John Wanamaker would certainly be relieved. When (not if) addressable TV comes to Canada, advertisers will finally be able to determine which half of their advertising budget is being wasted by combining direct advertising-type targeting with the interactivity of the internet and the reach and engagement of TV.
“It’s a game changer,” says Mark Sherman, president of Montreal-based Media Experts, who knows a bit about advanced TV technologies and their implications. He experimented in the space with now-defunct Quebec-based interactive advertising-on-demand network Etc.tv, which he helped launch back in 2004. “Once you have the ability to send a particular message to a particular household, by virtue of that being addressable it also becomes countable and accountable in a digital way and you have a whole new census-based ratings infrastructure. That’s a very important transformation of our business.”
Addressable TV stands to turn the sample-based ratings system on its head. The old system’s reliability falls apart the more granular you get and thus projections are not as accurate as census-based measurement, which addressability is poised to usher in: you will actually achieve a rating for segmented households.
“The most important part of this space is moving from sample-based measurements to truth, and then the analytics and understanding that come out of that data will make advertising more precise, powerful and accountable, and will bring strength to the television ecosystem,” says Sherman. “There is a notion that in an addressable television landscape you’ll be able to deliver a cat food ad to a household with cats and this is attractive to every advertiser and every media buyer.”
Don’t scoff. Yes, you’ve heard the promise of addressable TV before. You’ve even seen some false starts. But this isn’t hearsay. It is coming. In Canada, Cogeco is the first cable operator set to tinker with addressability at a household level. It will be initiating a trial run of targeted advertising software using the Advatar system, developed by New York-based Invidi Technologies, on the CHCH network in South-Central Ontario come late summer/early fall. Advertisers will be able to serve individual households relevant advertising based on public domain demographics information.
In the U.S. addressable advertising is a little farther along. Visible World, another New York-based targeted TV advertising company, has been serving addressable ads at the cable zone level since 2004. It’s grown to achieve a footprint that covers 55 million homes across the country thanks to partnerships with seven of the 10 largest American cable operators, including Comcast, Time Warner and Cablevision. Last year the company ran close to 15,000 zone-addressable campaigns on behalf of approximately 170 advertisers. In the U.S. there are 2,300 cable zones within 210 designated marketing areas. Targeting at the zone level is obviously not as granular as it is at the household level, so ads served tend to communicate information tied to geography, time zone or cable operator.
Household-level addressability is still in the trial phase. Visible World currently works with Cablevision, serving addressable ads to its entire footprint (spanning the greater New York area), which adds up to about three million homes. The trial run started in 2009 with Cablevision employee households; now three million homes with TV set top boxes (STB) are outfitted with code that acts as a dynamic identifier of the profiles associated with the STB. The profiles are determined using a model akin to traditional direct marketing. The subscriber database is provided to a third-party aggregator, a company like Experian, which matches it up against consumer data collected from a number of sources, then the aggregator strips out the personally identifiable information.
The result is a list of attributes to define segments like customers and prospects, including sub-segments like customers with product A, product B, or A and B, or senior households, households with kids, high-income or low-income households. A telco brand, for example, can develop a campaign that sends commercials with business-related offers directly to houses of business owners versus promotions surrounding texting plans to houses with teens. The metrics that come back from such hyper-targeted efforts can provide valuable insights.
“The importance is that [the metrics] give you insights that are not available through other means,” says Claudio Marcus, EVP, Visible World. “The granularity of the scale that the deployment yields is such that it helps you refine the strategy, creative development as well as the media strategy and the media planning.”
Consider a campaign executed by Cablevision and Visible World on behalf of the U.S. Army. Two core segments were targeted: potential recruits and influencers like teachers, or family members. The subsets beneath included different ethnicities, and households were targeted based on those segmentations. Given the scale of Cablevision’s footprint, the Army was also able to create control groups along with its target groups, so an ad for African Americans went to a Caucasian control group and vice versa.
A metric that Visible World gets back from household addressable campaigns called “tune away” enabled the Army to determine that the African American target tuned in more to ads geared towards Caucasians focused on leadership and patriotism, as opposed to ads geared towards them, which highlighted the economic benefits of signing up. The Army also discovered that lower-income Caucasian families were less swayed by Uncle Sam messaging than the economic benefits of joining up.
Marcus says that “tune away” also allows for a better understanding of reach and frequency.
“STB data lets you calculate, using real data, what the actual reach is, what the actual frequency is, what the effective reach is (reach for a certain amount of frequency) and that’s the real reach, the real frequency. It’s not based on a formula or an assumption, it’s based on doing the analysis against the households that actually saw it.”
Visible World is in discussions with the other major North American cable operators, including Rogers in Canada, to further deploy household addressability. Marcus expects it to surpass 10 million homes in the next 18 to 24 months.
“There’s a very high level of interest now because of the success that Cablevision has had. On the ad sales side, the CPMs that Cablevision is getting for addressable television are roughly two to three times the CPMs they used to get for their local ads,” says Marcus. “On the marketing side [household addressability] has had a huge impact in terms of using the inventory far more efficiently, but it also has been more effective, meaning that the ability to send the right ad to the right household actually results in higher incidence of sales.”
For advertisers, scale is needed for uptake. Luckily, the conditions for widespread household addressability couldn’t be better. There are more digital cable subscribers now than in the past, meaning more houses outfitted with STBs. The industry is resolved to standardize STBs for addressable application developers via its Electronic Binary Interchange Format (EBIF). In Canada, Rogers has signed on for this, and there are over 245 million EBIF-deployed homes in the U.S. Most importantly, the cost of bandwidth is down thanks to Switch Digital Video/User Resource Management, which ensures that bandwidth is allocated on an on-demand basis.
The single largest barrier to widespread household addressability and the advancement of television in general is the historical discord between cable operators and networks.
For addressability to work, a new business model is needed. With cable operators having the ability to manage only local ad inventory, it’s difficult to see how all parties could profit without one. In Canada the relationship between broadcasters and operators has changed and we’re well poised to take household addressability to a national scale. That’s thanks to the merger of operators like Bell and Shaw with CTV and Global respectively. For the first time in Canadian television history there is a substantial amount of programming inventory that’s common to an operator and programmer. The same thing is only starting to happen south of the border with the recent merger of Comcast and NBC Universal, which has sparked scale there.
“The question that remains unanswered is whether [household addressability is] in fact, attractive to broadcasters and whether it’s attractive enough, from a financial point of view, to be able to generate the incremental revenue to also satisfy their distribution partners,” says Sherman. “That’s because in order to realize this dream of addressable advertising you need a partnership between the operators and the broadcasters, which hitherto was difficult to achieve. In Canada we now have this new potential, but it needs to offer return on investment to the operators and to the programmers.”
“What’s interesting about that is that you can enable addressability not just on the ad inventory that’s managed by the cable operators, but you can actually enable it for the inventory that’s managed by the network as well,” says Marcus. “So, in the Canadian media ecosystem the [potential] benefit is that it could be deployed across both national and local inventory.”
Marcus adds that the second opportunity for Canada is the ability to better manage the language divide.
Despite the mergers between operators and broadcasters, a firm model for mutually assured profitability between them still needs to be figured out. But Canada is in a great position to do it.
“Throughout North America broadcasters and operators have an uncomfortable marriage, a cold peace,” says Sherman. “That’s been an obstacle for them figuring out advanced television schemes that would be great for advertisers and for the television ecosystem. It’s difficult for them to sit at a table and collaborate. That’s essentially over in Canada. Now programmer operators have common objectives, so there’s this tremendously fertile ground that offers the ability for Canadians to take the lead in advanced television.”
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