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November 2007 | Volume 10/ Number 11
For the Record

Making the Case for Advertising

National surveys keep tell us that although consumers are warming a little more to advertising for free content, they love DVRs because of the opportunity to skip commercials and get straight to programming. I noticed a caveat recently when I was watching Bravo’s Top Chef and was randomly hitting the fast forward to get to the next part of the show and. . . I saw a funny commercial.

I actually started hitting rewind instead of forward so I could see the commercial, thereby delaying my viewing of the next part of the elimination challenge which is by far the most climatic part of this reality show. Interestingly, if I took a survey about whether I would be willing to watch advertising to get free programming, I would probably say no. My time is valuable to me and saving a few dollars to watch commercials really turns me off. Although, after reflecting on my behavior in that instance, I have to say I’ve been thinking a lot about how our industry should view the multibillion dollar-a-year potential of dynamic advertising.

Looking over the industry, many of the MSOs are engaged in trials of one form or another to introduce new concepts in advertising. The industry’s commitment in this is clear. Raising the CPM (Cost per Thousand) rates are important to modeling the ongoing viability of offering new content. Doing this is going to require precise targeting, delivery of cutting edge advertising that gets a reaction, and a service model that does not get in the way of consumer satisfaction. Currently, there are trials with ad updates when VoD (Video on Demand) content is replayed, giving new revenue opportunity to a replayed movie or purchased sports event recorded via DVR. Although that’s a winning proposition for the operators, and even IPTV providers, it does not go far enough. It appears that specific location (aka city, ZIP, and neighborhood) and user demographic targeting is still about 12 to 24 months away from hitting what could be considered large-scale integration. Even so, with critical mass so “at arm’s length”, MSOs need to be concerned with the technical and business models of what those offerings will look like. There has been some discussion in the industry that consumers may dislike the opportunity to get more advertising, even if it is for something that interests them. The thought is that consumers hate commercials, but want content and don’t want to pay too much for it. That is difficult to build a model on. Based on my earlier observation of my own viewing habits, I think there is a way for all to win in this area.

One such way is to look at advertising as one would look at content. Well placed and high-quality content is important and necessary to keep consumers satisfied with their services. The same thought process applies to advertising. If it is entertaining, people will watch it. Actually not only watch it once, but multiple times. One of the most popular things downloaded and watched from YouTube besides user-generated content, is funny commercials. People will pass these links along to friends, put them on their MySpace, forward them to their mobile devices, save them on DVR, and talk about them with friends. If it is something they were considering purchasing, that is golden for the advertisers. Repeated play and probable purchase for the cost of one commercial is well worth looking into.

Targeting - the Next Silver Bullet

I think some of the emphasis in the industry must be on building a business model that is manageable, targeted, and creates user satisfaction. With all the pressure on the MSOs and service providers to ramp up advertising as a leading revenue generator in the services of the future, targeting has got to be part of that. With the recent specifications like the CableLabs’ ETV specifications released last year and the OCAP 1.1 release that is going into production this year, MSOs need to look at the management and modeling of targeting as well as the type of advertising that is going to succeed with their customers. This could very well be the next big “silver bullet” for the MSOs in the communications industry game. IT

Kelly Anderson is the Sector Head for Cable Markets for the TeleManagement Forum (TMF), responsible for driving the TMF’s overall cable initiatives. Her experience covers various aspects of the communications industry, such as consumer behavior tracking, personalization, interactive advertising and operational functions for cable operators. Anderson joins the TMF from, a collaborative industry consortium and leader in next-gen IP service usage and exchange standards worldwide, now part of the TMF.

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