Targeted Addressable Advertising Using Digital TV
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Arthur Middleton Hughes
Vice President / Solutions Architect
KnowledgeBase Marketing
: Targeted Addressable
Advertising Using
Digital TV
Arthur Middleton
Title Hughes
Vice President / Solutions Architect
SubtitleMarketing
KnowledgeBase
DMDAYS NY
Jacob Javits Center
June 21, 2007
1:25Date
– 2:20 PM
What is happening in Telecom?
• In 2000, we had Telcos, Cable TV companies,
satellite and wireless companies.
• Since then, technology has mixed everything up.
• Cable TV companies are offering phone, TV and
broadband
• Phone companies are offering phone, TV and
broadband – identical services
• The Internet and Packet Switching are
responsible for the changes.
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How Analog TV Works
• Most cable TV today is still analog.
• With analog, 100 channels are sent all together
in a coaxial cable.
• The subscriber uses his remote to click the one
he wants to see.
• No one knows which one he is watching.
• All this will change as we shift to digital TV.
• The change will be due to packet switching.
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What is packet switching?
• For 100 years, telephone service has used
copper wires that entered your home or office.
• You were directly connected to the party you
called by copper wires going through switches.
• With packet switching, phone calls, emails,
websites, & TV are broken down into tiny packets
• Billions of packets travel over the Internet without
direct connections.
Flag: Packet
Ends Here
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Packet #
& Controls
Payload: Webpage, TV, VoIP
or Email
Address:
To where?
Flag: Packet
Starts Here
Voice over Internet Phone Calls
• In VoIP, a voice conversation is sampled 8,000 times a
second and converted into numeric code
• The codes are put into packets and sent through the Internet,
with about 30 to 50 packets / second
• Each of these packets is sent to a specific address: the
person you are calling. They are directed by routers.
• At the destination, the packets are reassembled in numeric
order, and converted back in to conversation.
• The person being called sends packets back as well
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VoIP over the Internet
Each router decides where each packet goes next
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
Router
Router
Codec
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
Digitizes the call
samples 8000 times
per second
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
The Internet
Router
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
Router
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
Flag: Packet Packet # Payload: Webpage, TV, VoIP Address: Flag: Packet
or Email
Ends Here & Controls
To where? Starts Here
Router
Packets travel at the speed of light
Codec
Puts packets in numerical order
Converts digital back to analog
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Digital TV
• Digital TV is also sent in packets.
• Any company can send it: cable, phone, and
electric utilities. Digital TV does not use the
Internet!
• Digital TV uses company owned cables and
wires
• Subscribers use their remote to change
channels.
• A packet goes back to the provider.
• Result: provider knows what everyone watches.
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Digital TV providers know what set top
boxes are receiving
Provider knows which set
top box is receiving what
at all times.
.
“Send me channel 32”
TV Provider
Cable TV, Phone Co. Elec. Utility
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With digital TV, box receives
only the channel requested
not others. Your remote
asks the set top box to send
a packet request to the
provider.
Only two digital channels are received
Channel Being Watched
Guide Channel
Set top box
So the Digital TV providers know exactly what all
digital TV set top boxes are receiving at all times
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TV Ads are big. Direct Mail is Bigger
Billions of US Dollars ----2007 Estimates by McCann
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The TV Advertising World
Illustrative Advertisers
Ford
Di-Tech
Illustrative Operators
Pacific Life
Comcast
Illustrative Advertising Agencies
Y&R
O&M
JWT
Networks (CNN, HBO, TNT)
Time Warner
Illustrative Programs
CSI
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Dr. Phil
Cold Case
ER
DirecTV
TV is not a very cost effective way to get a
response.
• Phone calls and direct mail are the most cost
efficient.
• TV is mass marketing – better for brand
awareness than for direct response.
Marketing
Method
Direct Mail
Phone Call
Print Ad
Direct Response TV
Average Response
Cost
Response
Per
Per
Rate
100,000 Response
1.88%
1,880
$0.56
5.78%
5,780
$2.50
0.13%
130
$0.11
0.04%
40
$0.03
Cost
Per
Sale
$9.13
$4.00
$12.00
$166.67
* The DMA 2004 Response Rate Report
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Index of
Cost Per
Sale
228
100
300
4,167
But, what if you could target TV?
• Direct mail is powerful because it is targeted.
• Instead of mailing to everyone, you mail to
people who have bought something before, and
who have the right age, income, housing type,
children, etc.
• Suppose you could do the same targeting with
TV?
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There is a way
• Digital TV is fundamentally different from Analog
TV.
