I think an
important “under the radar“ tech trend is the development of the capability to
target television advertisements directly to households that meet a given
criteria. What this looks like in
practice is that you, the poor college student, might see an ad for Ramen
noodles while your wealthier neighbor sees an ad for a cruise in the same slot. Some analysts believe this technology marks
the end of dog owners seeing cat food commercials and the end of many wasted ad
dollars.
Currently
about 20 percent of U.S. TV subscribers have services capable of sending
targeted advertising to the household or viewer level. Dish and DirecTV make up most of this
figure, followed by Cablevision. In the
next couple of years Comcast will enter the fray and start driving the fraction
of targetable households up toward 50 percent.
How do
television providers target you? The
same way direct mail has been targeting you for years. Third party credit reporting agencies (Experian
for one) offer a wealth of consumer data for the right price, allowing cable
providers to segment their customers any which way by appropriately coding
set-top-boxes. DirecTV also makes use of
individual viewing data, allowing it to target individual viewers within a
single household based on viewing habits.
The future
of targeted television advertising is far from decided, and I believe the most
important factor to consider is the human-technology interaction on the TV
provider side. There are two important
camps that have very different ideas of what this technology can do for
them. TV providers see targeted
advertising as a way to raise their CPM (Cost Per Mile – the price charged per
1,000 impressions) and overall revenue from ad sales. Advertisers see this technology as a way to
reduce cost by buying only the impressions that are likely to result in conversions.
One more hiccup:
there currently exists no standard between cable operators selling targeted
advertising, meaning advertisers need to deal with each individual cable provider
when attempting to buy targeted advertising, an unattractive proposition for
advertisers used to buying ads at the national level through the national ad
exchanges that have existed for decades.
The
solution? I believe this technology only
works with a standard, and the best bet for TV providers is to sell targeted
impressions on an auction-based model, finding maximum willingness to pay for
each demographic, as there are likely to be some groups of viewers sought after
by multiple advertisers. As for the old
guard of television advertising, they’re not exactly champions of higher CPMs,
so you may not have to worry about blindfolding your TV just yet.
More reading
than you will ever do on television advertising:
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