The Big Opportunity for IPTV: Linear Addressible Advertising

Today’s service providers are leaving money on the table.

It’s hard to imagine that in today’s competitive and economic climate this statement could be true, but today, huge revenue streams from linear targeted advertising are going untapped. Linear targeted advertising refers to the ability to deliver advertising on linear television and tailor it to specific regions, postal codes or even individual viewers, allowing advertisers to reach their precise target audience and generate revenues from relevant ads.

Despite the buzz around addressable and advanced advertising, most implementation work is being done on a limited basis, predominately on cable’s video on demand footprint. Currently, U.S. TV advertising as a whole generates $69.8 billion[1] in annual revenues, according to November, 2008, research by eMarketeter. By implementing technology that can deliver linear advertising to specific audiences with real-time feedback on ad effectiveness, service providers stand to make millions, even billions of dollars.

Linear addressable advertising also promises to provide advertisers with feedback on an ad’s effectiveness in real-time. Using this new model, advertisers will know within minutes how many set-top boxes in the demographic and ZIP code saw the ad. Reports can provide immediate feedback to determine if ads have the right appeal and if necessary to update a campaign in real time. Feedback can be provided for zoned ads as well as for demographically-targeted ads.

In order to unlock revenues from addressable advertising, service providers need to work out an appropriate business model in conjunction with the content provider and have the necessary traffic and billing infrastructure in place.

Content providers open up the opportunity for service providers to carry out the ad insertion process. But this doesn’t mean that content providers must give up all control to the service provider. With the introduction of wholesale ad delivery business models, the content provider can still make the ad selection decision on which ads to use for specific target markets and therefore continue to sell the ad inventory. The service provider can also sell back information to the content provider relating to the number of people who viewed the ad and the number who skipped it. So, instead of placing one ad for the whole of a country or a region, content providers can place individual ads in individual towns or neighborhoods or even target them at specific demographic groups. This creates a win-win-win for the content provider, service provider, as well as the subscriber, who receives more relevant advertising.

Service providers must decide on the level of targeting as well as on the type of feedback. The ad value increases with more granular targeting and more specific feedback, but the required investment also increases. Today, service provider advertising is targeted at coarse geographic zones of approximately 200,000 households. Feedback is based on program ratings which are determined from statistical sampling. Today’s approach can be lucrative for service providers who might expect to generate $5 to $6 a month of incremental revenue per user for zoned ad placement.