July 1, 2008

Advanced Advertising Progression

The Personalized Future

By Ray Bontempi, Motorola

The old advertising maxim holds that half of all money spent on advertising is wasted, but the problem is knowing which half. With the emergence of online advertising, this statement is now virtually obsolete. These days, search engines target ads based on the search criteria a user enters. Retail Web sites have long made suggestions for new products and services based on a user's previous orders. As analog video systems have been converted to digital, the process of inserting localized advertising has become significantly simpler and more flexible. Localized digital ad insertion has been a success story for the industry, but only represents the beginning of a resurgence of new advertising revenues, new customer interactions and new target audience reach.

Advanced advertising - delivery of highly targeted advertising to well-defined audience segments - is a growing trend, spurred in large part by the success of personalized advertising delivered to consumers via the Internet. Mass advertising is a $70 billion industry today, with about $20 billion traditionally being spent in TV advertising alone. As advertisers gravitate toward highly valuable personalized advertising, the challenge for video service providers is to grow their delivery platforms to capitalize on the opportunities for delivering targeted advertising and by exploring new advertising models that are unique to the TV platform.

As service providers develop more sophisticated methods of targeting and personalizing advertising, revenue potential increases, and consumers benefit as well. Consumers get information tailored to their preferences and locations. Advertisers benefit from better return on their ad spends, as they provide information to an interested audience for their products and services.

Categories

Some main categories of advanced advertising are emerging.

1. Localized advertising: Localization covers insertion of locally generated ads and the customization of national ads for a local audience (with overlay graphics or with customized sections of video).

2. Telescoping advertising: Telescoping advertisements allow users to interact with live commercials to transition to a longer form advertisement or to request information (sometimes referred to as RFI, request for information).

3. Targeted advertising: Targeted advertising usually refers to an advertisement that is specifically targeted to a household, set-top or even an individual user. The appropriate ads are selected and can be inserted into video streams that are individual - usually video on demand (VOD), switched unicast broadcast and DVR playback sessions.

How it works

Localized: In the currently deployed localized advertising architecture, ads are ingested into a network accessible library and identified with unique metadata. Standardized interfaces exist between this library of ads, the splicer (which places the ad in the video stream) and the scheduling server. At the appropriate time, the ad splicer inserts the local advertisement into the national feed. Overlay graphics (such as a local car dealer's information or local air fares) can be overlaid on top of the broadcast video in much the same manner.

For example, while watching an episode of a network's newest sitcom, viewers may see the same car ad, but dealer information and sales information can be graphically overlaid on a national ad to deliver information targeted to a specific city. The benefits of this are a more relevant ad for the consumer, the opportunity for a local business to leverage a national advertising campaign, and more revenue opportunity for the operator.

Targeted advertising technology enables providers to push unique commercials to different target audiences - all of whom might be part of a larger audience watching the same program.

Telescoping and RFI: Telescoping and RFI-type interactive advertising could provide an extension of the targeted advertising buy, eventually providing such capabilities as an onscreen menu during a car commercial that will allow viewers to use their remote controls to view an extended VOD about the advertised vehicles. This interactivity is a key part of the success of Web-based advertising, and as the lines between TV and Internet continue to blur, consumers will come to expect interactivity and an ability to control the depth of content they choose to consume.

Telescoping technology can be implemented as a VOD session, initiated from an onscreen graphic, or it could pull a pre-positioned video clip from the local hard drive. The effect to the user would be similar, but this type of flexibility allows the operator to balance network and local resources. As shown in Figure 1, regardless of how the ad is inserted, the experience to the user involves automatically pausing the currently viewing video (either on the DVR or on the switched unicast session) and moving to an individually controllable long-form ad.

FIGURE 1: Telescoping advertising

With RFI capability, the on-screen menu will enhance viewer interaction with options to order a vehicle brochure, to send an e-mail and schedule a test drive, or to link by voice or online chat directly with someone connected to the local dealership.

The dealer's interaction with an actively interested potential customer is set into motion entirely from the TV set and without the consumer going to any more effort than pressing a few buttons. From a revenue perspective, a standard localized 30-second spot generates about $0.02 per viewer for the operator, whereas a 30-second interactive telescoping or RFI ad could generate substantially more. For high-value items such as a car, it may be worth several dollars for a single RFI or telescoping ad click.

Personalized advertising: Personalization directs and customizes advertising to specific households, set-tops and/or individuals. This type of advertising can be applied in situations where the individual video stream is under complete control of the user (either a DVR session, VOD or startover session, or controllable switched unicast). The specific advertisement selection is determined from an "engine" that identifies the most appropriate advertisement and directs the ad selection to the appropriate device (DVR, network splicer or VOD server).

Similar to the localized ad options, personalized ads can be modified with video, graphics, and in the selection of the advertisement itself. Telescoping and RFI information could also be embedded in these advertisements.

Delivery options

Targeted advertising can be delivered in many ways. There are tradeoffs among these approaches, and a hybrid of set-top and network-based approaches will likely be successful. Network-based targeted advertising can be seamlessly spliced into the video delivery stream without special set-top software. This is already done today for localized ads.

In the future, as networks move toward switched unicast (where each user has a separately controllable and individualized version of broadcast channels), this model can be expanded, splicing advertisements into these streams. (See Figure 2.) This model benefits from its ability to work on all video receiving devices. A client-based, switched-in-set-top system allows targeted advertising to be delivered using special set-top software that switches between available broadcast streams with different commercials. This model requires switching software in the set-top box and more plant capacity, but provides more flexibility and personalization than today's localized ads.

FIGURE 2: Ad trends going forward

The DVR-based solution pushes ads onto the DVR hard drive before viewing and then splices these ads in at the appropriate time in either live TV or on DVR playback. This solution is very flexible, allowing the operator to place ads in the broadcast and playback of content. VOD-based advertising provides the opportunity to place personal ads as well, since the stream is already individualized, and the technology exists today to place bumper and internal ads into video assets.

The good news for network operators is that a lot of the technology required to deliver targeted advertising is already widely available and implemented. On the client side, some set-tops enable delivery of targeted advertising through applications by certified partners and allow two-way interactivity through the remote control. Some ad servers can insert any advertising into or around video content.

Increased options

On a basic level, targeted advertising has been going on for years, with localized ads being spliced into video streams. Graphic overlays are common on everything from car commercials to franchise store commercials.

Ultimately, operators who deploy the technology into their networks determine what to do with the aggregate data they receive. The industry as a whole is committed to ensuring that customer information is protected and that our systems be built with this in mind. As we have seen with a number of operators and providers recently, including TiVo and Verizon, the trend is toward allowing people to opt-in or opt-out of this type of information sharing.

The future

The advanced advertising management ecosystem is a cooperative effort. On the one hand, it's sales driven, with advertisers, media buyers, content owners and networks all having a stake in the outcome. From another perspective, the emphasis is on the business process where selling, managing and reporting need to be done consistently based on a business model where value added is perceived by advertisers and consumers, not necessarily quantified.

As broadcasting heads toward "unicasting" in answer to increasing consumer demand for personalized content delivery and technology integration, this evolution of traditional advertising models enables more strategically targeted, efficient commercial buys for advertisers and offers increasingly relevant ad programming and convenient product information to consumers.

In a time when service providers are searching for new revenue streams as their traditional advertising revenues decline, this industry trend toward advanced advertising is an essential and inevitable progression - a progression driven by network operators, advertisers and consumers alike.

Ray Bontempi is senior director of product management, Home and Networks Mobility, for Motorola. Reach him at rbontempi@motorola.com.