I had a dream on addressability and targeting!

Figure 1 Interoperation between Geographic, Demographic, Pyschograhic

Ok I do have dreams on occasion about advertising (which some people might think is a little sad!!). But this morning when I rolled out of bed and wondered if it was possible that we could be entering a world in which advertising, rather than just being a revenue generator for everything on the Internet and TV, could also become about “putting an advertisement in front of a consumer that they actually wanted to watch”?

In a sense this is the holy grail of advertising. At the end of the day this is precisely what the advertisers want too. They want the consumer engaged and interested in the advertisement and often in a frame of mind to purchase the product or concept that they are promoting. There have been many technical limitations that prevented us from achieving this holy grail particularly on live TV. However, even on the Internet, with the cookie based tracking that is carried out, it is difficult in the extreme to achieve this goal. Don’t believe me? …well go on any website and look at banner ads and rate your level of interest in them. J

However, for a large number of technical reasons we may be entering a new dawn for video advertising where in fact we may be able to put an advertisement in front of consumers that they actually want to watch!

Addressable advertising (as it is “formally” named) has proven its success on-line by providing a lift to ad response rates for both brand and performance advertisers. LinkedIn, the popular social network for professionals, has reported that by using new targeting tools, the click-through rates lifted three to four times Linkedin report: http://www.entrepreneur.com/article/219624

An Ace Hardware campaign achieved a 60% lift in brand awareness and greater than 10% increase in click-through rates (CTR) for a targeted campaign managed by Microsoft Advertising (believe it or not, they are indeed into advertising). More recently, Facebook made public something that I always suspected, that they will soon be using your Web browsing to help decide which advertisements you watch!

Facebook to show you ads based on your Web browsing:

http://www.cnn.com/2012/06/18/tech/social-media/facebook-ads-web-browsing/index.html

Let’s contrast this with TV advertising!

Today TV advertising is primarily sold by demographics. Cable network advertising is sold by DMA or “geographic regions”. However, the point is that addressability is achieved as a poor overlay over the network due to technical limitations. The majority of advertising is schedule driven. The DMA’s have an approximate fit demographically (basically the demographic data represents the majority of the users in the DMA and the non majority get the same live local ads as the majority).

Stages of TV addressability

TV ads' addressability improvements are going through three different stages.

These three stages are not separate from each other. To the contrary, if they work together, the strongest addressability can be achieved--- not only do advertisers find their target customers, customers also find their "target" ads. Each stage builds on the previous stage in terms of refining the addressability and targeting.

1. Geographic targeting. For example, DMA and household targeting. DMA level targeting is a multi-billion dollar industry and has existed for many years now. Let me discuss them one by one:

An example of DMA targeting is local ads, which we play quite often on TV at your home. Thus every person watching live TV in Acton, MA watching CBS at 9:00 PM will see the same local ad. However in Cambridge, MA all users watching CBS at 9:00 AM may see a different local ad.

Household level targeting is not really used as of yet though many content distributors are attempting to achieve it.

Initially when local ads were introduced, local business owners found that it was what they could afford and that it was a very effective way to increase their local business. Shortly thereafter worldwide organizations started to learn the benefits of local advertising. They either used the same ads with different coupon information, or they used totally different advertising targeting people in different areas. This trend also happens in online advertising.

Research-Shows-National-Advertisers-Buying-Local-90

Finer grain geographic targeting is household targeting or say family targeting.

A simple example of it is if two households in Acton, MA are watching CBS at 9:00 pm they would see different advertisements in the local breaks. Technology is making it easier to do this now, but NOT on TV. Instead Live TV delivered to Ipads, Iphones, Smartphones and the web is technically able to do this. Traditional TV’s are being enhanced to address this capability too but there are major technical upgrades that need to occur in traditional cable and Telco networks to achieve this goal with traditional TV’s (actually with the set top box that is typically next to the TV).

