EXCLUSIVE: Canoe Scraps Initial Zone-Ad Plans

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Canoe Ventures has decided to discontinue its initial Community Addressable Messaging product, with CEO David Verklin citing technical and business limitations that he said prevented the zone-based cable advertising play from being commercially viable.

"At some point you have to decide, Is that dog going to hunt?" Verklin said in an interview. "We were trying to use 20th-century technology to enable a 21st-century advanced-advertising product."

Canoe, a joint venture of the U.S.'s six largest cable operators, had previously expected to launch "CAM 1.0" -- which would have been its first offering -- as early as last month.

The CAM system was to have let advertisers run a different spot in 370 high-income cable zones nationwide, with the default ad playing everywhere else.

But Canoe discovered that the inflexible scheduling requirements of local cable advertising systems, coupled with shortcomings of operators' existing ad-insertion infrastructure, would have made CAM fairly unappealing to marketers.

"It works, but only under a set of narrow limitations," Verklin said.

Specifically, Canoe determined CAM spots would have needed to be booked 11 days before air date; the insertion could only occur following the local break; and an unknown number of Motorola receivers in the Canoe footprint would have required an upgrade to properly display alternate spots to individual zones.

"We're still excited about the concept of CAM addressability," Verklin said, adding that Canoe will "restage CAM at a later time when we can bring the product out in a more flexible configuration." However, he said, it was premature to be able to estimate when the second iteration of the zone-addressable concept would be ready for trials.

For now Canoe will focus its efforts on interactive television, with the planned launch in the fourth quarter of 2009 of a lead-generation product -- a timetable Verklin claimed is still on track.

The "request for information" product will use CableLabs' Enhanced TV Binary Interchange Format (EBIF) specification and allow viewers to click a button on their cable remotes to have information or coupons delivered through regular mail.

At least five cable networks had been interested in testing CAM 1.0, which was also known as "creative versioning," according to Reed Barker, Canoe's vice president of product management for addressable advertising.

Rainbow Media's AMC was the only network that engaged in a real test; Barker declined to identify the others.

With Canoe, AMC recently ran a two-week test using promotional inventory in the early-morning hours to display either a spot for IFC or WeTV in more than 70 zones, covering about 3 million households nationwide.

One of the key problems in delivering that capability as a commercial product was that, while programmers typically lock down their ad schedules 24 hours in advance of broadcast, the local ad-sales teams at MSOs need to know at least nine days in advance what the ad-insertion schedule will be.

"The networks are used to being able to move their schedules," Barker noted.

In addition, CAM spots could only be placed immediately after the local ad pods. The issue here was that inserting local ad cue-tones at any other point in the national programming feed would have thrown off the ad-insertion systems of distributors who weren't part of the Canoe mix.

"We had to do no harm to non-Canoe affiliates," Barker said.

Finally, there was an issue in that receivers from Cisco Systems and Motorola have different ways of handling "conditional digital program insertion," which involves commands telling ad-insertion equipment which triggers to act on. A number of Motorola receivers in the field would have required an upgrade to provide this capability, Barker said, and Canoe "didn't want to force down a receiver upgrade."

"We said, Let's be responsible and not go to these extraordinary lengths to upgrade all those Motorola receivers," he said.

Canoe has concluded that zone-addressable advertising will need to be delivered in a way that's independent of the legacy ad-insertion systems.

The venture, along with MSO and cable network partners, is currently in the process of gathering requirements on the best way to tackle that problem.

"We always wanted to get a product in the market as quickly as possible to retrofit on the existing infrastructure," Verklin said. "But CAM 1.0 was very bound with these tight restrictions, and that's just too narrow for a commercial deployment today."