Targeted Cable-TV Advertising Systems Deployment

The cable-TV industry needs to move to targeted advertising, but cost challenges such as HD ad splicing and additional infrastructure requirements make it slow going. Here’s a gradual approach that cable-TV MSOs can begin deploying without the need for new set top boxes.

By Yaron Raz, BigBand Networks

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Video/Imaging DesignWire
(11/20/2009 4:30:58 AM)

As competition among pay TV services increases, and new players and categories are introduced, cable TV Multiple Systems Operators (MSOs) today are looking to offset churn with an increase in Average Revenue Per User (ARPU) while keeping subscription rates unchanged. TV advertising in general and specifically for MSOs has been a valuable source of income with a small yet steady annual growth of about five percent. However, as Internet advertising continues to get a larger share of the advertising market due to its increased value-ad to advertisers, service providers are looking to enhance their advertising offering. In addition, today’s economic climate requires any new initiatives to keep CAPEX and OPEX low, while having short payback periods.

This article will introduce and analyze the various tools and technical considerations for advanced TV advertising as well as the migration path from zone-based advertising currently deployed by service providers to the holy grail of TV advertising – one-to-one addressable advertising which entails interactivity, accurate measurement and national coverage.

Current Challenges of Zoned Advertising
While most MSOs have ad zone infrastructure deployed for their broadcast tier today, there are multiple challenges that are associated with the zoned infrastructure:

  • Lack of High Definition (HD) ad premium – Zoned ad insertion is based on splicers and ad servers, whose cost structure is Standard Definition (SD) stream based. An HD stream typically costs 4 times that of an SD stream. As MSOs introduce more content in HD form, they shift some of the eyeballs to the HD version. In order to maintain the viewership statistics of their spliceable channels, MSOs find themselves additionally having to apply splicing and ad servers costs for the HD version, which costs four times the price of the SD version. However, advertisers are not paying any premium today for ads played on HD versus SD. As a result, MSOs need to invest 4 times the CAPEX of their original SD zones just to keep their ad revenues at the same level as they were before introducing HD.
  • Zones are too coarse for demographic targeting – While MSOs are currently pursuing zone-based creative versioning in an attempt to leverage their existing infrastructure, most of the demographic criteria, based on which the versions should be assigned, does not lend itself well to zones. Zones are too coarse and include too many households. As a result, the ability to provide higher revenue-generating ads based on zones is limited, and any premium associated with the ad is low. MSOs need to be able to get finer granularity that can provide better targeting, while keeping any incremental CAPEX and OPEX as low as possible.
  • Lack of accurate delivery reporting – Advertisers are basing their TV spot selection on statistical measurements, which are not always accurate or partial and cannot provide delivery information on the actual ads. On the other hand, online advertising provides accurate measurement of ad delivery, click-through, and viewership, which is one of the main reasons advertisers are drawn to the Internet as a medium.

NEXT: Addressability, Interactivity, Reporting

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