• 30 million watch Cable Digital TV Today
• Verizon and AT&T are now offering digital TV
• Digital TV permits individually targeted TV ads.
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Suppose this ad went only to households
with babies present
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And this ad would never go to high rise
subscribers
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Units start at $1.4 million. Send this ad only to
those interested who can afford to buy
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TV could be as powerful as Direct Mail
Marketing
Method
Direct Mail
Phone Call
Print Ad
Direct Response TV
Average Response
Cost
Response
Per
Per
Rate
100,000 Response
1.88%
1,880
$0.56
5.78%
5,780
$2.50
0.13%
130
$0.11
0.04%
40
$0.03
Cost
Per
Sale
$9.13
$4.00
$12.00
$166.67
Index of
Cost Per
Sale
228
100
300
4,167
• You get the power by NOT SENDING ADS to
those households who are unlikely to buy.
• Suppose TV could deliver a 2% response rate
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How it works
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Step One: Create a Set Top Box
Database
• Start with the digital TV subscribers, with set top
box number and name and address.
• Append demographics from a compiled database
• The strip off the name and address.
• The remaining database has no personal
identifying information, but is perfect for targeting
of ads.
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Creating a Set Top Box (STB) Database
Set Top Box Number
Name and Address
Zip Code
Demographics
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Remaining
database has
no personal
identifying
information
Set Top Box Number
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Name and Address
Set Top Box Number
Zip Code
Zip Code
Demographics
Demographics
Step Two: find out what advertisers want
• Each advertiser specifies his ideal market.
• This is done by intuition, purchase history, or
modeling – just like direct mail.
• Example: High end lawn mower. Ad Specs:
–
–
–
–
–
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Single family home
Income over $50K
Zip codes near advertiser’s stores.
Ad to run from 6:00 PM to 9:30 PM
Will pay for 20,000 impressions
Why targeting is profitable
• Out of one million households, only 180 will buy
this lawn mower.
• Why pay for one million ads. Why not pay for
18,000? It is much less expensive.
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Step Three: Code the STB DB for ads
• Time: 6:04:30 PM. Advertiser specs run against
the STP DB. Each set top box has an ad
scheduled for it. There may be scores of different
ads.
30 Second Ads
Ads to be run at 6:04:30 PM
Set Top Box Database
Records
Every set top box has one 30 second ad scheduled for it at 6:04:30
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The channel watched doesn’t matter
• At 6:04:30 every digital set top box is either ready
for an ad, or not ready.
• Not ready means the box is watching a DVD, TIVO,
non-ad channel (HBO) or actually turned off.
• Ads will be sent only to those set top boxes that are
ready for an ad.
• Ads will appear on whatever TV program the set top
box is receiving at that time.
• Like direct mail, each ad can have a unique
response code. (Toll free number, or URL)
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How to prove that targeting works
• Send 100,000 Direct Response TV ads to
targeted households
• Send the same Direct Response ad to 100,000
digital TV households without any targeting – the
way TV has always been done.
• See the difference in response rate and
conversion.
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Insurance Ad for Seniors
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Ad for families with children
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Ad designed for just one subscriber
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Step Four: One Click to order products
Digital TV Subscribers have their names,
addresses and credit cards registered. Order
movies or products with one click of their remote.
Click to Order
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The new direct marketing
• Think about it: you can address 65% of all
households in America with targeted TV ads
directed to specific consumers.
• Using databases like AmerLINK you can know the
income, age, lifestyle of every digital TV viewer.
• Send different ads to households with new babies,
with high income, with single family homes, with
empty nesters.
• Digital TV can create a whole new direct marketing
industry. 65% of US viewers will have it.
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How much will Targeted TV Ads Cost?
• TV ads today cost $20 per thousand impressions
• Targeted TV ads could cost ten times that
amount -- $200 per thousand.
• Direct mail costs $500 - $600 per thousand
• TV, if it gets similar response, could be more cost
effective than direct mail.
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Implications for Nielsen
• For 40 years, a few Nielsen households have
reported on what everyone in the US watches.
• With digital TV, the providers can know what
everyone is watching all the time.
• They can tell advertisers the exact makeup of all
TV viewers. You can send targeted ads.
• Digital TV can become direct marketing, not
mass marketing.
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Conclusions
• A revolution has begun in the telecom industry
• Digital TV will change everything.
• Direct marketing will become much more
important as digital TV becomes a direct
marketing vehicle
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Books by Arthur Hughes
From McGraw Hill. Order at www.telecommarketing.com Contact Arthur:
arthur.hughes@kbm1.com
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