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Just who will pay for the next TV advertising revolution

In about 2003 the editors at Faultline got their first lesson in Addressable Advertising or Targeted TV advertising and we were blown away by it

By PETER WHITE

Published: 10 March, 2011

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In about 2003 the editors at Faultline got their first lesson in Addressable Advertising or Targeted TV advertising and we were blown away by it. The premise is simply, if you have 15 million people watching a TV channel, and only 5 million have a driving license, then if you played a car advert to the other 10 million, it would be a waste of money. Just as many people would respond to the advert if you only showed 5 million “impressions,” to borrow a word from the world of internet advertising, than if you played it in all 15 million. So why not ONLY play it in those 5 million homes and sell more advertising to play in the other 10 million homes, increasing your revenue.

We were led to believe that advertising could be sold at slightly cheaper prices, but sold ten times over, so that something like 8 times the amount of advertising revenues could be raised. But it’s not as simple as that, and more or less nothing definitive has happened in this area.

This week in the run up to the IPTV World Forum, recommendation engine player TV Genius has published a white paper on the subject entitled “Enhancing Targeted advertising with Content Discovery” and it’s fairly enlightened, and states many of the problems associated with what we shall continue to call Addressable Advertising, although throughout the paper TV Genius prefers to call Targeted advertising.

Flicking through its pages, there are a lot of good points, but at Faultline, over the past 8 years we have heard lots of good points too in favor of and against changing the world of advertising, and we thought we’d use the trigger of this paper to talk some common sense, and to explore some possible futures in TV advertising. We will unashamedly borrow some of these points from TV Genius, hence the credit, but we’re not sure we reach the identical conclusions (or any conclusions).

The first thing to ask is why hasn’t advertising become this fragmented, hyper responsive and aware environment which might bring in ten times the number of campaigns? And that answer is simple.

Most advertising is sold by what we shall call Networks, companies which create TV channels, either designed for free to air environments, which we shall call Broadcast Networks or for pay TV platforms, which we shall call Cable Networks.

Most broadcast networks use terrestrial broadcasting or satellite broadcasting and they reach every home in more or less the same condition, with the same adverts. The transmission operator, often a low margin business which serves all broadcasters in a given territory (in Europe), could only offer such a service to all of them collectively, and even then it could not access complex demographics in order to deliver adverts to different homes, the best it can do is to offer regional differences in advertising by splicing different advertising into local programming. This happens and it makes for improved responsiveness, but in a world where internet advertising is taking more ground by the day, it’s not enough. In the US transmission is supplied by a single market broadcaster, and they have even less money to spend on innovation, even though they have carriage agreements which allow some of their own advertising to run.

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