Potential Advertising Revenue Increase options
When looking to increase the advertising revenues, the following directions are considered:
- Improving addressability - As advertisers look to reach specific target audiences with specific messages, they are attempting to associate these groups with specific programs, channels and geographic zones that have a higher percentage of the desired audience than the average occurrence in the general population. The parameter used to measure this correlation is also known as an index. Advertisers able to get their specific message only to the relevant audience will be willing to pay more for each impression, as they are only buying the audience they’re interested in. This model has been proven by the Internet advertising as a valid business model. The Internet has taken this model further and provided a “Cost-per-Click” (aka CPC) model where advertisers only pay for viewers that actually click on the ads and get directed to their web sites. This is demonstrated in the following figure:
Fig. 1: Addressability levels and their associated premium
- Interactivity - Adding interactivity to ads allows advertisers to provide telescoping that enables the transition from live ads to longer form ads, known as Request For Information (RFI). An RFI also provides additional feedback on ads. It also allows the TV to follow the “Pay-per-Click” model of the Internet: a subscriber clicking on an RFI button in a TV ad would be equivalent to that subscriber clicking on the link in the banner ad. This provides more information than just impression delivery - with feedback of actual interest of the subscriber in the product/service presented. While only a smaller percentage of ads are a good fit for interactivity, the premium that is associated with interactivity (50 to 100 times more) justifies the effort of putting this mechanism in place.
- Comprehensive reporting - Another area where Internet advertising has an advantage over traditional TV advertising is the ability to provide advertisers with valuable and accurate feedback on the ad delivery and the customer engagement. Traditionally, advertisers rely on statistical measurements to associate specific programs and geographic zones with the number of eyeballs and demographics. However, as shown in the figure below, TV advertising can provide the same robust reporting capabilities as the Internet, based on combining the data on tuning information, advertising system verification files (aka “As run” data), and set-top box (STB)-related demographic information. Accurate tuning information is available as a by-product of Switched-Digital-Video (SDV). In a cable SDV system, when subscribers tune to linear channels, the STB sends a request for that channel to a network-operated SDV server. SDV servers fulfill these requests by putting the corresponding streams on the plant and providing STBs with tuning information for the requested channels. But the SDV servers can also log all the tuning activities and can cross correlate that information in order to provide anonymous profile-based feedback on each ad played. This feedback includes an accurate breakdown of the viewership, tune-away behavior that was observed on a second-by-second basis, as well as message repeat time. These measurements and reports are valuable to advertisers as well as operators for properly selecting the program spots for specific ads as well as for fine-tuning the messaging within the ads.
Figure 2 - Robust reporting capabilities for TV advertising
- Revenue sharing with Networks - The three enhancements described above - Addressability, Interactivity and Reporting - provide additional benefit for advertisers, a benefit that brings ad premiums to the MSOs when selling their ad inventory. But these enhancements can be applied to more than just the MSO-owned inventory. They could be applied to all the ads on the network. These enhancements cannot be implemented by the networks themselves, as they require narrowcasting capabilities, two-way interaction with the STBs, and information about the subscribers. However, MSOs can execute on these enhancements on behalf of the networks for some revenue sharing on the premium. This allows the networks to increase their ad revenues while providing MSOs with an important method of tapping into the other eighty-five percent of ads that are currently owned by the networks. Even though this ad revenue is smaller than the networks’ share, this provides a great up-side for MSOs.
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