3 Reasons Why the Wait is Over

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A nagging chicken-and-egg
problem has held back
advanced TV advertising,
which promises richly interactive
and highly targeted
capabilities combined
with the massive reach of

The Catch-22 is this:
Big buyers want to reach
a big audience. But the
TV industry hasn’t had
an incentive to invest
in advanced capabilities
because the ad
dollars aren’t there.
That, along with the technical
challenges of standardizing the
way those ads are delivered and
measured, has fed a cycle of inertia
preventing newer TV ad models
from catching fire.

“You need scale in order to
make this an actual business,”
said Carolyn Everson, chief operating
offi cer and executive vice
president of MTV Networks’ U.S.
ad-sales group. “The real trigger
for the entire marketplace is obviously
when it moves beyond
trials in a few million homes to a
national footprint.”

In 2010, three key areas will
start to show critical momentum:
interactive ads that let viewers request
more information, coupons
or product samples; video-ondemand
ads that can be served
on the fly; and wider availability
and use of set-top box metrics for
measuring TV viewing.

The adoption curve of advanced
TV advertising technologies
will follow that of broadband,
said David Kline, president and
chief operating offi cer of Cablevision
Systems’ Rainbow Advertising
Sales Corp. “In the mid-1990s,
when AOL dial-up was the Internet,
it was slow and it was clunky,”
he said. “It took some time, but
eventually we are where we are
today with broadband.”

According to Parks Associates
projections, advanced advertising
revenue for pay TV operators
will grow from $130 million
in 2010, or 0.5% of their total ad
revenue, to more than $4 billion
by 2014, representing 12% share
of the total. “Traditional TV ad
dollars will quickly shift, at rates
we’ve never seen before, to interactive
and addressable formats
— the ad buyers want this,”
Parks Associates research analyst
Heather Way said.

While similarly optimistic projections
have been made before,
marketers are now increasingly
accustomed to the interactivity
and measurability provided via
the Internet. By comparison, television
hasn’t kept up: 62% of major
advertisers said traditional TV advertising
has become less effective
in the last two years, according to a
survey by Forrester Research and
the Association of National Advertisers
released earlier this month.
The survey polled 104 U.S. marketers
that represent nearly $14 billion
in media budgets.

And so TV’s share of the pie
has dwindled. Marketers allocated
41% of their media budgets to
TV in 2009, compared with 58%
in 2008, the Forrester/ANA survey

To win back those advertising
dollars, cable operators, programmers
and their technology
partners are intensely focused
on scaling up three critical efforts
in 2010:

1. Interactive Ads Reach Critical Mass -- Finally

Canoe Ventures, created by the
six largest cable operators, is
gearing up to provide a way to
deliver interactive ads to millions
of digital-cable viewers by
the middle of 2010. The effort
would permit, say, an automaker
to allow consumers across the
country to request brochures on
specific models of cars or trucks
— combining the tactics of direct
marketing with the reach of

To be sure, cable consortiums have frequently failed to meet
their goals. And Canoe last year
abandoned its first product,
aimed at delivering zone-targeted
spots. It also has missed internal
deadlines for the request for
information, or RFI, feature.

But there’s been real progress
now on the deployment of the
underlying technical standard,
CableLabs’ Enhanced TV Binary
Interchange Format, which
forms the basis for Canoe’s interactive
ambitions. Comcast said it
has now enabled EBIF in 12 million
homes in 30 markets, and
Time Warner Cable has flipped
the switch for 900,000 subscribers
in New York City with 7 million
EBIF-enabled homes targeted by
end of 2010.

“The most important thing
that’s going to happen for interactive
is scale—that will be delivered
via cable’s EBIF footprint,”
said Peter Low, president and
CEO of interactive TV developer
Ensequence. “It’s what everybody
has been waiting for.”

Canoe, for its part, now has a
better grasp on the difficulty of
the job, said chief operating officer Kathy Timko. “We have grown
to appreciate the complexity and
understand the complexity of doing
this,” she said. “And we understand
that we have to do it well.”

Canoe will initiate the RFI
product later in the second quarter
with one cable network and
two fulfillment companies that
will send out coupons, product
info or other materials on behalf
of advertisers, Timko said. She
declined to name the partners
Canoe is working with.

MTVN’s Everson said she is watching the Canoe effort and
wants it to succeed. But she is dubious
about the initial RFI service,
which is set up to deliver information
only through postal mail (as
opposed to an e-mail). “I would
have liked to have the RFI product
deliver an immediate result for the
consumer,” Everson said.

Apart from Canoe — whose
owners are Comcast, Time Warner
Cable, Cablevision, Cox
Communications, Charter Communications
and Bright House
Networks — individual operators
are charging ahead.

Cablevision, for one, touted its
debut of clickable 30-second spots
last fall in the New York market as
a rousing success, delivering conversion
rates (the percentage of
people who requested more info
after initially clicking on an ad) of
between 40% and 70%. The MSO
also is pushing forward on household-
addressable spots.

Th at gives Everson some pause,
indicating that “a lot of operators
seem to be hedging their bets and
doing trials themselves.”

But Cablevision’s local advertising
capabilities and the goals of
Canoe aren’t mutually exclusive,
RASCO’s Kline countered. “I’m
just as anxious from a Rainbow
perspective to provide these interactive
capabilities at scale” across
multiple operators, he said.

In any case, interactive TV ads
have proven to be highly engaging,
according to Low. Ensequence’s
data shows that of subscribers with
access to interactivity, between 2%
and 8% click on ITV ads and spend
an average of 3 to 4 minutes with
an interactive ad.

