Targeted advertising trial to make local TV advertising more attractive, affordable

Cogeco Cable Inc.’s new trial for targeted ads will make television advertising more attractive and affordable for local businesses, Tom McCutcheon, the company’s vice-president of product development and project planning, said in an interview. “How many small businesses in your footprint don’t advertise with you today? Lots. They can’t afford it,” McCutcheon said. “The local aspect of this makes it very exciting for smaller broadcasters.” Cogeco announced Monday that it reached an agreement with Invidi Technologies Corp. and independent broadcaster Channel Zero Inc. to launch a trial of a targeted, advanced advertising system. Set for launch next year, the system will be trialed on Channel Zero’s over-the-air station CHCH. The system works only on digital cable (not over-the-air), and will reach CHCH viewers in the Golden Horseshoe area around Toronto and south-central Ontario who access the channel through Cogeco digital cable. The system’s technology platform, called Advatar, is provided by Invidi, and allows for geographically targeted advertising based on Cogeco’s subscriber information, and demographically targeted ads based on publicly available data gleaned from census reports or surveys. Under the system, CHCH viewers in two different locations who are watching the same program could see different, targeted ads. Although the Cogeco trial begins next year, it will not immediately be available to all potential viewers. But in an interview, Channel Zero president Cal Millar said the plan is to eventually make the system available to all of Cogeco’s roughly 200,000 digital cable subscribers in the region. McCutcheon said that local, targeted advertising will be sold at a discount because it will not reach as many viewers. Still, the value of that targeted advertising will be high for local businesses. “I think it really changes how advertisers and companies look at their media buys. Really, they want to reach that family. They don’t care what show they’re watching,” McCutcheon said. Collectively, targeted ad buys are expected to produce handsome revenues for the broadcaster and the distributor. “Instead of selling it once, you sell it at a discount many times, and the collective value of that spot has increased,” McCutcheon said. Major advertisers, he added, can pay a premium for a regional ad buy that offers targeted geographic or demographic ads. A car company, for example, could run a series of targeted ads. “You might buy the same ad on CHCH, but the minivan ad goes to the areas that have families with a certain income, and the pickup truck goes to other areas that are more rural,” he said. Consumers will also benefit, he said, because they prefer advertising that speaks to them. Although the system is a trial, McCutcheon said it has important implications for specialty channels and niche television services because television advertising could become highly targeted. Targeted advertising is seen as a potential solution to audience fragmentation and declining advertising revenues for local, over-the-air broadcasting stations—a problem that has led to bitter “fee for carriage” debates in recent years. McCutcheon said the Cogeco and CHCH advertising trial has brought a distributor and independent broadcaster together to work “side by side.” “We’re very excited about this because it’s a creative, market-based solution to a serious issue,” McCutcheon said. “It actually puts broadcasters and cable operators in a true partnership to solve it.” Millar said CHCH hasn’t had problems with advertising revenues, but the system will allow Cogeco to deliver ads and open opportunities for the local broadcaster to sell local spots. He said advertisers are already expressing interest. “As soon as the announcement went out, our sales force started phone calls,” Millar said. “We’ve got a sales force of 15 people selling local ads, so we’ve got the bases covered with local agencies and local advertisers directly.” McCutcheon said after the trial determines the value of the advertising system, the parties will look at how to share the revenues between CHCH, Cogeco and Invidi. He said he is not aware of any similar plans for targeted advertising from competitors, but said he encourages all carriers to explore the technology. “It’s really going to revolutionize TV advertising and improve the prospects of the Canadian broadcasting system. General adoption across the country would be great,” McCutcheon said. It’s expected that Invidi will be in discussion with other providers about its addressable advertising technology. McCutcheon said Cogeco began meeting with Invidi about launching the trial about a year ago. Cogeco then approached Channel Zero about the plan, largely because the broadcaster’s CHCH footprint matched Cogeco’s. “I think it’s a way for broadcasters to sort of keep pace and compete with video on the Internet,” Bob Reaume, vice-president of policy and research at the Association of Canadian Advertisers, said in an interview. He added that he hopes to see other television distributors and broadcasters reach deals to operate similar systems. “It’s a much more efficient use of their audience. I think advertisers will embrace it.” Advanced advertising models are also being developed in the United States. Companies have looked at models to run “pre-roll” targeted advertisements on video-on-demand services. John Lawford, legal counsel at the Public Interest Advocacy Centre in Ottawa, said in a previous interview that there are privacy concerns when companies cross-reference data for the purpose of targeted advertising. sdoyle@thewirereport.ca

Targeted advertising trial to make local TV advertising more attractive, affordable

Broadcast | December 9, 2010

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