Ever since WPP invested in Invidi, Microsoft adopted Navic, Visible World deployed in Cablevision's Brooklyn, OpenTV proudly engaged with NASA personnel in Huntsville and Starcom proffered its often
headlined 56% efficiency savings when testing addressable advertising utilizing TNS' tune-away research, discussions about pricing models for the ability to target specific TV commercials to specific
TV set stop boxes have proliferated. That's not quite true. Outsightful queries, not insightful discussions, about what pricing should be for addressable TV delivery have proliferated.
As I've mentioned on numerous printed and public occasions, there are no definitive pricing models for interactive TV (iTV) activity in the U.S. No "rate card" or "rape card," as we sometimes refer to
pricing models proffered on neatly designed stationary. Presently, video on demand is the closest we have to a "set" fee, which ranges, on average, from $20 to $40 CPM.
These figures are
based upon the U.S. broadband video ad fee model. Most desirable channels are more highly priced. Oftentimes, linear cable network VOD inventory is sold within an "Upfront package" (linear network
commercial inventory, broadband, maybe mobile and VOD in combination). Audience impressions are guaranteed. The package generally consists of a broad range of shows within the VOD channel menu.
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Eventually, when interactivity is added to the VOD offering other than the ability to click on a desired program and utilize VCR functionality (fast forward, rewind, and pause), the pricing
equation will become very murky since currently there are no industry cost guidelines for iTV advertising applications. At present, VOD advertising applications are limited to pre-roll commercials and
post-roll commercials plus billboards (upwards of 10 seconds in length). At some point in the future iTV apps - such as request for interaction (RFI), microsites, telescopes - will be incorporated
into the consumer and marketer's experience.
The many reasons that establishing acceptable pricing guidelines will continue to elude the U.S. media community in the near future, excluding
the lack of industry baselines, are:
A plethora of competitive services (cable, satellite, telco) with different penetration, models, capabilities and audience metrics. The cloak of "proprietary," which provides everyone - advertisers and distributors alike - with the ability to keep their experience and performance analysis a secret under the guise
of "it's my information and I [the corporate I] do not wish to provide my competitors with this data and lose my competitive advantage." The dearth of qualified, insightful
media professionals to interpret the consumer experience and campaign data, if any was allowed to be shared. Most media professionals in the U.S. have not experienced - as consumers - the varieties of
pay TV platforms (cable, satellite or telco) and certainly are not familiar with the multiple variations on interactive TV advertising applications. The overall lack of insight
and directional learning about the iTV realm i.e., consumer experience, best practices, applications, and creative design. The loss of sex appeal of the iTV space: in the early
2000's it was a hot topic, which after years of promise but not realization (deployment and return on investment models) flamed out to be replaced by press coverage of broadband video, mobile video,
out of home digital video and now economic crises. The internecine warfare between agency online and traditional folks concerning where planning and execution of iTV campaigns
fall within the agency infrastructure.Historical Modeling
Since its inception, broadcast TV, whether local or national, has been the baseline
for TV pricing in the U.S. market. When cable evolved into a more meaningful advertising platform around the mid-'80s with the introduction of programmers, such as MTV, Discovery, TBS, ESPN, and A&E,
the ad community welcomed cable inventory into their media mix but at a steeply discounted price. In many cases, a CPM priced at 50% of the broadcast rates.
The cablers (national and
local) have been fighting ever since to get back to parity with the broadcasters. Their claim: more interesting programming (more awards), narrowcasting to target specific audiences through specific
formats that broadcasters inefficiently reach (kids, young adult, CEOs), and cumulatively, greater percentage of TV viewers watch cable networks than broadcast. Although the cable networks have made
headway in the national arena, local cable inventory sales have not garnered the financial respect desired. Currently, cable operators generate $5 billion in local sales compared with $20 billion for
local broadcasting.
To remedy the financial inequality, the cablers conjured up two revenue generating schemes at the turn of the century: video on demand and interactive TV advertising
applications. Video on demand was supposed to serve a dual purpose: generate incremental revenue from subscribers as they forsaken their local video rental retailer in favor of the plethora of pay per
view movie choices at home, as well as garner some additional revenue from advertisers, who would pay handsomely for sponsorships of unique programming in a clutter free advertising environment; and
become that stickiness factor that would stem the flow of their subscribers to alternative pay TV platforms, such as satellite.
To date, the cablers' VOD forays have been a disappointment:
DVD rental is a healthy $16 billion business, advertisers have not been impressed with the cablers' VOD content and satellite platforms DirecTV and EchoStar claim nearly 32 million subscribers.
The deployment of iTV advertising applications, the second big revenue generating scheme, has yet to come to bear meaningful fruit as well. After much fanfare in the promise of ROI interactive TV
models in the late 1990s and the "fits and starts" deployment since 2002, the operators have little to show for their speechifying. However, perhaps with the formation of Canoe, the coordinating
effort by the major MSOs to deliver scale, data, and new and improved ad models, the media community will finally experience the efficacy of interactivity on the television. We can discuss these
philosophical issues at another time. Back to historical pricing models.