“That’s tremendously valuable,
and that’s before you even
get to RFI or lead generation,”
Low said.

2. Marketers Say Hello to
On-Demand Ads

Video-on-demand is a hugely
popular cable service, but advertising
revenue associated with
free VOD has been negligible.
Part of the reason: VOD ads have
had to be encoded in the same
file as the content, greatly limiting
the flexibility for advertisers
and typically requiring lead
times of 30 days or more.

So-called “dynamic” VOD ad
insertion could change all that,
by letting cable operators insert
different spots into on-demand
content at the split second it’s requested
by a viewer.

Comcast initiated a test with
BlackArrow’s ad-insertion system
in its Jacksonville, Fla., system late
last year, and Cox is conducting a
similar trial in Phoenix with NBC
Universal, using an ad system
from SeaChange International.

Cablevision offers dynamic VOD
advertising in its service areas.

Dynamic VOD ad insertion, if it
can be done at scale, could really
turn around video on demand,
MTVN’s Everson said.

“VOD has been, I would say, a
very disappointing solution for
many of our marketers as well
as our fellow programmers,” she
said. As video-on-demand usage
continues to increase, “it would
benefit everyone in the ecosystem
to have a robust ad model.”

Advertisers appear to be bullish
on the concept: Currently,
29% of media planners or buyers
purchase advertising in free
VOD programs — and of those,
54% foresee an increase in 2010
ad spend, according to a Parks
Associates survey of 96 U.S. advertising
and media executives.

“The marketplace needs to feel
more comfortable that Comcast
and others are investing in this,
then the ad dollars will start flowing,”
said Nick Troiano, president
of targeted-advertising systems
firm BlackArrow.

Troiano also pointed out that
the way dynamic VOD advertising
is bought and sold is a more
natural extension of how linear
TV ads are bought today; there’s
no alternate interactive creative necessary or EBIF-enabled settop.
“We’re moving out of the
world of ‘How do we make this
work?’ to ‘How do we make this
a business?’ ” he said.

Dynamic VOD ads are the “lowest-
hanging fruit” for advanced
ad delivery, agreed ActiveVideo
Networks director of business
development and customer engineering
Jeremy Edmonds.

“You already have a transaction
engine,” he said. “It’s a ripe
opportunity to do a dynamic, targeted
ad to that particular consumer.”

In the U.K., cable operator Virgin
Media has had encouraging
results with dynamic VOD ad insertion.
In a three-month test last
year, the MSO found that 54% of
viewers were “positive” about
ads in video-on-demand content.
Virgin Media, which used
SeaChange’s AdPulse system in
the trial, is now deploying the system
across its entire footprint.

3. More Access to Cable-Box

In addition to new advertising
formats, industry executives see a
prime opportunity to provide new
metrics to ad buyers — showing
who is actually watching linear
TV and time-shifted programs.

Advertisers are disenchanted
with the current Nielsen status
quo, and that’s not a new sentiment.
About 82% of big marketers
expressed interest in ratings for
individual commercials, according
to the Forrester/ANA survey,
a capability Nielsen’s core ratings
service does not provide.

Frustration with Nielsen led
to the formation of the Coalition
for Innovative Media Measurement
last year, by NBCU, Time
Warner Inc., Viacom and other
media companies, agencies and
advertisers. One of the consortium’s
main agenda items is to
explore ways to standardize settop
box data.

What marketers want to
see is the same value they get
with Internet advertising, said
SeaChange chief marketing officer Yvette Kanouff .

“My opinion is there’s not a
loss of confidence in TV advertising
— there’s a loss of granularity and transparency,” she said.
The way broadcast ads are currently
tracked is like throwing up
a billboard and approximating
the number of people who drive
by, as opposed to knowing exactly
how many people not only saw it
but wrote down the phone number,
Kanouff said.

On this front, media-measurement
firm Rentrak earlier this
month announced a deal with
Dish Network to integrate data
from the satellite operator’s settop
boxes into the commercial
TV Essentials audience measurement
service, bringing its sample
size to more than 15 million satellite,
cable and telco set-tops nationwide.

With the bigger data set, Rentrak
now claims it is the only company
to offer media measurement
in all 210 TV markets. Previously,
Rentrak said, the TV Essentials
commercialized service included
set-top data from Charter Communications’
Los Angeles division
and AT&T’s U-verse TV.

Rentrak has “fulfilled its vision
of providing a national footprint
as a foundation to overlay advertisers’
definition of their customers
to detailed TV viewing
from digital set devices,” Rentrak
CEO Bill Livek said in a statement
about the Dish deal.

Other companies that provide
aggregated set-top data include
Nielsen, TiVo, TRA Data and Kantar
Media (formerly TNS Media),
which has a deal to collect Direc-TV set-top data.

Google also is pushing the concept
of accountability through
set-top box data. The Google TV
Ads product, which the search
giant says has served more than
100 billion impressions to date,
lets advertisers buy national advertising
inventory on several
networks including NBCU cable
channels as well as local avails on
about 100 networks through Dish

“At the heart of it, we’re interested
in accelerating the trend we
see that TV advertising is becoming
more like Web advertising,”
said Shishir Mehrotra, Google’s
director of product management
for video monetization.

With Google TV Ads, a marketer
pays for impressions the ad
receives, projected from set-top
usage data collected from more
than 4 million boxes via Dish
and TiVo.

“It’s a big change from the way
the industry has done business, so
we wouldn’t expect everyone to
jump into it right away,” he said.
But, he added, “in terms of the value
of using set-top data as a better
way to measure a TV campaign,
the industry, generally, is accepting
that idea. That’s past the hump
in terms of credibility.”