Targeted Addressable TV Advertising

Targeted Addressable TV Advertising
Until now, TV ads have been mass marketing – with everyone getting the same ad, and no way of targeting or knowing who is viewing what. This is about to change for consumers who have digital TV from cable TV or phone company TV providers. Here is the way it will work:

Regular analog TV involves up to 100 channels sent simultaneously over a coaxial cable to every household at once. The subscribers choose the channel they want to watch by using their remote and their TV. No one knows what any individual subscriber is watching. Nielsen estimates what shows are watched by recording the viewing habits of a small representative sample of households.

With digital TV, the only channels coming into a subscriber’s home are the actual channel being watched, plus a guide channel that tells the subscriber what is available on the other channels. When a subscriber wants to change channels, he uses his remote to, say, shift to channel 64. When he does that his set top box sends a packet to the TV provider that says, in effect, “Send channel 64 to this set top box.” After a slight delay, the new channel shows up. Channel 64 and the guide channel are the only ones coming into the subscriber’s home at that time.

What this means, is that the TV provider knows what all digital TV subscribers are watching at any given time, because they are sending only one active channel to each set top box. This is powerful information!

Not only can the TV provider know what each digital subscriber is watching at all times, the provider can also send TV ads that are different for each subscriber.

The technical key to targeted advertising is digital TV using packet switching. Cable networks using services like BigBand Networks (www.bigbandnet.com), for example, can dynamically deliver separate copies of live digital program streams to each active subscriber, allowing each stream to be spliced with the right advertisement.

The system tracks which programs subscribers are watching in real-time. This provides cable operators with information that can be used to determine which promotional messages a subscriber is more likely to be interested in. For example, a subscriber watching a sports network has a higher probability of being interested in hearing about an upcoming local sporting event, than some viewer picked at random.

Packet switched digital broadcasts systems can also be configured to store information in a subscriber database. This can provide cable operators with precise viewing statistics without relying on third parties. The value of this information is high because it provides insights into the viewing patterns of all digital TV subscribers not just the subset of viewers that have been enlisted by audience research firms such as Nielsen.

A giant prospect database

Once the public has switched to digital TV, which is beginning to happen today, the digital viewing public for any cable or telephone TV operator will constitute a prospect database of millions of households. For each household, TV providers will be able to use services like AmeriLINK® from KnowledgeBase Marketing, or Experian’s Insource consumer database to append extensive demographics and behavioral data to their database records on every one of their viewing households.

TV advertisers of the future will be able to target their ads to individual households, rather than to the world in general. The ads you will see on the IPTV of the future can vary based on the household. If you live in a high rise, you will not see an ad for a lawn mower. If you are expecting or have a newborn baby in the house, you will see ads for diapers and baby food which other consumers do not see. If your income is over $100K you may see some ads that differ from those seen by folks living in households with incomes below $30K.

Digital TV advertisers will be able to build and use response models which they have been using previously on direct mail prospect databases. Using modeling many marketers have been able to increase their direct mail response rates by 30% or more, and increase their conversion rates on those who respond. Using similar methods, a marketer to IPTV households will be able to greatly improve his return on investment. Typical Direct Response TV (DRTV) ads get a response rate of 0.03%. Similar direct mail ads get a response rate of 1.33% — 44 times as much. If you can increase TV ad response rates by 4,400% you can sell a lot of products or acquire a lot of advertisers.

Using Nielsen, TV advertisers can make informed guesses on which message, which hour of the day and which channel appears to provide the largest total audience. With digital TV the targeting can greatly improve. Advertisers can provide cable and phone IPTV providers with lists of households in the provider’s service area which should receive each advertisement. In households with both adults working, daytime TV ads aimed at adults may be wasted effort. Homes with young children in the home should receive different ads from homes occupied by empty nesters or seniors. Result of IPTV targeting: improved marketing response, lower cost to advertisers, and higher profits for IPTV providers who append demographics to their viewing public database. Mass marketing can be replaced by very effective targeted direct marketing. Effect on consumers: prices can come down as the cost of marketing comes down and its effectiveness goes up.

A word of caution. There is a real danger of invasion of privacy with such databases. It is one thing to send direct mail pieces to households based on their purchasing habits. It is something else to channel mail or TV ads to consumers based on their actual viewing habits. TV providers will have to develop privacy protection systems for their subscribers. They will have to announce publicly how they will do this. It they don’t, restrictive legislation will quickly end this direct marketing media windfall before it becomes a reality.

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