The opinion

A vision for television advertising – Consumer addressability

As in most industries, there is doomsday talk about television advertising revenues. The informed prediction is that advertising models are disrupted and millions of advertising revenues are going online. What can the television industry do to adapt to this new world of marketing?

The shift of TV advertising to new media makes sense with the number of people now consuming content via the web and spending more time in front of their computers and on mobile devices. But TV advertising today is still much larger than internet advertising. The power and visual impact of television advertising with its massive reach remains a strong proposition for advertisers. Yet marketing spend in digital media keep growing quickly, and doesn’t match consumer behaviour – they’re spending more time on the internet than advertisers are spending in this medium.

Initial fears have been overcome – opportunities are presenting themselves

Much research predicts that internet advertising will have overtaken TV advertising between 2013 and 2015 and also shows that PVR is only a minor threat to the television advertising industry. To counter these threats, the TV industry must ensure that new technologies are adopted to make TV more addressable, interactive and measurable. This is a good start for creating addressable advertising – delivering different ads to a specific demographic within the same ad break to create more relevance.

Today’s television viewer has more control than ever over what they watch,and when and where they watch it. This creates trouble for advertisers having to justify ROI, as viewing audiences become more fragmented, less attentive and more difficult to track.

However, studies have shown that users will still view advertising as long as the ads are relevant to them and their interests. Some cable operators are already beginning to understand how to make the most of PVRs – companies such as BSkyB and Virgin Media are creating ‘smart’ set-top boxes which deliver advertising based on previous viewing, stated preferences or web browsing habits, for instance. The industry (according to a Forrester report from 2008) wants new interactive formats for programmers, networks and advertisers to address these changes.

These very same technology advancements aimed at the consumer are also paving the way for new forms of dynamic advertising capabilities that help advertisers deliver more relevant messages to specific audiences, creating a stronger engagement with their brands.

There are four elements required to make this a success:

• Addressable advertising – Advertising messages can be delivered to individual viewers based on their set-top box profile and interests resulting in a more relevant experience with the advertiser’s brand. An addressable advertising trial carried out by OpenTV with a US cable operator showed a 56% greater efficiency in sending ads only to relevant groups that a given advertiser wanted to reach, based on the per-spot costs of addressable and non-addressable ads. Those homes receiving addressable advertising also stayed tuned 38% more than previously. As television rolls out video on demand (VOD) and PVR technologies, on-demand advertising will grow alongside them. The nature of these technologies makes them ideal for supporting addressable ads.
• Interactive advertising – Viewers can more deeply engage with an advertiser’s brand, transitioning from a traditional 30-second experience into a fully interactive branded experience lasting several minutes at a time. As viewers become more and more on-demand-oriented, they expect more content to be available to them on their terms, including advertising. The 30-second spot of the future may be nothing more than a ‘trailer’ to entice the viewer to participate in the full branded experience.
• Multi-screen approach – Today, television services are not only delivered on the television set – they also reach out to consumer’s mobiles, game consoles and PCs. Advertising must adapt to this new environment and enable the industry to monetise wherever the content is consumed.
• Measurement and accountability – User data is collected and analysed to measure the effectiveness of a particular ad campaign. Audience measurement and reporting are increasingly important to demonstrate the effectiveness of addressability and interactivity, enabling operators to command higher CPMs (cost per thousand ad impressions) from leading blue-chip advertisers. The old advertising maxim holds that half of all money spent on advertising is wasted, but the problem is how to know which half.

To be effective, the audience measurement data needs to be approved by data consumers (market research organisations, media buyers, network operators and programmers). To measure the effectiveness of all forms of digital advertising – broadcast, interactive and telescoping (letting viewers switch to a longer ad or request more information) – the usage data collection system must function during both live and on-demand sessions, as well as navigate through interactive television services. Privacy policies must also be strictly adhered to.

Options for reaching the right audience

There are various addressable advertising methods that can be tailored to different audiences and take into account a viewer’s geographic, demographic and previous viewing habits to ensure that the right message is delivered to the right person at the right time.

To enable this there needs to be a digital infrastructure that offers multiple options for operators to address their consumers.

These include thematic, geographic, home, session and cross platform addressability.