2. Demographic targeting, such as targeting a woman aged 25-34 years old. Demographic targeting on DMA’s has existed for many years too. However, as described above, the demographic data for a DMA is for a large number of people. DMA sizes differ but they range from 5,000 to 50,000 users for operators that have implemented local targeting. The natural result is that the demographic data is not applicable to ALL users in the DMA, but rather to the majority of the users in a DMA. This example shows the strong inter –relationship between each of the levels of targeting where the geographic targeting, not being fine enough, reduces the effectiveness of the demographic targeting that is layered on top.

Then, move to the harder part-- demographic targeting, which is the second stage. Now some companies could conduct advertising campaigns to target different groups with various factors such as age, income, education background, family composition and so on. It will help advertisers to find the customers that they want to target. But is this the most effective way for advertisers to run their ads, or is this the way customers want to watch the advertising? My answer is no.

More precise demographic targeting layered on top of geographic targeting has been done in non TV industries such as direct mail for many years and is quite effective in reaching consumers. In this case, the usage of more precise geographic targeting, coupled with more precise demographic data, has yielded a very effective mechanism for targeting users.

However, it does not pass the smell test for ads that consumers WANT to watch. In short, how to make demographic ads more effective is a problem. For example, even in the direct mail industry the wastage is enormous (how many of the mailers that you get in the mail do you throw away? How many do you ever respond to?)

3. Behavior and psychographic targeting. What is behavior targeting? "Behavioral Targeting refers to a range of technologies and techniques used by online website publishers and advertisers which allows them to increase the effectiveness of their campaigns by capturing data generated by website and landing page visitors." (Wiki)

What is psychographic targeting? What is the difference between psychographic targeting and demographic targeting? The picture below answers this question.

Source: http://mashable.com/2011/06/30/psychographics-marketing/

There are ways to solve the problem: the third stage- behavior targeting and psychographic targeting is essential. These two methods are of utter importance when it comes tobringing customers the ads that they want to watch.

Browsing history, customer profile information, recommendation, all improve TV ads' behavior targeting. And what the Facebook(mentioned above) is doing online is behavior targeting.

In typical Internet advertising the focus is on creating the context for the user. For Example Google uses the context of the search to place advertisements. Although there is an ongoing debate as to whether behavior targeting is better than context targeting, there is no doubt that in addition to context, when the consumers' behavioral targeting is used, the targeting improves dramatically. There is a lot of research supporting my view: (1. Behavioral targeting was the most effective way to target ads (2006): http://www.bizreport.com/2006/11/behavioral_targeting_most_effective.html#;

2. behaviorally targeted ads achieve higher CTR and ATR(2006): http://www.clickz.com/clickz/news/1712836/study-behavioral-ads-convert-better-out-context

3. Behaviorally targeted online ads get better reception than contextual (2007)http://www.marketingvox.com/behaviorally-targeted-online-ads-get-better-reception-than-contextual-032954/

4. A new study is out showing the value of Behavioral Targeting(2007).
http://webanalysis.blogspot.com/2007/09/behavioral-targeting-better-than.html#axzz1yUtTIIzz)

Pros and Cons

So what are the pros and cons to this approach?

	Pros	Cons
Consumer	More relevant ads	Privacy
	Fewer ads (probably)
	More choice
Advertiser	Better targeting	Higher CPM
	Higher conversion rates
Content Distributor	Higher CPM	Irate customers
	More relevance

Summary

The clear issue then becomes one of privacy. The interesting thing is that in reality neither the advertiser nor the content distributor is interested in invading the consumers’ privacy. They both just want to connect the advertiser with the consumer.

The challenge is putting together the underlying information to provide consumers with ads that they want to watch while keeping the subscribers’ actual information as anonymous as possible. There are precedents in many advertising industries such as the online world and the direct mail industry. There are legal requirements in many countries in the world that need to be adhered to and I hope actually that the video industry can set a higher standard for privacy than is actually required.

There is clear value to everyone involved in the food chain from the consumer, to the advertiser and the content distributor. Technical limitations are decreasing. There is an opportunity in the video advertising industry to achieve the goal of putting ads in front of the consumer that they actually want to watch!