The potential for marketers to communicate specific offers and brand messages to coveted target audiences has never been greater, thanks to a raft of technology providers helping to drive the nascent category. But such talk has been swirling for more than two years.
Finally, ACTV and partner AT&T Broadband are ready to begin an addressable advertising trial, marking the first time the technology will be tested on a widespread basis. SpotOn software will be installed in the digital set-top boxes of about 42,000 AT&T Broadband customers' homes in Aurora, Colo.
The goal of the test is to provide consumers with specifically relevant advertising and to gauge their reactions.
"We want to know if the technology will work," says Marc Favaro, VP-national ad sales for AT&T Broadband. "We want to know if we can deliver an addressable ad to a consumer ... what advertisers think about it, how much will advertisers pay for it and how they will integrate it into their media methodologies."
ACTV and AT&T have not yet announced advertisers participating in the test, but both companies have been in talks with a diverse slate of marketers such as Campbell Soup Co., Delta Air Lines, Ford Motor Co., General Motors Corp., Johnson & Johnson, Kraft Foods and Procter & Gamble Co.
The two companies also have reached out to media agency executives who are helping clients navigate the complex world of addressable advertising.
AT&T expects marketers initially to use ACTV's SpotOn for delivering fairly simple offers plus options to receive more information about products and services.
For example, an advertiser like Ford could choose to overlay advertising content on programming. A consumer about to see a Ford commercial would first see a question such as: "Which ad do you want to see?" at the bottom of the TV screen, along with choices for specific models such as the Focus or Taurus. Viewers would make their selections via their remote controls.
With SpotOn, marketers can target ads to individual households; customize a TV spot's audio, video and graphics; allow viewers to choose spots that interest them; or request information about products, promotions and sweepstakes.
Once the viewers' preferences are fed into the set-top box, cable operators receive reports that are then sent on to advertisers to shape their marketing efforts. Viewers must specifically opt in for any personal information to leave the viewing household. SpotOn services to advertisers include data management, routing, tracking and metering, in part with Nielsen Media Research. Nielsen will work with ACTV to develop systems that can be used to measure a new generation of digital services from ACTV.
SEAMLESS TO VIEWER
Analysts and other industry observers say ACTV's SpotOn addressable advertising technology has the advantage of being seamless to the viewer rather than functioning as an onscreen graphic overlay.
An overlay can come in the form of an enhanced TV logo appearing on the bottom of network and cable programming. The Wink Communications icon is one such example of an overlay solution in which programming is tagged to alert viewers to the option of clicking, via remote control, for more information.
"The SpotOn addressable advertising product is a relevant, powerful proposition that improves the [return on investment] for advertisers and gives them accountability," says Spencer Wang, director and equity analyst at ING Barings.
"They [ACTV] have the right approach to the business on many different levels ... a strong management team, intellectual property ... we also like the fact that the SpotOn product uses full-motion video," Mr. Wang says. The product's flexibility also allows marketers to incorporate interactive features that go beyond opt-in methods.
Mr. Wang says the SpotOn trial is significant for the interactive TV space. "It's meaningful because it's a real deployment, it's gone from a technology idea/solution to something that can be measured out in the field."
ACTV, at press time, was close to signing other cable operators to SpotOn trials, but company executives declined to confirm those providers.
Agency media executives say their clients are showing interest in the trial.
"Addressable TV advertising is a terrific win-win for both the advertiser and the seller [the cable operator]," says David Adelman, senior VP-convergence media at Digital Edge, the New York-based unit of WPP Group's Young & Rubicam.
"Just like in selective binding for print," he says, "you have an advertiser that pays a premium for the audience that is exclusively the audience I want to talk to ... I'm paying a premium, but on a pure target [cost per thousand] standpoint, I'm paying less."
As with any new ad technology, SpotOn will need to deliver the eyeballs. Addressable advertising poses challenges even if it ultimately will make ad spending more accountable.
Marketers can expect to pay at least $50,000 to participate in trials such as the Colorado effort. The fee entitles the advertiser to a certain number of impressions. However, it remains to be seen whether the CPM model will work in the emerging new-media landscape.
Still, marketers and media executives are excited at the prospect of trying something new. Mr. Adelman maintains that addressable advertising delivered via broadcast-quality video will allow advertisers to deploy media tactically, rotating offers more frequently while creating unusual and entertaining message sequences.
Other media executives say clients are eager to try addressable advertising, but wonder how long it will be before a mass rollout of the technology takes place.
Industry experts don't expect significant deployment until late 2002. Much depends on how quickly advanced digital set-top boxes are built and distributed throughout the nation's cable TV systems.
Marketers will need to confront internal systems challenges in order to accommodate new advertising models. "They all get it; the question is how fast can they do it," says Art Cohen, ACTV senior VP-advertising and chairman of the Addressable Media Coalition. "It's enterprise-altering."
Plans for subsequent phases of the SpotOn trial include adding interaction between viewers and advertisers and the ability to handle product, coupon and information requests.
These will all require companies to rethink their marketing goals and the balance between brand- and promotional-oriented advertising.
"I think ultimately, the killer application is going to be the integration of direct marketing and list data into the distribution of advertising messages to individual households," Mr. Adelman says. "The power of database marketing combining with TV ... that's really awesome."