Kevin Cuddihy is senior VP of ad sales for Comcast Spotlight and has direct responsibility for the company’s five advertising sales divisions, as well as Vehix, which Spotlight recently acquired. Cuddihy joined Comcast Spotlight in 2001 as VP and general manager of Comcast MarketLink Detroit, moved into the role of VP of Spotlight's Midwest division in 2002, and became VP of advertising sales in 2006.
He has more than 23 years of experience, having spent 19 years with CBS and held the position of VP and general manager of WNDY in Indianapolis and VP/station manger of Detroit's WWJ-TV from 1994-2000. Like other operators, Comcast is bracing for a lackluster first half of the year as the economy tries to heal itself. A soft economy helped push down ad sales revenue in the second half of 2007 and that is expected to remain through the first half of this year. Cuddihy told Local Ad Sales that he is looking forward to a strong second half of 2008 as the political season heats up and the economy rebounds. An edited transcript follows:
Q: What happened to 2007 results? Why the drop in ad sales revenue?
A: Economic stress certainly affected our performance in 2007. Domestic auto share loss in an environment of less new cars in total being sold in the U.S. The real estate industry and the mortgage crisis affected not only their own industries, but also other key retail categories such as the furniture industry. Finally, spot cable and Comcast really got into the political game taking double-digit shares in 2006 for the first time ever that pushed large growth in 2006. If you look at our core growth in 2007, sans political advertising, Comcast Spotlight actually grew revenue in 2007 -- while our broadcast competitors showed negative core growth.
Q: What changes are in order to make up for that dip?
A: First, Spotlight and the cable industry are once again focused on a successful political season. In 2004, cable was not used at all in the primaries. In 2008, cable was used by the candidates in 20 of the first 22 states and in many instances is taking 25-plus shares of the business. We have a director of political advertising now, and we are working closely with both the agencies in D.C. and with our government affairs personnel to reach out to the candidates themselves to tell our story. Beyond political advertising, we will continue to work on growing our core business and expanding our new product offerings.
Q: What is Spotlight’s focus in 2008? What’s your biggest opportunity in the coming 12 months?
A: Clearly, our focus, and that of the country, is the presidential election. Our level of success in this political year will define our overall success. Our biggest opportunity outside of political is to continue to offer our customers more ways to reach their potential customers. As a customer-focused sales organization, the more products we can offer our clients in this fast-paced, changing advertising environment, the more likely they will see us as the first place to come with their advertising funds. These products, of course, include 50-plus networks available in markets across our footprint, video-on-demand advertising, online advertising with Comcast.net and, for our automotive customers, Vehix (which we purchased fully earlier this year). In addition, we will look at other opportunities in out-of-home and mobile, as well as continuing to collaborate with others to keep our markets complete.
Q: What is the biggest challenge?
A: Our biggest challenge is to continue to train the largest ad sales force in the U.S. on new products, while keeping them focused on the customer. Not every product we have will be right for all of our customers’ needs … but we’d rather have too many products than not enough.
Q: What kind of impact will a recession have on Spotlight?
A: A recession hits our core business. We’ve seen the slowing economy affect the auto and home industries already. On the other hand, when money is tight, our ability to target customers at a zone level increases advertising dollar effectiveness. Retailers need their dollars to work harder, and the ability to target the majority of their customers with little waste in a zone environment can be a positive. When I look back at 2007, our traditional local business grew at the highest level.
Q: Auto is a huge category and the car industry is suffering. How do you deal with that and will your acquisition of Vehix be negatively affected by the general malaise in the industry?
A: The auto industry is projected to sell fewer cars again this year. That does not mean that all manufacturers will sell less. It also does not mean that every area of the country will sell less. As I mentioned above, we have a product in our zone business that allows dealers to effectively target the majority of their customers with little waste. We partner with Polk and SRC mapping to strategically lay out marketing plans to maximize advertising effectiveness. In addition, we recognize that times are hard and many of our markets have developed economic stimulus packages in adjacent zones to enhance sales opportunities at a price that can give the dealers a solid return on their investment.
As for the car industry, we are simply taking advantage of the trends in auto spending. e-Marketer last week projected Internet advertising to grow 23% this year, while recently a major domestic auto manufacturer talked about shifting one-third of their spending to digital. We certainly want to be there, and we are with Vehix, On Demand and our other advanced interactive products. By combining the strength of the Vehix organization with the size of Comcast, we have seen significant increases in monthly unique visits (read banner and video advertising revenue) and a local sales force capable of generating leads for our dealers as well as giving those dealers a targeted auto portal with great market awareness on which to advertise.
