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Ad Market Grows in Fits and Starts

Feb 16, 2004  •  Post A Comment

Pat Ivers can tell you where his business will be in 30 days. The picture is a little less clear in 60 days, and by 90 days his cloudy crystal ball goes back in the closet. That’s because he’s working in the business of local cable ad sales in Denver, where the uncertainties of a still-recovering and stuttering economy are palpable.
Mr. Ivers is the VP and general manager for Comcast Spotlight, the local ad sales arm of Comcast, which represents 45 cable networks in the Denver designated market area. The Denver market, where Comcast focuses heavily on its ability to target ads within a geographic area, is an interesting microcosm for local cable sales, reflecting both the improved national economy and the still-languishing local scene.
Denver was late entering the national recession and is late coming out. The telecom industry, which had contributed a sizable portion of dollars to the local ad market, was hit particularly hard. Advertisers today are willing to spend money a month or so in advance, but rarely will commit beyond that, Mr. Ivers said.
That’s just one of the quirks in the Denver DMA, ranked 18th in the country, according to Nielsen Media Research. Another quirk is its massive geographic stretch; while the metro Denver area and two nearby counties house about 90 percent of the DMA’s 1.4 million TV homes, the remainder is spread over 53 additional counties in Colorado, Wyoming and Nebraska.
In the midst of the economic uncertainty, Mr. Ivers is spreading the word to advertisers that his market is ripe for the kind of ad targeting Comcast offers.
“In Denver there is still a lot of empty real estate and overpriced real estate,” he said, “and we still aren’t reading about a lot of companies coming to Denver. We’re still reading about people getting laid off in the high-tech sector. I think the economy has just shaken [advertisers] up to the point where they are uncomfortable making longer-term plans. We are still selling out … but actual buys are later and closer to deadline.”
That trend began in 2002, a bad year for local cable ad sales in Denver and for the economy in general. The local cable ad sales business was strong until August 2001 but began to crumble after Sept. 11 terrorist attacks. The next year was a down year, but 2003 began to show some improvement.
“You start to have a false confidence because of all the reports that the economy is picking up. Everyone is telling you it is except for your clients,” Mr. Ivers said.
Mr. Ivers said he’s unable to get a firm read on 2004 because of the short-term focus most clients are taking, but the early indicators look good, with national and regional sales strong.
The movement over the past few years to interconnect cable systems in a DMA so that they mirror the full scope of a broadcaster’s geographic reach has benefited cable on the national spot sales side, Mr. Ivers said. Locally, Comcast is able to tag such DMA-wide spots separately within each zone in Denver, if desired by the advertiser.
Though Denver became fully interconnected in 2003, the market’s expansive layout still tends to favor a different sales technique known as targeting. Cable’s greatest advantage in Denver is the ability to localize in different geographic zones. The Denver DMA includes 33 such zones that Comcast can sell in any combination.
With small pockets of the population far away, it’s not realistic to expect a TV viewer in Buffalo, Wyo., to drive to Denver and buy a car at a Denver car dealership, Mr. Ivers said, “but they have to advertise across the Denver DMA when they buy broadcast.”
On cable, they don’t. “The greatest amount of impressions is what a broadcaster sells. We want to reach the people that count, not just count the people you reach,” Mr. Ivers said.
Advertisers that want to reach specific niches are fine-tuning their focus. Rather than target a demographic such as adults 18 to 34, many advertisers are saying, “Maybe I am more of a `South Park’ audience or a `Trading Spaces’ audience,” he said.
Colorado Heart and Body Imaging, a preventive medicine center in Denver that offers heart, lung and body scans, uses local cable predominantly instead of broadcast because of the ability to educate different segments of its potential audience at different times, said Karen Haley, director of operations for the medical center. She also likes being able to deliver information across many networks.
“I like going with cable because I have so many different audiences,” she said.
