Back in the first heyday of interactive television, evangelists promised us a golden age of advertising and merchandising. The TV-watching public would buy pizza with a remote control and have it delivered from the shop down the street. Monica’s latest outfit on "Friends" would be instantly available for purchase through a TV channel hyperlink.
Yet these promises haven’t come to pass. Not only are consumers not interactively impulse-buying off their TVs, advertisers still haven’t been shown a way to put compelling, customized offers in front of them. Forget interactive advertising. We’re still in the infancy of targeted advertising. As much as advertisers have clamored for better audience information and ad insertion capabilities, today’s TV advertising landscape is much the same as it was 10 years ago—except now, DVRs and the Internet are eating away at cable ad dollars.
Is there any reason today to believe that things have changed? The answer is an emphatic "Yes." Key enablers for advanced advertising have finally aligned in the technology, business and consumer sectors. There are two key technology areas to consider. First, cable operators needed to upgrade their core video network technology from analog to digital, a transition that is now essentially complete. A digital network provides the capability to build advertising delivery systems that are real-time, scalable, and cost effective. Second, the industry has been hampered by significant diversities in advertising-related back-office systems, making it difficult to identify, track and bill for advertising assets moving within and across disparate cable systems. The cable industry’s Project Canoe initiative is being designed in part to deal with that dilemma. By standardizing advertising systems nationally, the industry will have a foundation on which to build out ad targeting and insertion technologies with the goal of providing a virtual national advertising footprint that also has the ability to target households at a granular level.
In the world of consumer-facing businesses, there is a constant battle for advertising dollars. In the U.S. alone, approximately $70 billion is spent on television-based advertising. Cable has recognized that there is more ad revenue available, but only if they can provide a competitive alternative to other media. At the same time, the television-based advertising that exists is threatened by those same alternative media, which are now providing richer audience data and sophisticated targeting capabilities.
Finally, the Internet has been around long enough now to have fundamentally altered consumer advertising behaviors. Consumers have been exposed to such a wide array of advertising models online that their likelihood to accept and take action against new methods on TV has risen to the level necessary to make targeted and interactive advertising successful.
So, the table is set for cable operators to create advanced advertising systems. In fact, since cable operators are already moving toward delivering personalized video experiences, the equipment they are putting in place today should have inherent advertising capability. Video-on-demand (VOD) and switched digital video (SDV) architectures can be augmented via software to participate in targeted ad delivery. Combined with edge QAMs, splicers, and set-tops, these technologies can support the entire process, from monitoring device usage patterns (no consumer identity information included) to dynamically inserting powerfully targeted advertisements—all in a cost-effective, bandwidth friendly manner.
The cable industry knows it has untapped financial resources in advanced advertising implementations. As the industry sorts through the remaining business issues, the technology for delivering targeted advertising is already on course to help operators take advantage of a wealth of new revenue opportunities.
(Buddy Snow is Motorola’s senior director, on demand video).