Mixed Signals

Advertisers and Tomorrow's Living Rooms

2/07/2011 1:30 PM

Oftentimes in business, as in life, it is important to be reminded of important underlying themes when approaching new developments.

A perfect example of that in the pay TV industry is the idea of always remembering the importance of monetizing the product or service. And still, these days, that means primarily finding revenues in either advertising, or subscription, or both. Cost per thousand viewers (CPM) and Average Revenue Per Unit (ARPU) are the cherished words for those pursuing this business.

At CES 2011 last month in Las Vegas, one of the core show messages or developments was tablets. Moreover, as it relates to pay TV, tablets will become the focal point of TV in scores of millions of U.S. TV households. Tablets will help us watch TV throughout the house, because the software interfaces being built by companies such as Technicolor (and its MediaNavi interface), Cisco (and its VideoScape software), and NDS (and its Snowflake service), as well as by companies such as Rovi, will aggregate and connect everything together. Once aggregated, the interfaces will help the content to be easily moved from room to room, following the individual user.

And as has been the case for so many companies in the past, looking at similar challenges, the interface evolution will be an opportunity for some, and an obstacle for others. This will be especially true for advertisers and their agencies. Indeed, there is lots of room for CPM and ARPU growth, especially for video delivered by Internet or Over-the-Top providers (OTT).

ScreenPlays magazine recently noted that “Internet CPMs, averaging under $5 in most categories, are a fraction of TV CPMs, which average $20-$30 based on dayparts and programming popularity.” As touch screen tablets replace funky and nearly archaic remote control devices, personalized TV seems a natural outgrowth of that change. Indeed, within a single typical U.S. household of two parents and two children, each is expected to have his or her own unique TV account. When that single person walks inside the room, or moves a certain way, a device recognizes that person (or that movement) and instantly delivers messages that only relate to that person, and on every level.

Thus, not only will channel lists customized to that single individual pop up on demand, but a screen format, and a sound level will set in instantly for that viewer. A specialized list of shows recorded to the digital video recorder will be accessed only by that viewer. Or, for a child, only certain shows within certain rating limits will be accessible. In fact, there will be dozens of individual adjustments made by the software and hardware.

But also very critically important to personalized TV will be what advertisers do.

Going back several years to a couple of books I wrote about both digital signage and DVRs, a heartfelt message I tried to maintain in those volumes was that of “relevant programming,” especially including advertising. Indeed, I challenge anyone to convince me even partially that the future of personalized advertising is not huge, assuming advertisers, agencies, and related industries make it relevant.

That is because personalized advertising is just another way of giving people the choice that they seek. And let’s face it, going back to the earliest days of true digital and first generation DirecTV, basic choice is the core reason behind the greatness of today’s pay TV industry.

So, when a typical teenager opens her tablet in her living room on a day after school, a part of that specialized and personalized upper, side, or lower screen scrolls or flashes a subtle message about a product or service she truly seeks and has interest in. For example, in the late summer or early fall, she might have an intense interest in the colleges she might attend next year. Or in the late winter, she might seek out prom dress information for one of the more important events in her teen life. And having both filled in her own profile information, as well as having entered special information about her own special interests, those educational and apparel ads and updates will arrive. And even with a DVR that offers a terabyte of storage (which is big), she will not skip over such desirable advertising video.

Thus, that special teenager will have special ads, which, if done well, will not only be watched, but sought out specially. And that is the future of advertising.

Indeed, it is a whole new ecosystem coming to TVs in living rooms, bedrooms, and every room throughout the average U.S. TV household. Speaking only from a numbers POV, taking roughly 115 mil. U.S. TV households, and estimating no more than 2.5 TVs in those homes, that represents hundreds of millions of additional, hopefully relevant advertizing locales, every day, for American advertisers and their constituents.

Furthermore, savvy social networks will drive that change and the opportunities for advertisers and their agencies even further. Plus, large monitor companies such as Panasonic and Samsung will not only add Internet connections to all new TVs, but also help turn those TVs, just like the tablets and handhelds, into computers that have the capacity to make just about any video happen when, where, and how anyone, anytime, chooses. Further, video delivered to all TVs via the Internet and OTT opportunities is just a few single digit years away from becoming the norm.

Will advertising be as effective using the tablet and user interface of tomorrow? The answer is not only “maybe,” or even “probably,” but clearly “certainly,” if advertisers can link that personalized world with the quality and relevant delivery of chosen advertising.

This is the successful future of advertising and tomorrow’s living (and other) rooms.

Jimmy Schaeffler is chairman and CSO of Carmel-by-the-Sea-based consultancy The Carmel Group (www.carmelgroup.com).