Ad Targeting Trial Results Map Practical Way Forward

Tracey Scheppach, SVP & innovations director, SMGX

Tracey Scheppach, SVP & innovations director, SMGX

March 8, 2010 – Experimentation in targeted advertising across various trial scenarios is beginning to generate results that point to what at least one major agency sees as a practical way forward.

Starcom MediaVest Group (SMG), the only agency to participate in every one of three recent ad targeting trials involving Comcast Spotlight in Baltimore and Huntsville and Cablevision in Brooklyn, believes the workable model entails relatively few target categories, thorough reporting on effectiveness and careful avoidance of privacy issues, says Tracey Scheppach, senior vice president and innovations director at SMGX, a unit SMG. “The more experience we gain with addressable advertising, the more excited we are regarding its potential to transform TV,” she says.

Working with three different technology suppliers – OpenTV in Huntsville, Visible World in Brooklyn and Invidi in Baltimore – SMG found that all three platforms were able to meet the agency’s fundamental criteria. “Do agencies care how the technology is delivered?” she asks. “No. The tests were meant to see whether addressability scales. They all performed.”

But that performance has to be on the advertisers’ terms. “What we set forth to do with Comcast was to tweak the technology the way advertisers wanted it to work,” Scheppach says, noting SMG was the only agency in the Comcast trials. Several agencies in addition to SMG are involved in the Cablevision trial, which is ongoing.

Such tweaking is commonplace in Invidi’s experience, says Michael Kubin, the company’s executive vice president. “We don’t do things in one flavor,” Kubin says. “The contributors to how we do it are a combination of the distributor’s platform along with the priorities set by agencies and advertisers. We’re just the facilitator.”

Tests like those with Comcast are vital to getting an addressable advertising agenda off the ground, which means it will be awhile before the market is ready to move forward on a mass scale, Kubin notes. “Everybody has their own ways of kicking the tires and making sure that when we put software in the set-top box it doesn’t explode,” he says. “They have to be very thorough, because we’re putting software in the most delicate part of their real estate.”

The Comcast Baltimore trial was a standalone event in terms of Invidi’s relationship with the MSO at this point. Invidi’s Advatar addressable advertising system is also a player in the telco and satellite arenas with a trial pending with Verizon’s FiOS TV operation and commercial rollouts of addressable advertising slated with both Dish Network and DirecTV (see July issue, p. 1).

“Dish will get underway in a matter of months; DirecTV will be a little later,” Kubin says. “This is an industry that’s had one big footprint for advertisers. For them to be able to segment down, whether by DMA or election district, is huge.”

Scheppach makes clear that her agency’s clients, and by implication, many others’ clients, are not ready for a targeted advertising regime that fragments audiences and the ads addressed to them into myriad categories. In the case of the Cablevision trials with Visible World as the technology supplier, the vendor’s pitch that “you can version it a thousand ways” didn’t resonate.

“Visible World blew creative minds away with all the versioning,” she says. Instead, the goal is to minimize waste in the creative process by identifying just a handful of categories that can be highly effective when it comes to tailoring ads for each category. “We wanted to be able to take what was one ad and split it into four versions and send a unique creative to an aggregated group of households,” she explains. “So the question we had for the technology was, were they able to append the data [required for identifying audience categories], split the spot into four segments and report back second-by-second on the viewing.”

OpenTV’s SpotOn platform came closest to having precisely what SMG was looking for out of the box, she notes. Invidi has the capability to define audience segments based on tracking of individuals’ viewing patterns as registered by set-tops from clicks on their remote controls, but SMG didn’t want to go there.

“We’ve taken an incredibly conservative approach to privacy,” Scheppach says. Rather than using information based on data generated from the set-top, the agency wants to use the same types of demographic data that are utilized in direct marketing from sources such as Experian, the data supplier in the Huntsville and Baltimore trials, and Acxiom and Nielsen, which are engaged along with Experian as suppliers to the Visible World targeting platform.

“OpenTV brought to market what we wanted,” she says. “They append data used widely in direct mail and use the set-tops to split the ads to the right profile.”

