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Profiling cable viewers

Feb 11, 2002  •  Post A Comment

With an estimated $55 billion invested in digital upgrades, cable operators are looking hard for a payback.
One idea that might wring a few more dollars out of a 30-second spot is ad-serving software from new companies such as ADexact and SpotOn that takes advantage of the capabilities of digital set-top boxes.
The two companies offer similar services. At the headend, a cable advertiser can modify an ad so viewers who are watching simultaneously see different versions based on one or more factors, including demographic or psychographic profiles, viewing activity or even viewer interests provided by subscribers.
Pete Moran, vice president of sales and marketing for year-old, Canada-based ADexact, explains it this way: “Corvettes to college kids, Suburbans to moms and tires to everybody else.”
It’s not quite interactive TV; it doesn’t require a viewer to do anything but watch. Mr. Moran believes that’s good. “TV is a passive environment, and the key to our success is keeping it passive.”
Or as Kevin Liga, CEO of SpotOn, a two-year-old joint venture of ACTV, OpenTV and Motorola, said, “You don’t have to get into retraining behavior at the household level.”
The approach brings to television a combination of traditional direct-response marketing and verifiable targeting of the type that was introduced by the Internet.
Mr. Liga, who is also chief technology officer of SpotOn parent company ACTV, says one of the key strengths of SpotOn’s software is its ability to modify exposure when showing an ad to a viewer for the umpteenth time.
Before viewers get too jaded, he said, “SpotOn can count how many times a viewer has seen an ad and say, `They’ve seen that ad enough times already; show them something else.”’
Both ADexact and SpotOn say they get around privacy issues because they don’t have to tell an advertiser anything about which specific customer is getting what. Ads can be targeted based on something as general as census data or specific neighborhood profiling. Or it can go a step further and use information gathered from customers by the cable company without specific personal identifiers.
Mr. Moran is quick to say that his organization has been working closely with the Advertising Research Foundation to formulate privacy standards for this kind of advertising. But he believes that once viewers understand the technology and the amount of control inherent in the system, they may actually ask to receive ads. “If people knew that they were going to be looking for a car in the next six months, they might be eager to see car ads,” he said.
It all sounds like a good idea. The software works; it has been working just fine on Internet sites. So why isn’t the phone ringing off the hook at ADexact and SpotOn?
Mr. Moran believes that success won’t come to pass until digital cable is something more than a promise. He estimates that the market for his product won’t take off until digital cable penetration reaches about 40 percent. As of November, 20 percent of households with cable had digital, according to the National Cable & Telecommunications Association. While that’s only half of what Mr. Moran thinks he needs, it’s a big increase from the end of 2000, when digital could claim only 6 percent of cable subscribers. “It’s not a question of if, it’s a question of when,” Mr. Moran said.
Last fall, Forrester Research analyst Daniel O’Brien looked hard at interactive TV advertising and concluded that advertisers who were using some form of it were enthusiastic, particularly about ad overlays that allow localization of national ads and, in the case of Wink, a direct response. He predicts that by 2003, 2 percent of TV ad budgets will be earmarked for this kind of advertising.
But it has been slow getting off the ground. SpotOn signed a deal more than a year ago with AT&T Broadband to experiment with a targeted ad program in Aurora, Colo. The program debuted in October, and so far there haven’t been any results either company wants to talk about.
ADexact, which just closed on a $5.5 million round of financing led by Toronto-based RBC Capital Partners, the private equity arm of Canada’s Royal Bank Financial Group, says it has signed a similar development deal with a Canadian cable company near its home office outside of Toronto, but didn’t want to say which one.
“We’ve been working closely with broadcasters and MSOs on the technology, and we feel that we’re going to have customers this year,” Moran said. “Everybody knows this is the right thing. It’s about moving ahead on the right thing.”