Uncertain future for targeted TV ads in Canada

One of television’s strengths as a vehicle for advertising has always been its ability to reach a lot of people with the same message at the same time. The industry has the technological capability to move in a different direction now and already has, to some degree, in the United States. Possibilities exist that can allow TV advertisers to reach smaller groups of individuals with their commercials that target households in specific locations and in particular demographic groups. “On the Internet, we can order up a male, 25-54 , who’s interested in golf and music, and serve them an ad,” Bob Reaume, vice-president of policy and research at the Association of Canadian Advertisers, said in a phone interview. “This is the kind of level of targeting I think we could get to with addressable television.” In Canada, Cogeco Cable Inc. and Channel Zero Inc.’s CHCH TV said they made Canadian television history by being the first in the country to offer localized advertising when their service, which allows advertisers to target their ads to viewers by their location, was launched in February. While addressable ads have been a possibility for years, other TV providers in Canada haven’t rolled out similar services. Cogeco and CHCH’s system generally targets ads through postal codes, according to Tom McCutcheon, vice-president of partner development at Cogeco. “There are various research firms, for example, that have a demographic code for each postal code,” he said in a telephone interview, noting that people living in the same postal code are likely to have the same demographic characteristics. “An advertiser could say, ‘I just want people with an average income over X, who live in this area, to get this particular ad,’ ” he said. “A car dealership, for example, may want to have the pickup truck go in rural areas, the minivan in suburban areas and the sports car maybe in higher-income areas, maybe within 50 kilometres of a dealership.” McCutcheon added that targeted ads also make it possible for smaller companies, who wouldn’t otherwise be able to afford it, to advertise on TV; now they can buy ads that broadcast only in a specific neighbourhood and to the types of customers they want to reach, he added. While CHCH is the first broadcaster to trial the new service with Cogeco, the cable company is also making the service available to other broadcasters in the Golden Horseshoe area in Ontario. Fred Di Blasio, senior vice-president of corporate development at Invidi Technologies Corp., which makes software for set-top boxes to enable targeted ads, including those used in the Cogeco and CHCH trial, said that for the company “right now… the active deployment is Cogeco.” “And we are at various stages of discussions with all of the , be they satellite or cable or IPTV, in terms of a launch,” he said in a phone interview. Rogers Communications Inc. and BCE Inc. did not return requests for comment for this story, while Shaw Communications Inc. declined to comment. In the U.S., addressable ads are more widespread, with companies including DirecTV and Dish Network Corp. offering the service. Last year, Invidi teamed up with U.S. cable giant Comcast Corp. and is “actively rolling out across their footprint as we speak,” added Michael Kubin, executive vice-president at the company, during the same interview. South of the border, addressable ads reach about 40 million households, Reaume said. Invidi’s technology is currently in more than 25 million of those set-top boxes, Kubin added. Kubin explained Invidi’s addressable ad technology “knows” who’s watching, either by geographic location or because it’s been loaded with data on the household from a research company. “Does it have a dog? Are there kids in the house? Do they travel a lot? What kind of car do they have?” he said. “And then it can also infer age and gender based upon viewing patterns of that box.” The software then “makes a selection of the best ad or ads to run for that person, based upon that person’s age and gender and geography and income and all that other stuff,” he said. “The decision is made right there, at the set-top box level.” Since the addressable ad technology resides in the set-top box, targeted ads are actually the domain of the broadcast distributors, instead of broadcasters, who have traditionally been the ones to offer television advertising. For the Association of Canadian Advertisers’ Reaume, addressable ads will be the technology that allows television to keep pace with the attractiveness of video on the Internet. “In my opinion, I think television has to move to dynamic insertion, addressable television, in order to remain competitive with online video,” he said. Reaume said Canada was lagging the U.S. in the addressable-ad space partly because U.S. broadcast distributors can sell two minutes per hour of advertising directly, yet the CRTC forbids the same of service providers in Canada. “We would like to be able to purchase the local avails in Canada, but the commission has decided it’s not in the cards,” he said. At the same time, in Canada, vertical integration would make it easier for broadcasters to sell targeted ads directly, Reaume noted. “The stars have aligned naturally in the past five to seven years, whereby the distributors are now owned by the broadcaster here in Canada, or vice versa. So all they have to do is a make a deal with themselves for this to happen,” he said. Cogeco’s McCutcheon said targeted ads open a new revenue stream for broadcast distributors by allowing them to profit from advertising. In the CHCH trial, it’s the broadcaster who sells the advertising and generates advertising revenues, he said, and in turn compensates Cogeco for “enabling the technology and advertisements to be targeted.” He added that “if television broadcasters can go to agencies and advertisers and say ‘I can give you the power of TV and I can localize it like the Internet can,’ it’s the best of both worlds,” he said. Duncan Stewart, Deloitte Canada’s director of technology, media and telecom, was less optimistic about addressable ads in a telephone interview. He noted that the current TV system already allows different demographics and people living in different cities to be targeted pretty effectively. “I can show ads in Toronto that are not seen in Vancouver,” he said, adding that the demographic audiences for popular reality shows like Duck Dynasty are different than, for example, those for cable drama Mad Men. Audiences for, say, fishing shows or NASCAR are “highly characterized and usually from extremely well-defined demographics that don’t change a lot over time,” he said. Another drawback for targeted ads is that producing television ads is expensive. “Most ads cost hundreds of thousands of dollars to millions of dollars for 30 seconds of advertising,” he said. “The current level of sophistication and cost or the average 30-second television ad is such that you cannot make 100 targeted versions that would work with each sub-segment audience.” He noted that Deloitte’s prediction for targeted ads last year was that while they are something that’s been tried for years, “they are unlikely to be, quote-unquote, ‘the future of television advertising.’ ” Stewart added that “one of the things that works about TV is that it’s a shared medium.” “It costs a lot, it reaches a lot; that’s the power of TV. Trying to make it a one-on-one pitch — that’s what direct mail and Internet . There’s a lot of solutions for that already,” he said. “Trying to make TV more niche may in fact decrease the value of it.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Uncertain future for targeted TV ads in Canada

News | May 6, 2014

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Uncertain future for targeted TV ads in Canada

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