TV Ad Futures: Set-Top Boxes, Network Sites Key To Targeting Customers

by Jim Harenchar, Sep 19, 2011, 8:45 AM

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No one knows who coined the phrase "a race against time, but that's precisely the situation many programmers and operators find themselves in. They are losing viewers to the more sophisticated operators in the digital world -- a problem that will only worsen with time. An added challenge: they don't often know specifics on lost viewers.

Knowing your viewers/audience is the core of the issue. Except for a single major cable network, traditional TV broadcasters have only a vague idea of who their viewers are and what their preferences are. Compare that with what Internet-based operators like Google, Hulu and Netflix know about their audiences. For example, Google knows nearly everything about you.

They have tracked every search you have ever done. If you participate in Google Chrome or any type of Google analytics, they have captured all of your individual household data -- including your cell phone number. Most importantly, they have a clear understanding of what you like -- and what you don't. Based on that, they can tailor and target advertising specifically to you.

Other online services, like Hulu Plus and HBO Go, which offer subscribers television series and movies, likewise track individual viewer preferences. If, for example, I enjoy HBO'S "Entourage" and miss an episode of the cable TV series, I can find it, or others, via HBO Go.

HBO records my preference and, as it introduces a new program that's similar to "Entourage," I'll get an email that says something like: Hey, we're launching this new show, called "Boardwalk," that we think will appeal to "Entourage" fans like you who've been watching that program for years.

Savvy networks have jumped at the chance to interact with viewers. Studies show that knowing viewer preferences can add to incremental profits by as much as 20%. How? It can offer premium ad rates, due to the level of viewer-enhanced data that has been captured and self-reported.

Advertisers are increasingly demanding more of what we call T.I.M. -- advertising that is Targetable, Interactive and Measurable. Today's advanced advertisers care less about viewership or ratings and more about gathering viewer information and behavior. This requires building a dialogue with the viewer -- something the interactive technologies are best suited for.

As noted, satellite television providers and one major cable network can do the same -- not the rest of the cable TV industry. With the exception of one cable operator, technology today allows for so-called zone targeting that divides the country into some 800 zones, which is not nearly precise enough.

What's needed are ways to reach -- and interact with -- individual households so cable networks can know their viewing behavior and customize advertising to reach them. Industry analysts predict that nearly 100 million homes could be equipped with this technology by late 2012.

How is that done? At least two solutions are attracting attention. One is to drive as many cable TV viewers as possible to use the Internet to connect and interact with the Web sites of individual channels or providers, thus leveraging the power of the Web to capture viewer behavior.

Another is to provide viewers with advanced set-top cable boxes already in use in the forward-looking part of the industry. They will enable them to connect and interact with the channels they are watching, and that will enable those channels, and their cable providers to record and utilize individual household preferences and other unique information. This is a large part of the perceived value of the recent Motorola acquisition by Google to aid Google TV.

Either way, viewers can be encouraged to provide more information about themselves -- plus their viewing habits, which are already being recorded -- so they can be ad-targeted more precisely. For example if a customer is using the Internet to get information about home-equity loans from Bank A, Bank B, learning this, can offer an ad for its loans.

And, if tracking a particular householder's viewing habits yields information that he spends a lot of time watching a particular sports channel, an advertiser can target him with relevant ads.

These strategies, coupled with standard business intelligence analytics and data modeling, are giving the cable operators a fighting change to remain in the game. It's a constantly evolving landscape and both cable operators and advertisers recognize the impact these technologies will have on a nearly $70 billion market.

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