• by David Goetzl  @dgoetzl, May 14, 2009

Canoe Ventures is on schedule to launch later this month its initiative allowing networks to deliver targeted ads to homes with upper incomes, a company spokesperson said. But multiple sources said Canoe is struggling to get networks to sign up.

The national cable networks have concerns about the costs Canoe would charge them and how they could monetize the system based on advertiser demand, sources said.

Canoe has promised to launch the Community Addressable Messaging (CAM) platform by the end of May. CAM allows a network to "split copy" and send one ad into homes with incomes of $100,000-plus. At the same time, a different ad is fed into homes with lower incomes.

Networks would pay Canoe for the rights to use the system and then sell the opportunity to advertisers, which have long coveted avenues for more precise targeting. Canoe promises networks "new ways to enhance the value of their existing inventory."

The Canoe spokesperson said several national cable networks have signed on to use the CAM service, although she would release no details.

But this week, an executive who received an update on Canoe's progress said no networks have agreed to participate. The executive said that several networks Canoe has pushed hard to ink deals with have resisted.

None of the networks contacted for this story would provide comment.

There is some pressure on Canoe -- funded amply by the six leading cable operators and led by high-profile CEO David Verklin -- to deliver on its timetable. Cable operators are counting on Canoe to provide a major new revenue stream -- with addressability just one venue.

"How quickly the industry gravitates to it is yet to be determined, but the power of addressability is probably the single biggest savior for television," said Tracey Scheppach, a senior vice president at Starcom USA.

The CAM debut later this month would be an official launch and not a trial, the Canoe spokesperson said.

To be sure, more than two weeks are left in May for Canoe to make deals. And as discussions continue with networks, Verklin and other Canoe executives could offer them incentives to use CAM.

The identity of the networks Canoe says it has already signed is hard to divine. Media companies representing dozens of top-tier networks are taking a pass, multiple sources said.

Reasons include uncertainty about what Canoe would charge them to participate -- and whether they could sell the inventory to advertisers at a premium. Some networks are also skittish about investing in technological upgrades needed to power the system on their end.

The Canoe spokesperson declined comment.

Sources said networks have struggled to get a handle on exactly how Canoe would bill them to use the CAM technology. One source said Canoe was seeking a payment up front, and then a fee for every CAM ad a network ran.

But another source said a different pricing structure has been floated -- which suggests that Canoe is open to making different deals with different networks.

Amplifying that negotiations continue, a source said a well-known network "would like to participate and is expecting to and planning to, but (hasn't) seen terms and conditions."

Sources said networks are not rushing to sign up because there are questions about how interested advertisers are in purchasing the CAM ads during a recession. Networks presumably would look to charge marketers steep CPMs, aiming to recoup their costs and turn a profit.

Gary Carr, senior vice president at TargetCast, said: "If I thought I could spend my dollars with less waste, it may be worth it."

Starcom's Scheppach said "addressability deserves a premium, that's for sure." A CAM proponent, she said she would actively seek out an advertiser willing to use the system when it becomes available.

But some advertisers may be less excited about CAM, since the cost of spot TV has fallen so much in the recession. The spot market could allow a marketer to purchase targeted ads more efficiently than with what Canoe offers.

Under the CAM system, Canoe can deliver ads to 60 million set-top boxes nationwide. And within that pool, Canoe has identified approximately 2,500 geographic zones.

Using data from market research firm Experian and the Census Bureau, it has further identified 370 zones that have a majority of households with annual incomes of $100,000-plus.

That allows advertisers to run the "split copy." So, in the same 30-second slot, one ad could go to the 370 higher-income zones, while another could be beamed into the remaining footprint.

The upper-income zones represent 18 million homes, while the remainder account for about 42 million. The system only allows for two different ads running in the same slot.

Canoe's Verklin frequently cites the example of American Express airing a spot for its premium Gold Card in the high-income zones, while one for its more standard Green Card is delivered to the others. "One national spot, two messages," is how Canoe bills CAM.

While networks such as TV Guide Network and the Weather Channel have offered versions of addressable advertising on a national level for some time, Canoe is seeking to broaden the opportunity to other cable networks. Addressable advertising has taken root in local areas, with Cablevision able to target ads by individual homes in the New York area, and Comcast conducting a trial in Baltimore.

The CAM program is Canoe's first initiative. But the venture promises three others, including: dynamic ad insertion in VOD programming; interactive-television applications, where viewers ultimately could buy products with their remote controls; and providing second-by-second ratings data culled from its 60 million set-top boxes.