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Interconnects in a growth mode

Jun 17, 2002  •  Post A Comment

Interconnects work.
That is the message that Tom Olson and National Cable Communications are trying to disseminate, and they’ve got some compelling data to back it up.
Mr. Olson is the CEO of National Cable Communications, a spot cable advertising rep firm that also operates CableLink Interconnects, which is made up of seven interconnected markets, and helps cable systems form their own interconnects.
Cable systems have made a concerted effort over the past few years to link their systems together to allow for easier ad placement. In January 2000, 10 of the top 100 markets were interconnected; today that number has risen to 54.
An interconnected market is one that can deliver at least 80 percent of the cable homes in the DMA and one in which there is a single contact to buy the homes using one order, one contract, one tape and one electronic invoice. That way, agencies can place orders with one source rather than with each cable system in a market, since there can be many.
Usually, an interconnected market sees a boost in revenues the year after the ad insertion platforms of the various cable systems are linked, said Mr. Olson. In 2001, the seven CableLink markets rose 11 percent in ad revenue over the previous year, when they were not interconnected. In the first quarter of 2002, CableLink was up 11 percent. During that same period, the national spot cable industry as a whole was up 7 percent.
CableLink’s increase in the first year is reinforcement that interconnecting makes life a lot easier for advertisers, he said. “We’re doing something right-and it’s not just that we can physically link the hardware,” he said.
An interconnect is a much more attractive buy, and it streamlines the process of ad placement, said Diane Plage, senior VP and director of operations with LCI in New York. “The spot cable business has grown significantly in the last five years as there have been more interconnects,” she said. “You are buying the market better and completely. If you leave cable out, you aren’t buying the market,” she said.
While have boomed over the last few years, the first interconnect-Adlink in Los Angeles-was formed 14 years ago. In 1996 the market became 100 percent interconnected so that all cable subscribers can be reached through Adlink, said Vicki Lins, the company’s senior VP for marketing and communications.
Adlink has seen revenues grow from $60 million in 1997 to $138 million in 2000. While some of that growth is attributed to the increase in ad spending in the late ’90s, it is also due to new products the company began marketing in 1997, Adtag and Adcopy, which allow advertisers to target their ads within the cable market while still placing one buy and receiving one invoice, she said.
“It’s the convenience of one-stop shopping with being able to tailor to different consumer groups,” she said. Mercedes-Benz tags its ads with information on local dealerships, while Coors has offered different commercials for Anglo and Hispanic markets, she said. Earlier this year, the New York Interconnect announced that it had licensed Adtag and Adcopy from Adlink.
Despite the evidence, the interconnect phenomenon still has its skeptics. aren’t being held to the same standards as broadcast DMAs, said Chris Rohrs, president of the Television Bureau of Advertising. Cost per thousands for local cable are dramatically higher than for local broadcast, and they don’t deserve to be, he said.
“If these want to compete for the dough, they need to compete on the same standards. We are reminding agencies to get the ratings right and use the audience numbers. It’s crucial that [interconnects] be held to ratings information and that you don’t overpay,” he said.
NCC’s Jeff Boehme, senior VP research and marketing, is not surprised by TVB’s defensive position, but today’s trends speak for themselves. “Broadcast continues to decline and local cable continues to increase,” he said.