Market dimensions, forecasts and research around cable and multichannel video advertising
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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.
Looking for one? Hiring? Proceed directly to cable/broadband advertising sales guru Jim Birschbach and MediaRecruiter.com.
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DIGITAL VIDEO INSERTION: The placement of commercials into cable or multichannel video program streams using storage and server equipment that translates video content into the binary code of computing. Digital ad insertion systems, now common in the cable advertising industry, originated in the 1990s as an alternative to cumbersome and sometimes-unreliable tape-based insertion systems.
DYNAMIC VOD ADVERTISING: It’s not that VOD advertising isn’t compelling, or “dynamic” in its own right. But here the term refers to the ability to customize the advertising messages appearing within video-on-demand program streams requested by TV viewers. Early in the medium’s development, commercials typically were hard-coded into VOD programs – meaning anybody who ordered a particular episode of a show saw the same commercial. Dynamic VOD advertising allows providers to send different commercial messages to different viewers, depending on household demographic characteristics and other indicators. The behind-the-scenes process is complicated, and bringing scale to its deployment has been challenging, but dynamic VOD advertising remains a signature cause for the cable advertising industry, and its availability is steadily rising.
EBIF: Some of the most promising interactive TV advertising concepts revolve around an odd-sounding technology called EBIF, for Enhanced Binary Information Format. Invented by the cable industry’s research and development arm, CableLabs, it’s a compact but powerful software specification that’s embedded in millions of cable television set-top receivers, and can support some interesting enhancements to traditional (read: passive) TV commercials.
EBIF makes commercials come alive by inviting viewers to respond to what they’re seeing and hearing on the screen. Typically, EBIF-powered commercials include graphic overlays that occupy a small footprint within the total TV screen. Those overlays can do several things. They can invite viewers to request more information about an advertised product – a new sedan, let’s say – by pointing their TV remote control at the screen and clicking. A few days later, a glossy brochure might arrive at the mailbox, or a representative from a local dealership might call with an invitation for a test-drive.
EBIF applications that appear on the TV screen also can invite viewers to find out more information about products or services through longer-form video presentations that appear on the screen shortly after an EBIF overlay is selected. These so-called telescoping applications whisk viewers to an associated video-on-demand program that might offer a virtual tour of our sedan’s interior, for instance. EBIF also supports instant viewer polls that can be tied to advertising campaigns or sponsored contests. There’s little limit to the creativity advertisers can employ to more deeply engage viewers using the interactive TV platform known as EBIF. It supports local and national ad campaigns, so there’s no geographic limit on its suitability.
INTERCONNECT: A collective array of cable and multichannel video providers, typically operating within a common metropolitan or market area, that collaborate to distribute advertisements to more households than any single provider could deliver. Interconnects, which typically offer a single point of sale to advertisers, are designed to overcome complications associated with the geographic fragmentation of the multichannel video industry.
LOCAL AVAIL: The time allotted by national/regional cable networks for local advertisements sold and placed by local cable/multichannel video companies. Most national cable networks offer 2 or 3 minutes of local avails per hour. These time slots are the core asset for cable’s local advertising business.
RFI (Request for Information): A technique for allowing interested viewers to proactively request brochures, catalogs and other follow-up information about products and services they see advertised on television. Using a double opt-in invitation (viewers must affirm they’re interested in more information, and then again verify they’d like it to be sent), RFI offerings are an interesting alternative to legacy direct-mail techniques that push materials to individuals who may or may not be interested in them. RFI was the first national-footprint enhanced advertising product to be introduced by the cable industry’s advanced advertising company, Canoe Ventures.
TELESCOPING: A relatively new technique for enhancing traditional TV commercials with deeper-dive video content that offers demonstrations and explanations of advertised products and services. Telescoping leverages the abilities of video-on-demand infrastructure. When a viewer clicks for more information on a Telescope-enhanced commercial, she/he is actually evoking a discreet video-on-demand stream from a server array maintained by a cable or multichannel video provider. At home, the viewer sees a (typically) 3- to 5-minute video that relates to the original advertisement. Proponents say Telescoping is effective in conveying detailed product information to self-selecting, highly engaged viewers, resulting in a significantly higher propensity to buy.
Here's a quick explanation of how commercials find their way to cable television viewers along three main pathways: national networks, local systems and regional spot purchases.
Questions? Comments? Get in touch!
