Advanced Ads: 3 Reasons Why The Wait Is Over
Interactive Spots, Dynamic VOD Ads, Set-Top Metrics To Take Root
By Todd Spangler -- Multichannel News, 2/20/2010 12:00:00 AM
In this story:
1 Interactive Ads Reach Critical Mass — Finally
2 Marketers Say Hello to On-Demand Ads
3 More Access to Cable-Box Metrics
A nagging chicken-and-egg problem has held back advanced TV advertising, which promises richly interactive and highly targeted capabilities combined with the massive reach of television.
The Catch-22 is this: Big buyers want to reach a big audience. But the TV industry hasn’t had an incentive to invest in advanced capabilities because the ad dollars aren’t there. That, along with the technical challenges of standardizing the way those ads are delivered and measured, has fed a cycle of inertia preventing newer TV ad models from catching fire.
“You need scale in order to make this an actual business,” said Carolyn Everson, chief operating officer and executive vice president of MTV Networks’ U.S. ad-sales group. “The real trigger for the entire marketplace is obviously when it moves beyond trials in a few million homes to a national footprint.”
In 2010, three key areas will start to show critical momentum: interactive ads that let viewers request more information, coupons or product samples; video-on-demand ads that can be served on the fly; and wider availability and use of set-top box metrics for measuring TV viewing.
The adoption curve of advanced TV advertising technologies will follow that of broadband, said David Kline, president and chief operating officer of Cablevision Systems’ Rainbow Advertising Sales Corp. “In the mid-1990s, when AOL dial-up was the Internet, it was slow and it was clunky,” he said. “It took some time, but eventually we are where we are today with broadband.”
According to Parks Associates projections, advanced advertising revenue for the pay-TV industry will grow from $130 million in 2010, or 0.5% of their total ad revenue, to more than $4 billion by 2014, representing 12% share of the total. “Traditional TV ad dollars will quickly shift, at rates we’ve never seen before, to interactive and addressable formats — the ad buyers want this,” Parks Associates research analyst Heather Way said.
While similarly optimistic projections have been made before, marketers are now increasingly accustomed to the interactivity and measurability provided via the Internet. By comparison, television hasn’t kept up: 62% of major advertisers said traditional TV advertising has become less effective in the last two years, according to a survey by Forrester Research and the Association of National Advertisers released earlier this month. The survey polled 104 U.S. marketers that represent nearly $14 billion in media budgets.
And so TV’s share of the pie has dwindled. Marketers allocated 41% of their media budgets to TV in 2009, compared with 58% in 2008, the Forrester/ANA survey found.
To win back those advertising dollars, cable operators, programmers and their technology partners are intensely focused on scaling up three critical efforts in 2010:
1. Interactive Ads Reach Critical Mass — Finally
Canoe Ventures, created by the six largest cable operators, is gearing up to provide a way to deliver interactive ads to millions of digital-cable viewers by the middle of 2010. The effort would permit, say, an automaker to allow consumers across the country to request brochures on specific models of cars or trucks — combining the tactics of direct marketing with the reach of TV.
To be sure, cable consortiums have frequently failed to meet their goals. And Canoe last year abandoned its first product, aimed at delivering zone-targeted spots. It also has missed internal deadlines for the request for information, or RFI, feature.
But there’s been real progress now on the deployment of the underlying technical standard, CableLabs’ Enhanced TV Binary Interchange Format, which forms the basis for Canoe’s interactive ambitions. Comcast said it has now enabled EBIF in 12 million homes in 30 markets, and Time Warner Cable has flipped the switch for 900,000 subscribers in New York City with 7 million EBIF-enabled homes targeted by end of 2010.
“The most important thing that’s going to happen for interactive is scale—that will be delivered via cable’s EBIF footprint,” said Peter Low, president and CEO of interactive TV developer Ensequence. “It’s what everybody has been waiting for.”
Canoe, for its part, now has a better grasp on the difficulty of the job, said chief operating officer Kathy Timko. “We have grown to appreciate the complexity and understand the complexity of doing this,” she said. “And we understand that we have to do it well.”
Canoe will initiate the RFI product later in the second quarter with one cable network and two fulfillment companies that will send out coupons, product info or other materials on behalf of advertisers, Timko said. She declined to name the partners Canoe is working with.
MTVN’s Everson said she is watching the Canoe effort and wants it to succeed. But she is dubious about the initial RFI service, which is set up to deliver information only through postal mail (as opposed to an e-mail). “I would have liked to have the RFI product deliver an immediate result for the consumer,” Everson said.
Apart from Canoe — whose owners are Comcast, Time Warner Cable, Cablevision, Cox Communications, Charter Communications and Bright House Networks — individual operators are charging ahead.
Cablevision, for one, touted its debut of clickable 30-second spots last fall in the New York market as a rousing success, delivering conversion rates (the percentage of people who requested more info after initially clicking on an ad) of between 40% and 70%. The MSO also is pushing forward on household-addressable spots.
That gives Everson some pause, indicating that “a lot of operators seem to be hedging their bets and doing trials themselves.”
But Cablevision’s local advertising capabilities and the goals of Canoe aren’t mutually exclusive, RASCO’s Kline countered. “I’m just as anxious from a Rainbow perspective to provide these interactive capabilities at scale” across multiple operators, he said.
In any case, interactive TV ads have proven to be highly engaging, according to Low. Ensequence’s data shows that of subscribers with access to interactivity, between 2% and 8% click on ITV ads and spend an average of 3 to 4 minutes with an interactive ad.
“That’s tremendously valuable, and that’s before you even get to RFI or lead generation,” Low said.