Is targeted TV on the way?

Virgin Media's TiVo system expected to target ads
Virgin Media's TiVo system expected to target ads

Will tailored ads ever become a mainstream reality, Alasdair Reid asks.

Targeted TV advertising is the media industry's equivalent of the Loch Ness Monster: stories about it tend to appear roughly once a year, usually during the silly season.

This year has been no different, with a somewhat ambitious Advertising Age story last week hinting that, this time, the whole business could now be for real in the US. It reported that an insurance company, Allstate, was running a campaign that only some DirecTV and Dish Network satellite householders will see. The rest will be served up a DRTV filler ad.

Targeted TV advertising has been on the agenda in the UK since the first wave of TiVo hype back in 1999, and it gained a new impetus with the introduction of the Sky+ box a couple of years later. In 2006, James Murdoch (remember him?), who was then BSkyB's chief executive, announced that a targeted TV product would soon launch: and it was formally named AdSmart in 2009, with an on-demand roll-out pencilled in for 2010 and a broadcast stream launch in 2011.

When AdSmart failed to appear, Virgin Media began closing the hype deficit when it announced that its own TiVo-driven targeted ad system would appear in the second quarter of 2012. It didn't.

We're talking about an intermediate technology - something slightly more clever than old-fashioned linear broadcast TV but rather less interesting than the sorts of ad-serving techniques that will become commonplace when commercial TV eventually becomes a subset of online and mobile.

It's fairly easy to envisage it happening within the on-demand offerings of the BSkyB and Virgin Media platforms, because they are akin to online offerings anyway; but for this to become a mainstream proposition, it has to work within the real-time broadcast stream of mainstream cable and satellite and digital terrestrial TV channels.

The mechanics of this are eminently achievable. You drop your targeted homes temporarily out of the satellite or cable broadcast stream and serve them an ad you've previously saved to the hard drives of their PVRs.

But the administrative reality is daunting. Crudely put, the issue is about what you show in homes not being targeted during a break - and how you optimise the system so you're not creating great swathes of worthless inventory. And the complexities would quickly proliferate. Imagine, for instance, what would be involved if ITV attempted to sell each spot in Coronation Street on a split basis, and asked Sky to manage the ad serving to half-a-dozen target groups in every instance. That might be an interesting discussion. In other words, you could argue that targeted broadcast advertising is not just a philosophical contradiction in terms, it's inherently more inefficient than the supposed market inefficiencies it's intended to counter.

Sadly, neither Virgin Media nor BSkyB felt inclined to take part in this Forum - though agencies say we shouldn't read too much into this. Yet there are continuing problems, as George Robbins, the video manager at Starcom MediaVest Group, points out. For instance, Sky and Virgin may have lots of data on their customers, but they can't use it currently because they don't have the right permissions under privacy laws. He says: "There is a lot of work to be done - and the logistics will be immense. It's not like online where inventory you don't need is automatically picked up by other advertisers. The issue is what you put in there during ad breaks in non-targeted homes."

Chris Wright, the joint head of investment at Initiative, agrees that data protection could be a limiting factor. On the other hand, he confesses he's rather upbeat about the market's potential. He says: "I think we'll see targeting happening at postcode level, not just on Sky and Virgin but on BT boxes too. It's certainly plausible."

Dilshan Swaris, Carat's associate director, broadcast, concedes that this might be a niche opportunity over the medium term - but he says it would also be a mistake to underestimate the opportunity here. He states: "Sky has data. Clients have data. I think it's inevitable that this data will be used to open up a whole new aspect of TV."

And Richard Oliver, the managing partner, investment, at UM London, argues that we have to see this within the context of a broader smart TV revolution. He concludes: "Every media channel is generating more data and making better use of it, and TV won't be the exception. With the digital switchover complete and more TV being consumed across more connected devices, addressable advertising of some sort is simply inevitable."

NO - George Robbins, video manager, SMG

"Sky and Virgin and others [for instance, YouView] will want to make more of their data. I'm sure we'll see more of this in non-linear catch-up TV. But as for broadcast TV - no, there are just too many hurdles."

MAYBE - Chris Wright, joint head of investment, Initiative

"I believe we'll see small-scale testing of this in 2013 and even more after - and I think we'll see advertisers explore tailored messaging. But we're not likely to see it on many mainstream channels soon."

MAYBE - Dilshan Swaris, associate director, broadcast, Carat

"You can argue that the strength of the likes of ITV and Channel 4 is their mass reach ... so targeted advertising might not impact on that area of the market. But it will add a new dimension to TV advertising."

YES - Richard Oliver, managing partner, investment, UM London

"There are financial and technological hurdles that media agencies and broadcasters will need to overcome, but I think we are well-equipped to do that. It will become part (though not a dominant part) of the advertising mainstream."

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