Q: Furniture and home stores are also traditionally a strong local category. Has the housing market meltdown affected that category? If so, how do you address issues such as this?
A: Yes, furniture and home stores have traditionally been very strong for us. It is our job to help them find the most effective way to reach those customers that are buying … to match them up. The opportunity to have a showcase on VOD (their own TV channel) making products available 24/7, is one way for furniture stores or other retailers to keep their stores top of mind 24 hours a day -- something they can’t do with other traditional media outlets.
While the current economic conditions have made it a tough industry, large flat panel television sales have proven that people are in fact spending significant money on their homes even today. In addition, we are benefiting from double-digit growth in the local restaurant and entertainment categories.
Q: During your fourth-quarter earnings call, Steve Burke said he thought the first half of the year will be soft but he still is optimistic for the second half. Why will the first six months be soft? What makes the second half more attractive?
A: Two things will affect the back half of the year. Traditionally 70-80% of all political oriented dollars are placed in the last 10-13 weeks prior to election. With political as the largest growth category in 2008, that will substantially push the back half growth above the first half. Secondly, we are exponentially growing our digital revenue, particularly in online advertising, and this will continue to scale into the second half of the year.
Q: Which categories are the most vulnerable? What categories do you want to grow?
A: In 2007, we were able to get some small growth out of the auto industry and clearly this largest of all categories is vulnerable, although I feel like we are better positioned today than at any time in our past. The finance industry will continue to be difficult this year, and it looks today unlikely that the real estate industry will be able to turn around in 2008. On the positive side, tune-in business from the networks and local stations should grow this year with advanced products like our iGuide Banner ads and video on demand “Feature” advertising opportunities. I would also expect to see growth again this year from local opportunities such as entertainment and restaurants. Finally, while we often reflect the country, the medical/health category should continue to increase for the near future.
Q: What kind of impact will political advertising play this year? Why is it always so difficult to get political dollars each year?
A: As I mentioned, political advertising will be the key revenue driver for Comcast Spotlight in 2008. Comcast, NCC, our national rep firm, and other major MSOs have worked hard to offer our products in a way that is effective and easy for the political agencies to buy. Issues that plagued cable in the past are gone, and we now offer significant advantages over our competitors. With the roadblocks gone, agencies this political season have shown a willingness to invest heavily in cable.
In New Hampshire, cable received at 28 share of the political advertising pie, and even today in Pennsylvania, we see those same type of shares. Comcast offers not only the entire market footprint with its interconnects, but offers candidates the ability to target their messages within the market with our zoning ability. Candidates can target just the areas of a DMA that are within the state that is having a primary, they can target republican or democratic strongholds, or target with multi-cultural messages.
In addition, earlier this year, the Center for Governmental Studies released findings that video on demand helped in increasing voter turn out at early western primaries this year – a clear endorsement of cable. And this fall, cable will only increase its share of political advertising dollars with congressional, mayoral and other local elections take place…all capable of purchasing just the zones that fall within their cities or districts….Comcast often receives 75-100% of these dollars during the election season.
Q: What are the goals for Project Canoe?
A: “Project Canoe” is the result of an ongoing dialogue with our advertising partners. They have asked for a simpler, more interactive and robust platform and we intend to deliver this for them. The cable industry, with its two-way plant, is poised to take interactive advertising to the next level, but in order to fully capitalize on this opportunity, it is essential that MSOs work together to define the standards for submission, distribution and measurement of advertising. “Project Canoe” is the inter-company coalition organized to manage this process, along with our partner CableLabs. The goal of “Project Canoe” is to create a seamless, simple national network that will allow marketers to take advantage of our interactive, engaging and measurable advertising on a national level. That means that an advertiser will be able to create one ad that can run in any cable footprint around the country, and they will receive the same measurement data regardless of the areas in which a spot runs.
Q: Comcast announced it would invest between $50 million and $70 million to fund Project Canoe. How will the money be spent?
A: Exact details regarding our investment remain fluid as we build out this project with our industry partners, but we are putting significant resources to this groundbreaking project to benefit our advertising clients. Meeting our clients’ needs will drive our investment decisions.