Addressable Ads: Big Opportunities, Big Hurdles

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Every advertiser wants addressable ads — but it’s going to be 5 years before there’s significant scale from Canoe Ventures to interest major marketers in the technology, predicted GroupM director of emerging media Michael Bologna at our advanced-advertising event Monday.

No doubt, addressable ads work: Comcast’s Baltimore trial with SMG reinforced that, finding that viewers who saw addressable ads tuned away 32% less of the time. There’s also no doubt they’re valuable: nearly 40% of U.S. ad and media execs are willing to pay upwards of 20% more over traditional TV ad costs, according to a Parks Associates survey.

However, as Bologna said, there are plenty of barriers to this becoming widely available on cable — including that any spending on addressable ads will have to come out of existing budgets.

It’s complicated to serve targeted ads, especially when you’re trying to do that across multiple providers, with dozens of set-top configurations. Recall that Canoe’s first product was going to overlay different ad versions on top of local cable ad zones — the idea was scrapped as too complicated. Meanwhile, Dish, DirecTV and Verizon are each working on their own targeted-ad approaches, with Invidi Technologies.

So will Canoe’s 2.0 addressable service take 5 years? I asked a Canoe exec about Bologna’s comment after the event… and didn’t get much more than a raised eyebrow. Clearly, the Canoe team is aiming for something sooner than 2015.

But there are other issues aside from the technical execution. Not every advertiser, of course, really needs to segment their messages - or is interested in spending money to produce multiple versions of a 30-second commercial, one cable veteran told me during the cocktail reception.

“Nabisco has one Oreo spot dunking the cookie in the milk,” he said. “They don’t want to do one where you dip it into the coffee.”

Then, you’ve got privacy concerns — a gigantic can of worms that some MSO execs say privately is the biggest stumbling block to rolling out addressable ads. While P&G may think it’s awesome to be able to slice and dice ad inventory according to demographic data, many consumers are uneasy about the idea, as are (more to the point) their elected reps in D.C. It’s a double-standard but that argument doesn’t dismiss the privacy issues (see Double Standards on Privacy).

For those reasons, the cable industry is more bullish about pushing the rock up the interactive hill. Also at our event Monday, DirecTV VP of ad sales Rich Forester said the DBS operator’s interactive platform has been extremely popular — generating more than 1 billion clicks per month (not all of them for ads, however).

In 2010, there are likely to be three areas of advanced advertising gathering momentum: interactive ads (with the wider rollout of EBIF); dynamic VOD ads; and set-top box metrics (see this week’s cover story, Advanced Ads: 3 Reasons Why The Wait Is Over).

Addressable ads, on the other hand, while they’re desirable won’t reach scale in the near term. Cablevision Systems says it’s on track to deliver addressable spots to its 2.9 million digital subs in the New York market by June 2010, using Visible World’s system. But that’s just a fraction of the reach Bologna’s clients are looking for.

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