Coming to a set-top box near you: cable companies use addressable advertising to benefit all

Coming to a set-top box near you: cable companies use addressable advertising to benefit all

Sarah Schmelling

You’re sitting in your living room watching cable TV, when commercials appear that seem to know who you are. They know your age group, your gender – they seem to know that you like sports cars and that you prefer macaroni and cheese with regular noodles, not with dinosaur shapes. You have just received addressable advertising – commercials targeted to your neighborhood or household that several companies in the cable industry hope will be the wave of the future.

“Cable companies have been looking at the opportunities presented by improvements in the network and trying to take advantage of them,” said Bruce Leischtman, an analyst with The Yankee Group. Improvements include the development of digital set-top boxes, which allow the insertion of programmable advertisements into the digital video stream.

This technology, offered by Next Century Media, has enabled MediaOne to begin its recently announced trials of addressable advertising in the Detroit area. The testing, which is part of a larger rollout of digital television services there, will direct advertising from “every major agency” to specific households using switching software developed by Next Century, according to that company’s Senior Marketing Consultant Ted Livingston.

To target the advertising, the company starts with basic ZIP code information, then compiles information from customer questionnaires filled out during installation, outside databases and click-stream measurement of customer viewing habits. The company ensures customer privacy by using numbers instead of names, Livingston said.

This strategic targeting benefits both advertisers and consumers, Livingston said. Advertisers can reach an audience more specifically, and in customer interviews conducted by Next Century, 80% said they’d be interested in seeing commercials especially for them, he explained. Leischtman agreed that “conceptually” the service should be good for both sides.

Benefits for the cable company include developing stronger relationships with customers and better pricing from satisfied advertisers, said Tim Collins, MediaOne launch manager for digital television services. The company will test the service in 2000 homes, plus another 1000 homes in a control group, he said. Follow-up interviews will determine the service’s success.

The first major move toward addressable advertising through cable was the Tele-Communications Inc./Kraft Foods announcement earlier this year, Leischtman said. The agreement, which brings targeted spots to several large markets and 16 cable networks, is different from MediaOne’s tests because it offers ads from only one company and targets neighborhoods, not households.

It’s a two-pan deal, said a TCI spokeswoman. TCI will use digital advertising insertion to send different Kraft ads to specific zoned neighborhoods, and Kraft will be involved in the “dialogue” about next generation set-top boxes with TCI, she said.

Addressable advertising is one of the biggest things to hit the cable industry in a long time, said Art Cohen, vice president of advertising for Your Choice TV, a digital cable service. The company rebroadcasts popular television shows on eight channels, and because viewers choose the programming, they receive targeted advertising. “[Addressable advertising] is beneficial for everyone,” he says.

Cohen not only predicted that this kind of service will be more widely available in a few years as digital set-top boxes improve, but he also said telcos could get into the picture with the use of video digital subscriber line services.

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