Research has backed up the theory that viewers are more likely to embrace targeted advertising, ensuring a win-win situation for the industry and audiences alike, writes John Reister.
Successful advertising strategies are an imperative for any service provider building a sustainable IPTV network. Today's television viewers are becoming frustrated with advertising that is not relevant to them. An ongoing study conducted by Comcast Spotlight, the advertising sales division of Comcast Cable, and media agency Starcom MediaVest Group, illustrates the impact of addressable advertising in terms of increased ad relevance and advertiser accountability.
Comcast delivered ads across eight cable networks designed to target households based on characteristics specified by advertisers including General Motors, Discover Card, Hallmark, Kraft, Mars and Procter & Gamble.
The study found that households served targeted ads in commercial breaks were less likely to change channels, tuning in elsewhere 38 percent less of the time than homes that received non-addressable advertising.
This result underlines just how powerful addressable advertising can be, offering IPTV service providers the opportunity to increase IPTV revenue streams by enabling marketers to send specific messages to the intended audiences. Advertisers can make use of targeted delivery methodologies to increase ad effectiveness and obtain real-time feedback on ad campaigns. IPTV operators will also enjoy much higher average revenue per user (ARPU) to grow and sustain their subscriber bases.
"Addressable advertising gets us closer to the power of mass personalisation by delivering highly relevant brand messages to engaged consumers," says Laura Desmond, CEO, The Americas at Starcom MediaVest Group. "This is the ideal connection in a world of scarce consumer attention."
In deploying targeted advertising, operators first need to settle on a choice of delivery mechanism. There are three principal models to choose from, centralised, customer premises and intelligent network edge.
In a centralised model, operators process insertions for all streams at the network head-end and deliver video content across the network from there.
With a customer premises model, programme streams and ads are sent to a set-top box (STB) at the customer site which splices the ads and then distributes to the consumer.
And finally, an intelligent network edge model uses a distributed network-based ad insertion system that places different ads into the same media slot for individual IPTV subscribers or set-top boxes. Typically, programmes are sent to video service offices before being processed and distributed to subscribers.
In the centralised model, all individual programme streams are processed either in the head-end or at associated video hub offices. As a result, the transportation of processed content across the entire video delivery process can overload the network during peak periods or when scaling to large numbers of subscribers.
This approach requires expensive upgrades to the network transport infrastructure and is difficult to scale, especially as the amount of available programme channel increases.
Ultimately, it fails to leverage the carriers' network ownership to deliver a superior service or differentiated advertising package.
The customer premises model calls for higher performance and more expensive devices in the customer premises supporting ad insertion. In addition to the high cost of incorporating such intelligence in STBs, scalability becomes an issue as operators have to manage the process of downloading thousands of ads to hundreds of thousands of IPTV STBs, with frequent updates.
STBs may also need replacing as and when new types of advertising come on stream.
The network-based intelligent edge approach allows telcos to maximise the utilisation of their network and the services that run over it. Operators can provide mechanisms to build specific geographic and demographic rules for targeted ads at the edge of the network before delivering programmes. The capital expenditure (CAPEX) cost per subscriber to deliver ads is optimised, as are network manageability and control.
Verification, monitoring and reporting capabilities are also superior to those in the CPE approach. For example, advertisers are interested in the ad viewing data by different geographic and demographic groups.
This information is likely to eventually lead to more effective interactive applications such as television commerce (t-commerce).
The edge of the network is also the best place to control personalisation in line with network conditions. An intelligent edge has the flexibility to default to regional ads as networks become congested, or deliver more personalisation as access network bandwidth becomes available.
While putting in place a suitable network infrastructure to deliver targeted advertising is central to the whole process, the choice of ad delivery models is equally important.
The implementation process is clear enough: addressable advertising is achieved by inserting specific ad clips into the available programmes before delivery. Operators can send targeted ads to groups of subscribers and even to individual television sets, with many advertisements simultaneously sharing one available spot. As the viewers watch the same programme streams, they will see different ad clips.
However, in order to access the revenues they generate from addressable advertising, service providers need to have first worked out the best possible business methodology and have implemented an appropriate traffic and billing infrastructure to service subscribers.
In the newly developed wholesale ad delivery model, the content provider allows the IPTV delivery operator to carry out the ad insertion process. However, the content provider can still decide which ads to use for which markets and therefore continue to sell the ad inventory. And the operator can send back information to the content provider about the number of people who viewed the ad.
So, instead of placing one ad for the whole of a country, content providers can place individual ads in individual towns or neighbourhoods or even target them at specific demographic groups. As a result, the content provider's ‘product' is now much more refined, enabling it to attract the attention of more advertisers and halt defection to the web.
From the operator's perspective, moving to a wholesale delivery model is often lucrative. Content providers have to supply available time slots for advertising, widely known as ‘avails'. This involves marking off space within content streams to enable the operator to insert ads, using splicing techniques to target specific regions.
This practice can be lucrative for operators who might conservatively expect to generate US$5 - $6 a month of incremental revenue per user for regionally or demographically-targeted ad placement.
On top of this, digital video networking vendors such as BigBand Networks can support not just the traditional SCTE 30 ad server approach but also the emerging SCTE 130 standard that helps to provide a foundation for this new wholesale business model and at the same time achieve CAPEX savings and ad campaign flexibility.
This new standard has helped television advertising evolve from a monolithic to a distributed model such that the business entity that inserts ads can be different from the one that sells, chooses or schedules them.
With this distributed model in place, operators can start to move from a traditional advertising strategy to one embracing a more closely targeted approach.
On the road to full addressability, operators typically first opt for zoning. Using the wholesale ad model, operators could start with a city-by-city methodology, or jump to a neighbourhood-by-neighbourhood approach.
From the operator's perspective, the more granular the approach the more expensive it will be to configure the network to deliver the requisite functionality.
Once zoning is in place, the operator can provide feedback on the viewership within each zone. Operators can, for example, gauge the numbers who tuned into a particular channel and the numbers within a particular neighbourhood or postal code viewing a specific ad. The level of feedback will of course depend on prevailing privacy regulations.
The next stage typically is to move to full addressability and ultimately interactivity. This phased approach allows the operator to mitigate risk by ensuring that the business model works and that the necessary authorisation has been received from the content provider.
Addressable advertising services over IPTV networks are feasible today and have been in active deployment in the United States for several years, with significant sums of money already generated. According to research from Packet Vision, the revenue opportunities from addressable advertising on IPTV will be about $1.6 billion in the United States, $500 million for France and $250 million for Spain, by 2011.
This new approach to advertising offers benefits to operators, content providers and consumers alike. It is better for viewers to see commercials for products and services that are relevant and tailored to their individual areas of interest. For the content providers, the extra revenue generated can fuel additional content creation.
For operators, the potential benefits are even more attractive. Addressable advertising enables them to extract much higher value per ad and to optimise revenues by selling a specific slot to multiple advertisers.
With the ability to choose ads per subscriber based on geographic, demographic, contextual or behavioural information, operators could fetch higher average revenue per user from targeted IPTV ad revenue.
Coupled with this, the growth in their subscriber base from deploying addressability could positively contribute to better competitiveness against satellite operators and Internet video providers and, in turn, attract more advertisers and marketers. For the IPTV community, addressable advertising may well turn IPTV from a service with potential to one that delivers sustained commercial success.