NCTA: Ad model set to change

ATLANTA--Advertising-supported television isn’t going away anytime soon, but it will be dramatically changing, executives at the National Cable & Telecommunications show said today.

The spread of video to the Internet and mobile phones, the proliferation of digital video recorders and the shift of ad dollars from TV to the Internet are all having an impact on traditional thirty-second and one-minute advertising slots which have paid for TV programming to date.

Content providers can’t fight these trends because they are consumer-driven, said David Zaslav, president of NBC Universal Studios, but they will have to adjust.

“We don’t know yet if people are going to sit in front of their PC and watch an hour-long show or if they are going to watch it on their iPods,” he said. “We know they are experimenting. We have to follow consumer behavior and be aggressive about being on all these platforms.”

Advertisers also want to be on these platforms, he said, but they understand that the industry is in transition. Among other things, it needs to develop a way of measuring audiences on newer platforms, Zaslav said.

“Advertisers are willing to give us a little wiggle room,” while a new business model is developed, he commented.

One possibility is for ads to become programming and compete for viewers, said Tony Vinciquerra, president and CEO of Fox Networks Group.

“I am confident that we have enough smart people in our business and enough smart people in the advertising business to figure this out,” he said.

One of the expected changes is increased focus or targeting of ads. Cable companies already do digital ad insertion that puts local ads onto their digital networks at the local hub. Later this year, Terayon, the leading provider of digital ad insertion equipment, will trial adding local content to national ads, said Kanaiya Vasani, vice president of marketing.

“The next step is demographic targeting,” he said. “We will stream multiple ads to the set-top, and the set-top will pick the right one, depending on who is watching.”

Those decisions can be made based on the time of day or the program chosen, Vasani said. “There is also spot optimization, which uses different creatives from the same advertiser, depending on who is watching.”

Telephone companies are already planning to do similar focused advertising on their IPTV platforms, he said. “Our equipment is already deployed in the cable network and these changes can be made with software upgrades,” Vasani said. “We will take that cable experience to the telcos.”

There are multiple options for how to deliver targeted ads, including introducing interactivity, which enables customers to get more information about advertised products and, in some cases, to make a purchase from the TV.

“Cable companies will be able to decide for themselves how they want to do it – we will provide them with a toolkit,” said Matt Goldman of Tandberg Television. “This will let advertisers keep their ads fresh and target their ads more.”

The change could come sooner rather than later, Vasani said.

“Advertisers are very interested,” he said. “And when you are working on the revenue side of the house, rather than the cost side, things move much faster.”