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Can this man pull together the six largest cable companies to create the next generation of TV advertising?

6/13/2008 8:00 PM Eastern

David Verklin will have to paddle very, very fast in his new job.

As of Aug. 4, Verklin will head Canoe Ventures LLC, the New York-based joint venture established by Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision Systems and Bright House Networks.

His assignment: build the foundation for the next generation of cable TV advertising before the Internet starts cutting into it, and do it by convincing six large corporations that don't always see eye-to-eye to link arms, form a kick-line and dance in perfect unison.

Canoe, officially announced last week with Verklin's hire, is being funded by $150 million pooled from the operators, with ownership stakes based on the proportion of subscribers each operator contributes.

Programmers, ad agencies and marketers have welcomed the Canoe concept with initial enthusiasm. The idea is to provide a nationwide footprint for advanced advertising capabilities, to deliver interactive options or targeted ads based on demographic data.

“Call me a dreamer or say I have a screw loose, but I believe this is an opportunity to change the way America uses and watches television,” Verklin, formerly CEO of Aegis Media Americas, said in an interview.

THREE PRODUCTS

Canoe will sell products and services — to cable programmers and ad agencies — in three buckets, according to Verklin: interactivity, addressability and data.

The vision is for Canoe to deliver Internet-like precision, interactivity and tracking. An automotive marketer could let viewers request more info (“press A on your remote to see more”) or be able to show a minivan spot to a young family while pitching a luxury sedan to a wealthy retiree household.

“I like the idea that we'll be able to control who the ad will go to,” said Aegis Media CEO Sarah Fay, who was hired to replace Verklin at the agency in April. “And it's not projected results like Nielsen — it's real results. And we'll be able to pay accordingly.”

Others were cautiously optimistic about the plan. “We're waiting for Canoe to take back the curtain and understand a little bit more about exactly what the opportunities are,” ESPN executive vice president of sales and marketing Sean Bratches said. “Frankly we're in the nascent stage. But from directional perspective we're very encouraged.”

Canoe Ventures will sell its technology platform not to advertisers directly but to cable programmers such as ESPN and MTV Networks, who will in turn resell ad inventory to marketers.

“We're half tech company, half service bureau,” Verklin said.

That represents a shift in business model from the original plan that Canoe would sell inventory directly and employ its own national sales force.

For one thing, the industry already has a centralized ad-sales organization: National Cable Communications, owned by Comcast, Cox and Time Warner Cable, sells spot cable advertising on networks in major markets. NCC president Greg Schaefer said his company will work with Canoe in the same way as other ad agencies. “From my perspective, Canoe is the technical-enablement piece for various organizations in the industry — including us,” he said.

For now, the MSOs aren't providing many other details about Canoe Ventures, such as when it is expected to launch its network platform or how many employees it has.

Canoe hasn't yet decided on the standards or even their scope. But Verklin said he has been given authority from the six MSOs to set those standards once they're developed.

The company's pricing models will be varied, depending on product, Verklin said. Some could be based on CPM (cost per thousand impressions). Others may be sold as a percentage of revenue; for example, if Canoe handles billing and fulfillment for an order placed by a viewer.

Verklin expects interactive features to be the first Canoe product line to be available, though he didn't provide any time frame for delivery. The interactive features will also be available to programmers to embed in their editorial content, to provide, say, live polling during a game show.

“Canoe is not just about advertising,” Verklin said.

LOGISTICS HURDLES

But getting from idea to execution won't be easy. There's a reason cable doesn't offer a national platform today for advanced TV advertising: It's a difficult logistics problem.

The heavy lifting for Canoe will be deciding exactly what the baseline technical standards and capabilities should be across the six operators — which collectively serve more than 53 million subscribers. Then Verklin and crew will need to ensure the infrastructure gets in place to provide that in all markets (or at least the major ones).

Today cable systems in different markets have a very wide range of technologies for delivering interactive features. Cox, for example, just this spring introduced video on demand in Phoenix.

“You still have to build it out through the cable plant. It's going to take a little while for them to all get on the same page,” said Jed Meyer, senior vice president of Nielsen's DigitalPlus business unit. He added though, that Canoe “is a real positive game-changer for cable.”

At the same time, the MSOs have numerous other priorities vying for their attention besides trying to grow their (relatively small) ad revenue, like managing the digital TV transition next February. Verklin, 52, acknowledged the rough rapids Canoe will have to get through.

“The challenges in front of us are serious,” he said. “It's going to take a lot. The cable TV industry does not necessarily have a great history of consortia and this is a big technical challenge.”

But according to Fay, Verklin's the right guy for the job.

“They need someone who is a voice of change in the market,” she said. “Someone with his chutzpah can rally people around him. If anyone can do it, he can — David is the great peacemaker.”

Added Bratches: “Verklin is a smart guy. He's a communicator, he knows people. He has the bandwidth to organize the disparate parties.”

At some point, Canoe will combine TV viewing metrics with Internet surfing data to provide advertisers an integrated view across both platforms, Verklin said.

And, he said the company wants to open its doors to telco and satellite operators: “We're going to begin in cable television but, yeah, eventually we hope to reach out and bring our product line to both those parties.”

September