EBIF triggers. Dynamic insertion. Return paths. Pre-rolls. And that’s just for starters.
Understanding the new language of advanced television advertising is a requisite for participating in a rapidly emerging media sector that could produce up to $4 billion in new revenue by 2014, according to analyst estimates.
So let’s get with it.
ZoneWire, from Stewart Schley Content Services, is all about fostering dialogue, offering education and sharing news about traditional and advanced advertising over cable and other multichannel video delivery systems.
Our hope is that ZoneWire plays some small role in supporting a new, better way to engage audiences through television advertising. By better aligning commercial messages with audience tastes, interests and places, participants in the cable advertising space are (finally) making significant progress in turning TV advertising from an intrusive gambit to a welcome presence in people's lives. Here's to that.
About this Schley guy...
Stewart Schley has written extensively about the media and telecommunications business for longer than he would care to recite, for a range of leading business publications and market research/analysis firms. He does double-duty as a Contributing Analyst for One Touch Intelligence, a provider of expert perspectives on the competitive media and communications marketplace.
More to the point, Stewart has covered the local cable advertising business since 1989 (!). He was Editor and Publisher of Cable Avails, a monthly magazine for the local cable advertising business published by Cowles Business Media, and was the founder and Publisher of CSP: Cable Sales Professional magazine, published by Lundwall Communications. He also wrote the Local Cable Advertising Sales newsletter, published by Multichannel News, from 2005-2007. So them's the credentials.
ZoneWire is made possible (or at least made less charitable) by sponsors that support cable's advanced advertising business. We thank these companies for contributing to the conversation.
Friday, May, 24 2013
Canoe-BlackArrow deal moves DAI closer
By: Stewart Schley
Friday, May, 24 2013
This week’s news about a technology licensing agreement between cable advertising consortium Canoe and BlackArrow suggests some fresh deployments of dynamic ad insertion into cable network VOD programs are close to unfolding.
As we’ve reported, so far the Comcast-Sony-Lionsgate network FearNet is the only cable network that’s “out there” with live, dynamic ad insertion into viewer-requested VOD streams. But Canoe now publicly says NBCU is already testing the DAI waters, and other programmers are in the wings. They’ll be working a footprint that for now covers about 28 million U.S. homes reached by DAI-enabled delivery networks from Comcast and Time Warner Cable. It includes 26 of the top 30 TV markets.
“Programmer usage of dynamic ad insertion (DAI) began at the end of the last year with Canoe rolling out services to FearNET, as well as trials with a number of NBCU properties. Full-scale programmer onboarding led by Canoe is currently under way with additional programmer announcements forthcoming in the near future,” Canoe announced.
That means we’re getting close to a multi-network DAI/VOD world, with Canoe helping various networks assemble the piece-parts needed to make the medium happen. They involve measurement accreditation, campaign management intelligence, marking and allocation of VOD ad positions and some hand-holding for advertising agencies that are brand new to the terrain.
The Canoe-BlackArrow deal relates to one piece of the puzzle, which is the way advertisers manage their VOD campaigns. Shifting creative in and out and scheduling ad availabilities are two big components. The licensing deal specifically involves BlackArrow’s Affiliate software set, which is used by programmers to help advertisers set ad policies, ad sales rights, and asset metadata.
Some translation is in order: setting “ad policies” and “ad sales rights” is part of the bigger brew of inventory positions in the DAI/VOD world. The way it’s likely to work for the most part is that cable networks initially will inject into their VOD programs the same set of national advertisements that appear during the linear broadcasts of those TV shows. Those spots will show up for three days on the VOD programs, so that networks can get credit for viewing impressions that fall under the Nielsen C3 measurement window – literally a 72-hour period in which commercial ratings are counted. In other words, if you’re the viewer at home and you order up FX’s latest “Sons of Anarchy” episode via VOD within three days of its linear premiere, you’ll see the same set of national commercials people saw during the debut broadcast.
After that – and this is where BlackArrow’s Affiliate toolset comes in – programmers can reconstruct the advertising mix within their VOD shows to allow for local cable advertisements and/or different national advertisements that begin on day four and beyond (remember that most VOD programs are up and available for about a month). The ability to carve out these new inventory positions and shift new commercial content in and out of the assets without having to re-send the entire program file is an important piece of the VOD ad puzzle, and it’s the one that Canoe hopes to help solve with its latest licensing agreement.