Dynamic Ad Targeting - Cable TV's Vision of the Future Print E-mail

Dynamic Ad Targeting - Cable TV's Vision of the Future
by Graeme Newell
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In last week's article I laid out five trends motivating the future of the cable TV ad business.  In this week's article, seven more.  If you would like to read all three parts of this article, click here.

Dynamic ad targeting is the great hope of the cable TV future. Just as Google delivers custom ads designed to the user’s personal tastes and desires, the cable industry is building a new generation of hardware and software solutions to deliver the perfect ad to the perfect prospect at the perfect time.  The ultimate goal is elimination of ad waste. For example, a smart cable box will know that a viewer only buys healthy and natural foods.  It will eliminate ads for Pizza Pockets, Burger King and fried cheese sticks.

Major Advertisers are Angry
The precision of internet metrics has changed the game.  Major companies such as Walmart, P&G and Ford have diverted major portions of their ad budgets to online because of its efficiency and message targeting precision.  In speech after speech, CEOs from huge companies have given the ad business a tongue lashing.  They have put the broadcast and cable business on notice – get more efficient or the blood letting will continue.  They will not tolerate cable’s ever-increasing CPMs and clumsy, outdated, wasteful ad targeting.

Lack of Reach is Keeping the Current TV Ad Model Alive
As much as they hate the current TV ad model, advertisers know that TV is the only game in town if they want convenient and effective national penetration. These advertisers love the detailed metrics and focus of the internet, but a efficient national online buy is still impractical.  They will begrudgingly continue to pay the ever-increasing fees as TV audiences dwindle because they have few other choices.

But make no mistake, they are angry, and will do everything possible to knock the cocky TV business down a few notches.  As TV rates continue to go up, national advertisers will be more willing to go through the tedious process of placing numerous small internet buys.  If the internet can ever build an efficient national platform, the exodus will be huge.  The cable industry knows it must change and do it fast, or it will lose its best customers.

Lack of Standards is the Biggest Hurdle
Huge dollars and herculean effort are being put into developing this new lifestyle-targeted addressing technology, but each major cable company has its own flavor of hardware and software.  One company may find a solution, but unless ALL the companies share a standard, efficient national buys will not be possible.  A hardware solution will soon be found, but ego may delay implementation for years.

The cable companies know they must get along and work together, but it’s just not something that comes naturally.  Technical standards committees have been formed, but there are still huge players who refuse to participate, preferring to go it alone. This has led some industry analysts to predict that this technology is still at least five years away.

This means that the limbo of ever-declining TV ad revenue will continue for the next few years.  TV audiences will continue to leak away as gaming, DVRs, online video continue to chip away at the base.  Until ad targeting shows up, there isn’t a better plan and TV advertisers must simply endure this walk through the desert, but there could be an oasis on the other side.

Everyone Hates Hulu
The cable programmers are jazzed to deliver their programming to everyone on any screen they choose – laptop, phone, or home theater.  But in order to do that, they need to make at least a little bit of money.   The internet and companies like Hulu and YouTube got out there early and set the pricing standard – unfortunately, that standard was free.  Now the expectation is set and going back to a viable revenue model will be tough for consumers to swallow.  The cable programmers feel that these early companies ruined it for everyone, and they are more than a little bit mad.  Cable programmers have dabbled in online content delivery with projects such as TV Everywhere, but they refuse to get in the direct content delivery game without a solid model for building revenue.  So for the foreseeable future, cable programming on multiple screens will be experimental at best.

Daily TV Viewing Time is Topping Out
Despite the fact that ratings for individual channels are down, overall TV viewing is at an all-time high.  The consensus is that there are not enough hours in the day for substantially more viewing in the home.  This means that one of the best ways to increase revenue is to increase ad efficiency – get more dollars through better ad targeting.  The other major hope is to increase viewing outside the home. This is also why mobile is such a coveted new platform.   If mom can watch TV while she’s in the grocery store line or waiting to pick up the kids, big growth in actual viewing time is still possible.

Pre-roll and Interruption Advertising are Dead for Younger Demos
Total control is a huge factor in the viewing choices for younger viewers. An entire generation of people have grown up watching Youtube videos in their bedroom on a laptop, and they are accustomed to that delivery mode.  They rarely go to the living room for the ten-foot experience of traditional TV.  Older viewers are more amenable to being held hostage by ads in the middle of their programming, but a whole generation of younger viewers is already lost.

One of the major MSOs did a study asking younger viewers what they would do if they had 30 minutes to watch TV.  85% said they would go to YouTube or some other streaming video service.  Only 15% said they would turn on a traditional TV.

In-Show, Permission Marketing is on the Horizon
The exodus of younger viewers is just one of many trends that is converging to destroy the interruption ad model.  DVR penetration is moving up too.  Coke saw the stats on ad viewing of DVR homes and moved their marketing out of the breaks and into the show where younger demos would actually see it.  Powerful interactive cable boxes mean this trend will be supercharged.

As services like Hulu, YouTube, DVRs and Itunes all converge to give the audience more control over the viewing experience, advertisers who lack a personal connection with a targeted viewer will be eliminated by ever-more-sophisticated ad zapping techniques.  If viewers don’t love you, they won’t listen to your message. 

This means cable companies will use their new interactive tools to make advertisers a huge part of the program.  Advertisers will no longer be content to live in the breaks.  Who says ads have to be in the breaks?  The same technology that works on placing content in ad breaks works equally well at placing content in the actual show.  These new interactive cable boxes mean advertisers will join programmers in an ever-increasing creative role.  Program producing will take on a whole new definition, requiring a wider skill set.  Games, fan blogs, quizzes, Facebook sharing, and permission marketing will all be imbedded in the show.  Traditional ads will be seen as less and less viable.

Next week, seven more trends motivating the cable TV ad business, including major advertiser's discontent with the ad agency skill set, or read the entire three-part article now by clicking here. 

Graeme Newell is a broadcast and web marketing specialist.  He guarantees that his teasing seminar will immediately increase your news ratings or his workshop is free.  Find out more here.