A topic of discussion among those of us in cable’s technology enclave is the prospect of the industry migrating towards an all-digital cable system. This promises to boost competitiveness by greatly enhancing network capacity.
Local advertising is a vital cable practice that must be protected through the transition to all-digital. If the programming content is digital from the headend to the set-top box or cable-ready digital television, then a local ad spot should certainly also be digital from storage to insertion to its journey into the home.
The imperative for the all-digital scenario contributes to the generally improving case for local digital advertising, given the continuing rise in digital penetration and the increased popularity of digital programming content.
The technical story has also improved, with the collaboration of Cable Television Laboratories Inc., the Society of Cable Telecommunications Engineers, and technology vendors in forming and implementing standards, including control interfaces and the cue tones that delineate the proper insertion point.
However, adoption of local digital advertising promises more than just a carbon copy of the existing analog process. Technological possibilities open multiple opportunities to enhance revenues and profitability.
Storage can be consolidated to a few centralized servers, with highly efficient Gigabit Ethernet — already in use for high-speed data and increasingly for other digital video services — used to transport those ads towards their destinations. Splicing can occur at whatever location within the system is economically optimal for the network configuration.
In systems that simulcast both analog and digital signals, the digital ad-insertion infrastructure could be repurposed for the analog service, rather than running two systems, with decoding used to place content in analog form at the proper point in the network.
Local digital advertising is enabling new models for how and where ads are sold to open new and enhanced revenue streams for cable operators.
With increasing network connections between facilities and even between nearby systems, the interconnect model can be replicated in digital, providing more eyeballs for the advertiser. In this way, even the most niche-oriented content is subject to increasing audience sizes that enhance local advertising viability. This is called “superzoning”.
Its opposite, “subzoning”, also opens interesting possibilities. Multiple ads can be spliced into a program simultaneously, each one transported to different areas within a cable system. This geographic refinement can allow more advertisers to participate while also enhancing the value of ad delivery by increasing local relevance.
Ads can be pinpointed even further. We have constructed systems with partners that transport multiple ads to the same zone, and use a subscriber profile to determine which ad is shown. This allows the swinging single to check out a sports car, while the neighboring family of four, watching the same program, learns about minivans. The power of such targeting could increase the dollars-per-eyeball of the ad.
HDTV is another digital cable area with ad-insertion promise. Just a year ago, the scale of high-definition penetration made this seem impractical, but with millions of sets now sold every quarter and weekly launches of new HDTV programming, this too is an increasingly ripe area for operators to sell local ads.
For one thing, when programming is available at the same time in both standard and HDTV formats, advertisers expect to reach both audiences. And the self-selective element of the HDTV demographic (people who have money, and spend it) makes this a particularly compelling audience to have.
Digital advertising’s potential goes beyond broadcasting as well. Free video-on-demand is doing nicely where offered, and innovative operators are contemplating ways to make this service ad-supported.
It is believed that viewers would only tolerate a little bit of advertising on their VOD content, but the values of those ads could be enhanced by targeting them according to location, time of day, or the profile of who’s ordering.
There is even potential for digital advertising to revive ITV practices. Direct response-advertising drives huge business — imagine viewers reaching for the remote, rather than the phone, when intrigued by what Chuck Norris and Christie Brinkley have to say about the Total Gym.
Or interactivity and VOD techniques could be combined to allow an interested viewer to jump from a brief ad to a longer elaboration on the offering, while using time-shifting to eventually return to the original program without missing anything.
In practice, we are still in the nascent stages of local digital advertising. But the technical and business models are coming together, and system plans including all-digital transitions drive implementations.
Digital advertising can be much more than just a copy of the analog model, and the possibilities opened in this format could introduce exciting new business practices for cable operators. We look forward to it.