addressable advertising. Mary Corigliano, who heads brand strategy at reality-TV network TruTV, recently worked with both providers on "telescoping ads" when she was looking to promote "Black Gold," a 2008 show about a group of Texas oil-riggers attempting to track down new caches of oil.

She found she could stretch out 30 seconds of ad time into two minutes of content time by telling viewers they could watch preview clips of the show by clicking off the commercial onto another channel. "It gave us a bigger creative canvas," she said. In some ways, it was not unlike an internet banner ad leading viewers to another site. But unlike those ads, which are seen as a nuisance with fewer and fewer people bothering to notice -- let alone mouse through -- Ms. Corigliano discovered that TV viewers were not as reluctant to click their remotes and watch a two-minute segment of the show. "A lot of people watched it and interacted with it," she said. "It was very successful."

David Kline
David Kline

David Kline, president of Cablevision's advertising-sales division, said interactive advertising in general and addressable ads in particular are still the future of TV, despite their slow adoption. "It's where we're all headed," he said. "Thirty-second ads are having a rebirth because of all this."

The Long Island, N.Y., company, which reaches 3 million households, has perhaps been the most aggressive about applying the latest technology to commercials. The cable company recently inked a deal with five different advertisers through media-buying conglomerate Group M to run all five ads within one 30-second break across 25 different cable networks. It was a significant move for a relatively small player within the cable firmament and it has gotten the attention of key buyers.

"The fact that major advertisers are now using these advanced targeting capabilities signifies a seminal shift toward broader adoption," Group M CEO Irwin Gotlieb said in a statement.

While that broad adoption has yet to really emerge, media buyers see addressable ads as a way to eschew what has long been an unspoken gripe about TV advertising.

"We think it is the future because it helps to reduce waste," said Mike Bologna, who heads up emerging media at Group M. "On TV today, the ads go to everyone we want but it also goes to everybody we don't want. Addressable gets us to the people we want to reach without waste." The ability to target ads to people can also bring in more ad revenue. While people in the industry would not reveal exact figures, advertisers are paying a premium cost-per-thousand price for targeted ads, Mr. Kline said.

Still, some executives aren't so quick to adopt targeted TV commercials for concerns over privacy, an issue that has recently rankled the digital ad community. Congress and the Obama administration have moved to enact a privacy law that would prevent marketers from targeting ads to consumers online.

"We're trying to find the balance between emerging privacy rules, business models, and technology deployment," said Kevin Smith, Comcast's head of media sales, adding that the cable company has been testing addressable ads in limited form, reaching more blunt groups of households than the narrow segments Cablevision is slicing.

Craig Woerz, managing partner at agency Media Storm, agreed privacy issues has hurt wide adoption among advertisers, but the results are appealing. "We've been doing them for seven years for Dish and with DirectTV, and when we can see 30% to 40% more ad recall, I don't understand why people don't just ride off on that," he said. What's more, he believes that agencies that remain wary of the technology could be cut out of the equation. "Sellers are cutting agencies out of the business and signing multi-year deals directly to the advertiser," he said. "These ads are worth the premium because they're trackable and [have] strong ROI potential."

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