The cable operators imagined that making their advertising inventory interactive and targeted would enhance its
value to the ad community. Rightfully so, in my opinion. But by how much, since there were not any pricing precedents to build upon? The following is a guide to the interactive TV pricing models
formulated, brought to market but ultimately stillborn:
Increase Marketshare (40%) + CPM Premium (30%)
The first interactive TV applications to be launched with
much fanfare were Visible World's static banner over video commercial appearing during cable local commercial breaks, Wink's interactive banner over video commercial appearing during cable local
commercial breaks and satellite platform DirecTV's local commercial breaks, and Navic's interactive banner over video commercial appearing during cable local and satellite platform EchoStar's
commercial breaks.
The Visible World application could be delivered to "cable zones," which were defined as a series or clump of zip codes that fall within the cable operator's
distribution footprint. Navic's interactive banner could be distributed to specific zip codes within an operator's footprint and thereby not limited, as Visible World was and is, to a cluster of zip
codes. I do not remember Wink's distribution schemata - though the company was purchased by John Malone's Liberty Media, rechristened ProServe and absorbed by Liberty division OpenTV in the early part
of the century.
Since TV pricing models up until that time were based upon passive viewing, there were few case studies to scrutinize to glean insight into pricing in an
interactive environment - except, of course, the Web. Somehow, the cable operators were so sure of the efficacy of this new interactive commercial product that they approached the advertising
community - rather arrogantly - with the following paraphrased pronouncement: If an advertiser wishes to utilize its interactive TV applications the advertiser will have to consider the following:
In markets where the applications are deployed, an advertiser will have to augment its local cable budget by approximately 40% over last year's or previous commitment.
On top of the marketshare enormous increase, all CPMs from prior deals will be augmented by 30% in order to utilize the interactivity.Augment Marketshare + CPM Premium (<30%)
+ Cost Per Overlay Click
In general, advertisers and their ad agencies balked at the demand. In response, the cablers modified their negotiating stance as follows:
In markets where the applications are deployed, the cable operator would appreciate a "to be determined" increase in expenditure over last year's or previous commitment. On top
of the additional monetary commitment, all CPMs from prior deals will be augmented upwards of 30% - dependent upon size of budget. A cost per banner overlay click or deliverance
would be negotiated i.e, Wink and Navic would have a pre-established click rate for households that utilized their remote to click on the video commercial banner overlay; and Visible World's static
banner would garner some form of delivery surplus charge but none was ever articulated to my knowledge.Augment Marketshare (TBD)
In general, advertisers and
their ad agencies balked at the demand. In response the cablers modified their negotiating stance as follows:
In markets where the applications are deployed, the cable operator
would appreciate a "to be determined" increase in expenditure over last year's or previous commitment.
New National Advertiser Introductory Offer
In
general, advertisers and their ad agencies balked at the demand. In response the cablers modified their negotiating stance in hopes of gleaning something for the time, money and energy they spent
deploying the new interactive advertising applications and went to select clients directly - privately bypassing the ad agencies:
In markets where the applications are deployed
the cable operator would appreciate an opportunity to work with specific clients to prove the model and would willing to experiment with an advertiser at no cost for interactive elements as long as
the advertiser spent additional dollars for a campaign.Let's Get Your Agency On Board/Charter Offer
In general, advertisers balked at the "special offer" and referred the
cablers back to their ad agencies. In response the cablers modified their negotiating stance in hopes of gleaning something for the time, money and energy they spent deploying the new interactive
advertising applications and went to select agencies in hopes of closing a "charter deal." The premise was as follows: let's work together to set your agency and its Blue Chip roster of advertisers
apart from its competitors i.e., differentiation in new business pitches; and propel your agency into a leadership position in the industry. Requirements:
Willingness to develop
iTV advertising models by sharing agency expertise (research, buying, planning, creative) through the initiation of a campaign. Willingness to speak publicly about the campaign
(trade press and/or panels at industry conferences about the experience. Share case studies with the trade press and/or panels at industry conferences.
Pledge a comfortable level of financial commitment to the cable operators that would guarantee the agency and its blue chip clients the opportunity to discover the wonders of iTV.Epilogue
To date, none of the aforementioned pricing models have had much success and taken hold. Ultimately, there have been too few experiments actualized, distribution scale has
been an impediment, the ad community has had difficulty understanding the concepts (coverage, pricing, research, consumer interaction), there has been little communications from the pay TV realm
(cable, satellite, telcos) to help ameliorate the discomfort and quite frankly, other media has garnered the headlines in recent years i.e., broadband video, mobile video, search, behavioral
targeting, privacy and, of course, any movement from Google.
The conception of a "Canoe" could benefit the community but unfortunately, at present, it is staffed with the same
guys who have not enjoyed success when they worked for the individual cable juggernauts as well as respected members of the media community who have little pragmatic interactive TV experience and
generally offer outsightful solutions.
Pricing considerations in the future should include the following components:
Charging incremental fees for
households where technology is deployed and not across the entire DMA (designated marketing zone). Purchasing specific cable networks for interactive inclusion i.e., branding vs.
request for interaction (RFI). Purchasing specific programs/genres for interactive inclusion. Pre-negotiated rates for viewer activity i.e., connections,
appointments, acquisitions, click-throughs.In order for the aforementioned to be efficient, the media community will need to have more granular data from set top boxes as well
as case studies and research analysis that connects to usage and possibly to sales in order to comprehend its value proposition and incorporate into future media plans. And most importantly, we need
to engage in dialogue: insightful, meaningful, pragmatic conversation.