Cable Operators

Narrowing the Target

3/24/2006 7:05 PM Eastern

Soon, the proud new owner of a Chrysler minivan could receive a commercial during his favorite show that only appears on his TV and not his neighbor's.

The spot will pitch accessories from grill guards to luggage racks to window tinting. With a click of his remote, a set of heavy-duty, color-coordinated floor mats gets delivered to his home.

This is the “holy grail” for cable operators and their advertisers, said Charter Media vice president of national sales and development Todd Stewart. It's a complete “combination of on-demand, interactive and consumer commerce,” said Stewart, who sells ads aimed at Charter Communications Inc.'s 5.9 million subscribers nationwide.

Early attempts, from companies such as Wink Communications Corp., at delivering interactive, highly customized ads to consumers failed, partly because of a lack of digital set-tops in U.S. homes, which could handle the customer's orders. Spots also had to be tailored for individual systems, whether those of Comcast Corp., Time Warner Cable or direct-broadcast satellite providers.

But technical advances and standardization may soon allow automobile manufacturers, packaged-goods companies like Procter & Gamble and other media buyers to purchase interactive ads that would reach an entire market.

The result: Advertisers finally will be able to send ads for products to just those viewers who would be interested in them.

The interactive-television approach takes age, income and purchasing information from such sources as Claritas Inc., Donnelly Marketing and Equifax, and combines it with data on viewer preferences, such as their predilection to respond to TV polls, that operators collect on their own. That is combined with precise information on where and how viewers live.

“Sitting at home, if you live in a condo or apartment house … watching a Home Depot ad for the spring sale on lawn mowers is pretty irrelevant to you,” said Comcast Spotlight vice president Paul Woidke, whose Adtag/Adcopy tools allow Home Depot to direct ads for curtains or bathroom fixtures — but not for lawnmowers — to subscribers in apartment buildings.

BROAD CUSTOMIZATION

A key focus today is to take this approach across large markets shared by major cable operators. One of the first targets: Los Angeles.

Charter, Cox and Time Warner Cable each have cable systems there. By the end of the year, the companies hope to be able to sell advertisers the ability to run interactive ads throughout what is now the second largest market in the U.S.

Working with Needham, Mass.-based Navic Networks Inc. — which also works with Time Warner and Charter — Cox has sold interactive ads to more than 50 advertisers in Phoenix and Tucson in the last three years, director of new media David Porter said.

And what is in store for L.A. can be envisioned by the kinds of interactivity Cox, Time Warner and Charter are pitching advertisers. These include:

  • Telescoping: An icon on the corner of his TV screen prompts a viewer to drill down to a detailed video ad. A viewer can take a virtual test-drive of a car, as Charter has done with an Infiniti car dealer in Los Angeles.

  • Call for action: After viewing a pop-up message on the bottom of his screen, a cable subscriber can request a direct mail-piece on insurance plans that might save money, as Time Warner customers can from State Farm Insurance. The subscriber also can press a button on his remote to receive a phone call from the advertiser.

  • Voting: Subscribers press the A, B and C buttons on their remotes to respond to multiple-choice questions on screen. In this manner, Time Warner Cable has marketed its own Road Runner high-speed Internet service in Los Angeles, running ads that ask viewers how they connect to the Web.

Satellite services Dish Network and DirecTV Inc. are also raising the bar with their own forms of interactive ads.

EchoStar Communications Corp.'s Dish has cut deals with Mercedes-Benz USA and other advertisers that allow subscribers to test-drive cars.

TECHNICAL CHALLENGE

The challenge for cable is adapting thousands of headend servers nationwide to deliver interactive ads. DirecTV and EchoStar rely essentially on national headends.

New software must also be downloaded to millions of set-top boxes in subscribers' homes, and advertisers need to be given production tools that allow them to create one spot that will work on every system.

“To achieve any meaningful scale, we need to implement the industry standard that will let advertisers and programmers build their enhanced TV or interactive ads once,” Time Warner Cable vice president of interactive television Joan Gillman said.

CableLabs is leading an effort to help standardize interactive TV, developing an Enhanced Binary Interchange Format specification that would allow interactive ads to run on multiple systems.

The spec has been completed, but CableLabs continues to tweak it, lab director Frank Sandoval said.

Gillman said a “large number” of Time Warner Cable divisions can support interactive advertising at present, including Hawaii; Syracuse, Rochester and Binghamton, N.Y.; the Carolinas; and Los Angeles. But each system has to set up and manage each interactive ad itself; it's far from an automatic process.

Pricing is also up in the air. Time Warner doesn't have a set rate card for interactive ads. Sometimes, Time Warner charges a premium for interactive ads. In other instances, they are offered as an incentive to buy more conventional commercial time.

Porter said Cox also doesn't have a published rate card for interactive ads, but that it's not giving the ads away for free. “It's a discreet value that is distinct and incremental to the underlying commercial.”

Over the long term, Cox plans to work with companies such as Catalina Marketing, which handles frequent-shopper programs with retailers, to enable advertisers to target viewers based upon spending habits, Porter said.

That way, if a subscriber bought a new Gillette Fusion razor, he could receive an ad for a pack of refills. A “coupon” might appear on screen. If the coupon is “cashed” by remote control, the new blades would show up in the mail.

That in turn would lead to a new holy grail: Knowing who responds to what offer, so a marketer can determine what the next offer should be and for whom a promotion should be prepared.

“One day we'll be able to pull in that third-party data and make intelligent advertising decisions,” Porter said.

September