Interconnects on the increase

Feb 10, 2003  •  Post A Comment

Cable interconnects are hitting critical mass and taking on a more significant role in helping national and regional marketers reach television viewers across an entire local TV market.
An interconnect is defined as a single sales organization representing a collection of individual cable systems that can present at least 80 percent of the cable households in a given market. Rather than negotiate with each system on a marketwide purchase, the ad buyer deals with one entity, places one order, receives one invoice and one affidavit certifying that commercials ran as scheduled. Two years ago, only 10 of the top 100 television markets met that definition. Today 56 of the top 100 and 85 of the top 200 markets are served by an interconnect.
National spot cable advertising grew about 6 percent to $3.5 billion in 2002, amid one of the most difficult environments for advertising in years. National Cable Communications, the largest buyer of spot cable, saw its billings soar to over $500 million and expects to top $600 million this year as more advertisers allocate more dollars to cable.
“We are doing business with virtually all of the top 100 television advertisers, and that certainly was not the case two years ago,” said Tom Olson, NCC CEO.
At the heart of the interconnect growth story is the recognition years ago of one of cable’s dirty little secrets. In years past advertising agencies had been frustrated with the complexity of buying spot cable. It was much easier to deal with a couple of broadcast stations than with the dozens of cable operators that dotted the landscape in big markets. In the “old days,” covering an entire market with a cable buy necessitated placing orders with a sales representative from each operator and then drowning in paperwork to keep up with them all.
The growing acceptance of electronic data interchange (EDI) has eliminated most of the paper orders, invoices and other physical records. NCC has invested more than $3 million over the past six years to simplify ad servicing for its 2,000-plus EDI-enabled cable systems.
More to do
As successful as the interconnect and EDI movements have been, there remains much to do. Interconnects still capture only a fraction of television spot buys in any given market, an indication of just how difficult it is to change age old buying habits.
“There is a lot of a certain mindset still out there. We have to change the way a lot of people have done business for many years,” said Bob McCauley, president of Adlink of Los Angeles, generally considered the industry’s most successful interconnect. Adlink’s revenue rose seven percent in 2002, to about $150 million. Mr. McCauley expects a 20 percent increase in 2003.
“We are getting a much bigger piece of the pie, and we’re not just getting thrown a bone any more, but we have a lot of room to grow,” he added. Even after years of educating buyers, Adlink takes only about a 10 percent share of spot TV buys in the sprawling Los Angeles Designated Market Area.
Honing in on the customer
NCC is moving rapidly to culminate one of cable’s brightest promises for advertisers, the ability to target and focus messages to discrete audiences. Already able to direct ads to demographic groups by virtue of cable’s diverse programming-MTV for kids, ESPN for men, HGTV for women, for example-ad-serving technology is about to turn a major corner toward the capability to deliver a specific message to an individual household, a practice known as “addressable advertising.”
NCC this month launched addressable television advertising in seven markets: Albany-Schenectady, N.Y., Buffalo, N.Y., Hartford-New Haven, Conn., Grand Rapids, Mich., Cleveland, Providence, R.I., and Wilkes-Barre-Scranton, Pa. Using a product called IntelliSpot, developed by New York-based Visible World, delivered via a digital video system built by SeaChange International, Maynard, Mass., the service enables advertisers to customize, target and update their commercials to reach a specific target audience.