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Local cable advertising: the basics

Okay, class: Here's the fundamental explanation of what "local cable advertising" is all about.

We're actually going to start backwards, by telling you what local cable advertising isn't. It isn't the commercials that play nationally on a cable network. In other words, when you watch a national cable network -- let's say ESPN -- and you see two commercials back-to-back for Budweiser and Scott's fertilizer products, you're watching national ads, not local spots. Those same two commercials are seen simultaneously across the U.S. by anybody who happens to be watching ESPN and paying attention. The Cincinnati Bengals fan in Kettering, Ohio sees the same commercial the Seattle Seahawks fan in Tacoma sees.

So we eliminate that category right off the bat. What does it leave us? With a smaller number of "local" commercials that appear within the same ESPN network signal, but are clearly meant for local audiences only. Here are the three main categories of local cable advertising.

Local advertising insertion . Cable TV networks like ESPN give 2 or 3 minutes of advertising time each hour to their video distributors -- the cable, satellite and telco-video companies that constitute the "pay television" industry. These are companies like Comcast, DirecTV and Verizon's FiOS TV that collect monthly payments for television service.

A couple of times per hour, they'll insert local commercials into the program breaks provided by their network partners: ESPN, MTV, HGTV and the like. This is mainstay inventory for local cable advertising. The way local ad time is allocated is essentially identical to the way television advertising works in the over-the-air, broadcast TV domain. The big broadcast networks (ABC, CW, FOX, etc.) also give some time to their local TV station affiliates to sell to local advertisers.

But there are key differences. To a broadcast TV station, a "local" commercial plays out across the entire reach of the TV station's over-the-air signal, or, in official FCC parlance, its Grade B Contour. That means, for example, that in Denver, the local commercial played out by the ABC network affiliate KMGH-TV shows up in central Denver's swank Cherry Hills neighborhood, and it also plays in the mountain community of Evergreen, Colo., about 30 miles to the west. Same commercial, same TV station, market-wide coverage. Cable companies have a very different geographic profile, however. Because of the way their physical networks are stretched across a metro area, cable companies have the ability to parse the reach of a local commercial much more granularly, by selected geographic "zones." Again using Denver as an example, the local cable operator Comcast can place several different commercials into the same program break provided by ESPN, with each playing out at the same time into a different zone within the broader Denver market. Thus, the viewers in Cherry Hills might see a different 30-second commercial than viewers in Evergreen, even though they're watching the exact same cable channel at the exact same time. It's a nifty feat of geo-targeting that sets cable apart in the local television marketplace.

Regional or national "spot" cable . Beyond single-market local ad insertion over cable (Denver, for instance), it's also possible to play commercials out over multiple local cable geographies. Imagine a footware retailer with locations across the southeastern U.S.. To advertise a big back-to-school sale on running shoes, the store owner might decide that it makes sense to target teens who watch a lot of BET and MTV. But because the retailer has a regionalized presence, it probably doesn't make sense to buy a national commercial on MTV. Why pay to reach viewers in San Diego, Dallas and Boston when there are no stores in those markets? At the same time, the retailer's ad agency may find it arduous to make separate local cable purchases from separate cable companies across a dozen more more cities in the southeast, where it does maintain stores. The solution is known as "spot" cable, or "national spot" cable. (This latter term is confusing, in that buyer really aren't buying a "national" footprint. "Regional spot" would be a better description. Nonetheless, it persists.) The "spot cable" market allows an advertiser to contact a single sales organization that will take on the work of making sure the right spots are televised on the selected cable networks, only in the markets they want. And anymore, chances are that "single sales organization" is one company. Owned by three large cable companies, it's called NCC, and you can find its website here . The spot cable market is growing as advertisers warm to the idea of making regionally concentrated buys across multiple cable geographies. Political candidates, in particular, are spending more on the medium.

Household-specific advertising . One last level of "local" cable advertising is the smallest, but the most intriguing and the one many are looking to for rapid growth. Also known as "addressable" advertising, it refers to the ability to associate commericals with individual households, not just broad geographic zones. Here, it's possible that next-door neighbors who happen to be watching the same national cable network at the same time might see entirely different commercials. One household, which includes children, sees a spot for a restaurant that features a Family Night special. Next door, the childless couple sees an ad for a high-end automobile. This emerging market features the most granular interpretation yet of a "local" commercial -- one that's directed at an individual cable-subscribing household.