Remember that time you were watching Hulu and were prompted to watch one ad or another, and you couldn’t care less? What if the ad instead offered you a discount and was specifically related to what you wanted to do in the next hour? Well, it looks like that’s about to happen. The Federal Communications Commission (FCC) last month voted to unbundle set-top boxes from cable companies, and that means television advertising is about to get a lot more interesting.
Most reports on the matter focused on consumer choice in new streaming devices and the marginal savings to cable customers of $231 annually, however, this misses the point altogether. What's exciting here is that this decision will inevitably have a profound impact on the way we receive and interact with content in the living room.
Why? It’s all about the data and giving people what they want.
Think about it this way: Younger Gen X-ers and Millennials are cutting the cord in the living room and have been for some time. Netflix, Hulu and HBO Go/Now top the charts on over-the-top (OTT) streaming devices like Apple TV, Fire TV and consoles like the PS4 / XBOX One, while products like Google’s Chromecast allow users seamlessly to broadcast video content from their phones to their televisions. In addition to the on-demand content these apps deliver, they also incorporate interactive experiences such as karaoke, shopping, and exercise, to name a few, and much of this delivery is based entirely on user patterns (i.e. user data).
The FCC’s ruling effectively forces cable companies to open designs to their systems, paving the way for technology companies like Apple and Google, who have historically struggled to get TV deals, to establish stronger footholds in customers’ homes.
This is great for the customer, not only because it offers more choice, but also because by opening up a system that was previously under lock and key, it will lead to more competition. That in turn will lead to innovation in both TV hardware and software and will give both cable and technology companies a mode of seamlessly gathering data on viewing patterns across live television and streaming services.
It is with this data, coupled with machine learning, predictive viewing pattern analysis, and smart content delivery that we could see paradigm-shifting services arise. Much like Netflix learns what we like to watch, technology and cable companies will be able to more deeply understand our likes and dislikes, offering us highly tailored content and smart advertisements like we’ve never seen before.
Imagine, for example, that you’re watching the Super Bowl and based on your viewing data, the content provider’s algorithm will know that you’re a health conscious viewer who likes to exercise. They serve you a GrubHub ad, potentially with a coupon, touting a local restaurant that makes amazing kale salads, which you can buy now, have delivered to your door in 30 minutes or less, while your neighbor might get an ad for pizza instead. Convenient, awesome, amazing, and this is exactly where we are headed.
The plan, of course, has its naysayers. Cable companies are set to lose approximately 20 billion annually because of the ruling. However, if these same cable companies invest in technologies that provide value-add services like a food recommendation engine and extend them across an array of goods and services that same 20 billion will eventually seem like an afterthought.
While government is often well intentioned, the end result is often lacking. This ruling, however, is huge and will affect everyone within the TV hardware and software ecosystems, from content creators to brands to consumers and ISPs. More so, if we are to look at the overarching trend in TV content delivery, consumers have spoken: they want digitization. Google in Q3 of 2015 alone sold 9.2 million Chromecast units, accounting for 35% share of the streaming devices market in that same quarter, according to JPMorgan, Apple is expected to sell 24 million units of the new Apple TV this year, and market intelligence firm Parks Associates estimates that more than 1 in 5 US broadband homes has an OTT device.
Yet these streaming devices are simply precursors to the types of set-top boxes that we’ll be connecting to our TVs in the years to come. These new devices will enable cable and technology companies the means to collect customer data, create more sophisticated algorithms, and establish real relationships between consumers and brands, leaving advertisers to become technologists and data scientists.
Jacek Grebski is the co-founder and partner of Swarm.