Comcast recently was working on a deal with a local exercise facility that is targeting highly athletic young adults and teens. The business wants to reach kids ages 5 to 18 and their parents. That niche is clearly not a standard demographic but is reachable by using specific local cable viewer profiles. The facility wanted to target viewers geographically too. Comcast supports such nuances through its zoned approach and by providing local consumer market research, Mr. Ivers said.
Hitting the Demographics
The local system has also run geographically targeted ads for dog trainers who work at clients’ homes, something over-the-air broadcasters could not feasibly offer.
“Our greatest competitive advantage is our ability to target because [broadcast] cannot do it,” Mr. Ivers said. “They cannot target the demographics the way we do. And they cannot target geographically the way we do.”
The biggest advertisers on local cable are now largely the same as those on broadcast, with automotive and furniture leading the way. In addition, most local broadcasters advertise on cable, because stations need to promote themselves visually but can’t advertise on their direct broadcast competitors, said Matt Mansi, general sales manager for Tribune-owned WB affiliate KWGN-TV in Denver.
As local cable competition for ad dollars heats up, broadcasters have begun paying attention. Chris Rohrs, president of the Television Bureau of Advertising, gave a presentation Feb. 3 at the University of Denver about the benefits of advertising on broadcast channels, one of a series of presentations TVB has been making to markets around the country for the past three years.
In his address, Mr. Rohrs questioned the economic value of advertising on cable. He said that for the 29 insertable networks on the Denver Comcast system, the cost-per-point base for adults 25 to 54 is more than four times the $290 that advertisers plan for in Denver. In most local markets, cable is three times higher than broadcast on a cost-per-point basis, he said.
“It holds true in literally every local TV market. The cost-per-point winner in local is broadcast,” he said. “There are two reasons. There is very little inventory in local cable. And there are [only] about 10 to 12 cable networks advertisers really want to buy, such as USA, Lifetime, Discovery,” he said. The cost-per-point is even higher in Denver, he said, because the composition of multichannel homes there is a bit different from the national average.
About 60 percent of homes in the area subscribe to cable service, roughly 10 percentage points below the national average, he said. In addition, alternative delivery systems, primarily satellite operators, serve 23 percent of TV homes, which is 5 percent above the national average. That contributes to what Mr. Rohrs characterized as overpriced local cable ad sales in Denver.
Mr. Ivers disagreed with the TVB assessment. Comcast packages multiple networks and programs together to produce a buy that creates efficiency and helps advertisers reach their cost-per-point goals, he said. “We have to compete on a cost-per-point basis in Denver. There’s not a media buyer out there who would buy if that weren’t the case,” he said.
When the Comcast sales staff makes a pitch to a client, it relies on Nielsen data in only about half of the pitches and uses market research data from firms such as Scarborough Research, Claritas and Media Audit in 95 percent of those deals. Scarborough Research, for instance, provides qualitative market data on local consumers, their demographics
and their shopping habits to networks and cable systems in the top 75 markets.
Such local market research enables the cable system to help advertisers identify the geographic pockets with the greatest concentration of viewers fitting the profile they want to reach. “What’s unique about how we package is we try to match up networks and geographies,” Mr. Ivers said.
Despite the economic challenges, cable has made inroads into broadcasters’ ad base. Financial services firms and automotive dealers are among the advertisers that have increased their buys on local cable in the past three years, Mr. Ivers said. A substantial chunk of that growth is due to the online venture Comcast formed at Vehix.com with Salt Lake City car dealership Ken Garff Automotive Group.
The Web site provides resources for people who are buying a car and also serves as a hosting service for dealership Web sites. Comcast can now offer its ability to create so-called “turnkey” Web sites to its auto-dealer ad clients. In many cases, the leads from the Web site that turn into cars sold cover the cost of the advertising, Mr. Ivers said.
“There were some staunch automotive clients we weren’t having success with up until three years ago. They were still holding up that you need a 3 rating for national automotive. The reality is those programs are harder to come by and people are starting to understand that now. We’re seeing minimum requirements start to go away,” Mr. Ivers said.