But, with tweaks, all the other platforms worked as well, generating convincing results for SMG’s clients. In the Baltimore trial, completed last year with about 60,000 households participating, analysis of anonymous set-top data revealed homes receiving addressable advertising tuned away 32 percent less of the time than homes that received non-addressed advertising. The participants reported advertisers achieved a 65 percent improvement in efficiency based on their ability to reduce per-spot costs by delivering ads to groups that were relevant to them.

Much about this trial and the Comcast trial in Huntsville, which reached 8,000 households over two years ending in 2008, remains under wraps, including the names of all the advertisers who participated and the types of categories that were used to define audience segments. In these and in the Cablevision trial, the focus has been on sales of the two minutes worth of local avails operators have for placements in cable network programming each hour, but there are obvious implications for sales of addressable avails on a national basis, once Canoe Ventures has the clearing-house platform in place to support that capability.

“We used a dozen blue chip advertisers across a lot of categories,” Scheppach says, mentioning consumer packaged goods, retailers, financial and autos as examples. The one major category not in the mix was pharmaceuticals, she adds.

The only publicized audience category of the four employed in Baltimore was households that have dogs, but Scheppach stresses that there’s much more to framing such a category than meets the eye. “There are thousands of variables involved that allow a direct marketer to go to Experian and say, ‘I want to mail to households that have all these attributes,'” she says. “So there’s a lot of data that went into defining the four splits.”

In other words, choosing households with dogs captures an aggregate of households with high percentages of other key criteria that go into defining an audience segment that is sufficiently specific to the targeting needs of many major advertisers but not so granular as to burden creative departments with developing a lot of niche ads for one ad slot. “All we’re doing is applying the same disciplines used in direct mail marketing to the TV market,” Scheppach says.

“Advertisers are going to approach how they use data differently,” she notes. “We were able to split the avail and sell whatever categories were of interest to the advertiser. There were advertisers who used only two categories, some who used three and some who used four. We’re convinced the ability to split avails and use data to aggregate audiences in different ways will have universal appeal.”

Four categories is not necessarily the right number, she adds, noting that, even in the trial, there were some advertisers who might have liked to have a couple more options. “I’m sure that once we have a nationally deployed system a decade from now four may not be optimum – it may be five or six. But atomizing it down to 1,000 categories is way too much.”

Major marketers active in the Huntsville trial, all SMG agency clients, included General Motors, Discover Card, Hallmark, Kraft Foods, Mars, Miller Brewing Company and Procter %26 Gamble
Two advertisers were identified as participants in the Baltimore trial – Walgreens and Walmart, both of which had glowing responses to the trial results.

“Across the board, we – like all marketers – have increasingly demanded more accountability in our marketing efforts,” says Christine Kubisztal, manager of media service, at Walgreens. “In a world with increased digital resources, converging technologies and greater need for fine-tuned consumer focus, there is no reason not to demand this accountability from TV advertising. We believe that this effort by Comcast in partnership with Starcom MediaVest Group is a momentous step towards the future.”

As for Walmart, Rex Conklin, senior director of media, says his company “remains committed to challenging the marketplace to improve our ability to deliver the right message at the right time and place to our shoppers. Our addressability work with the Comcast and SMG trials today will result in more effective and efficient advertising tomorrow.”

Like many others in the ad business, Scheppach stresses the move to addressability isn’t just about preventing ad dollars from shifting out of TV to online by making advertising more useful to existing TV advertisers. It’s about offering a low-cost and possibly more effective alternative to direct mail marketing, with the potential to draw in a much larger range of advertisers as well as to shift existing TV advertisers’ direct marketing dollars into TV.

“I wish we would stop focusing on getting Internet money back,” she says, noting that Internet advertising in video is a fraction of the size of the $50-billion direct mail business. “The cost for a direct mail piece is roughly $1, which is a $1,000 CPM. The average CPM in TV is $10. This is an easy argument to make to advertisers, although it’s not an easy transition for them to make. But, honestly, it’s the only thing I see that will really save television.”