• Thematic addressability – Audio and video compression technologies introduced with digital television have multiplied the number of channels an operator can offer. As a consequence, digital carries increasingly specialised channels that reach very specific audiences. For example, golf ball manufacturers will want to buy airtime on The Golf Channel. This technique offers the advantage that it does not require any modification, either to the digital infrastructure, or to the way ad space is bought today.
• Geographic addressability – As operators reduce the number of households per node, households in these nodes become more homogeneous from a demographic standpoint. Geographic addressability is a specialised form of local advertising insertion, and with networks already equipped for ad insertion there is minimal impact. Unlike home addressability, geographic targeting can even be introduced on analogue channels. On the other hand, the efficiency of geographic targeting is limited, depending on the factors used for targeting. Populations in a node can be rather homogeneous as far as ethnicity and revenue bracket are concerned. Other factors such as age, however, vary greatly in a node. The marketer is trying to reach the group with the largest ROI, typically detectable based on buying patterns and brand attitudes. Because where people live does not predetermine either their buying patterns or brand attitudes, geographic targeting (zones, nodes, or even specific blocks) can never achieve the precision the marketer desires. This is not to say that geographic addressability hasn’t been a step in the right direction.
• Home addressability – In this model, multiple household profiles are offered to advertisers within the same ad slot. For example, within the same slot, one advertiser may buy space to broadcast an ad targeted at young couples expecting children, while another advertiser may buy space on the same slot to reach dog owners. During the slot, the young couple will see one ad while dog owners will see another. Addressable advertising maximises the operators’ revenues for linear advertising, since it can charge higher CPM to reach a more targeted audience. While home addressability is limited to channels in the digital tier due to its requirement for additional bandwidth, it can be used to target homes based on any collectable data, including factors known to vary greatly within a node, such as age and number of children.
• Session addressability – With the broad deployment of session-based delivery – including VOD, addressable, network PVR, and Switched Digital Video – operators have a new category of advertising which is addressed to each session. As with home-addressable advertising, this form of advertising allows targeting based on a wide variety of parameters, such as demographic data, geographic location, usage patterns and other operator- or advertiser-defined criteria. Session-based addressability is fully bandwidth-efficient and enables perfect targeting – there’s no need for a default advertisement for those homes that fall out of the set of demographics, usage patterns, or other criteria being targeted.
• Cross platform advertising – Marketing is less about pushing messages and more about creating an experience with the consumer. Video advertising is now available across many platforms such as traditional analogue and digital television as well as broadband and mobile, and new technology is needed to support these new delivery mechanisms to offer participation television, for instance, where the viewer can interact with live programming across multiple platforms.
• Marketing and mathematics – Advertising is increasingly becoming more complex, and the need for data quality, quantity and accessibility has created a form of marketing mathematics. Set-top box measurement and internet clickstream now provide fine-grain information on consumer behaviour, and yield analysis, or the ability to select an optimal media placement, is becoming increasingly important to allocating advertising budget to the best advertising opportunity. New digital tools, predictive models and behavioural targeting will turn insight into foresight – but measurement tools are needed to go with this.

Standards are starting to emerge to support this new dimension of television advertising. A new architecture for communication and interoperation between the various systems involved in TV advertising is needed, which will completely change what’s been used for the past 20 years. The current 24-hour schedule file and verification logs are now being replaced by web services to provide real-time standardised interfaces.

Moving with the (technological) times

To take advantage of advanced advertising technologies and approaches, ad insertion needs to happen at the most viewer-specific point in the architecture – that has the available storage but also best corresponds to the desired level of targeting. Ideally this needs to be feasible at all levels, from area-wide addressability to advertising to a specific population which might require a specific device or PVR to insert the ads.

In short, not only should the technology adapt to changing advertising models, but the surrounding support systems need to be upgraded to make cleverer use of available information. This means traffic management and advertising billing systems to provide ROI details and success rates of campaigns and ads.

TV advertising will survive and emerge stronger in the light of technological advancements – television is still the most powerful visual and emotional media. But to do so it needs to move with the times and consumers’ demands to become more ‘addressable’ – whether on the TV, on the web or via any other delivery platforms.

 

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For more information please visit OpenTV
Matthew Huttington, interview in RapidTV News