‘Advanced advertising’ poised to generate new revenue streams for cable and DTH

Proponents of “advanced advertising” say the new technology has the potential to generate significant advertising revenue and “staunch the bleeding” for cable and satellite operators. Targeted advertising technology—what the industry calls “advanced” or “addressable” advertising—allows multiple system operators (MSOs) to use subscriber-related data to engage in targeted television advertising locally and demographically. Rick Mallon, VP product management at Sigma Systems, said in phone interview that if General Motors wanted to advertise on television for the Super Bowl, they could create targeted ads geared towards families. Those ads could then be further targeted to specific communities, with a banner running across the bottom showing the nearest dealership. MSOs would charge advertisers a premium for the service. “They want to staunch the bleeding,” he said, referring to declining ad revenues. “Not only can you target families you can also target local at the same time,” Mallon said. “What has to happen is all the MSOs across the country—Bell, Shaw, Rogers, Videotron, etc.—need to put in this architecture. They’ll be able to identify who’s watching what show and the demographics of the subscribers.” It’s not clear when advanced advertising will be rolled out in Canada, but major MSOs are experimenting with the technology in trial throughout the United States. Sigma Systems, an IP services company in Toronto, has partnered with ARRIS, BlackArrow, Cisco, FourthWall Media, Motorola, OpenTV, and This Technology to provide the technology for advanced advertising. The companies participated in an demonstration hosted by Cablelabs on Nov. 12 in Louisville, CO. Paul Delzio, director of business development at ARRIS, said in an interview that Shaw Cable has expressed interest in deploying advanced advertising for use with its video on demand (VOD) services. “Ninety per cent of all VOD usage is free, but it’s not free to run that infrastructure or get that programming, so I think they want to try to monetize that,” Delzio said. “I think that’d be a good reason why VOD would be a first start.” Delzio said he recently calculated a model for a company running one “pre-roll” ad on VODs, with each subscriber viewing five VODs per month. The advertising revenue alone paid for the VOD and the advanced advertising costs, including an upgrade, in 14 months. He said he expects American MSOs to start “writing checks” for the service next year. Last year, the largest six American MSOs formed Project Canoe, an alliance that aims to sell national, targeted advertising across all cable systems. Demographic subscriber data are drawn from companies such as the Neilson Company. These data are cross-referenced with basic subscriber information gleaned from MSOs’ billing systems. “We look at the postal code, we look at the address,” Mallon said. “You can get very, very close to the household level.” Delzio added: “We can very precisely place ads that are relevant to the geography, the programming, the income group, which you couldn’t do in the past.” Mallon said advanced advertising would encourage more VOD in place of personal video recorders (PVRs). He said he believes PVRs are cumbersome and that when advertising is done well and properly targeted, viewers want to watch it. “If I get more beer ads, I’ll probably be pretty happy with that,” he said. Technology is also being developed to allow viewers to use their remote controls to vote during television programs like So You Think You Can Dance and American Idol. When viewers start interacting with their televisions, it creates the potential for further advertising—through interactions such as requests for information, downloading a brochure, or watching a short video. John Lawford, legal counsel at the Public Interest Advocacy Centre in Ottawa, said stronger privacy laws in Canada have probably slowed a national rollout of advanced advertising north of the border, particularly concerning the cross-referencing of data. Mallon said that, for the time being, subscriber-related data collected for the services do not include “behavioural” viewing such as show or channel preferences gleaned from set-top boxes. “That’s where you start to get into privacy concerns,” Mallon said. “It starts to feel icky, and I’d have a lot of concerns and questions about it. Although the technology is there, I don’t think it’s going to be used for a while.” However, more advanced systems could be rolled out in a second phase, he said. When the technology is rolled out nationally in the U.S., consumers will be given the choice to opt-out of advanced advertising, he said.

‘Advanced advertising’ poised to generate new revenue streams for cable and DTH

Broadcast | December 16, 2009

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