SMG's Scheppach: Marketers Are Hungry for Holy Grail of Addressable Advertising
Exec says more media owners, distributors must be involved first
By John Consoli -- Broadcasting & Cable, 2/9/2012 2:25:58 PM
As resident expert in addressable advertising, tablets, online video, DVR and VOD usage, converged TV, interactive TV, mobile video and set-top box measurement, Scheppach helps invest clients' dollars across all video platforms.
Scheppach talked to B&C contributing editor John Consoli about the status of addressable advertising, SMG's joint testing of addressability with DirecTV and where TV Everywhere fits into the advertising equation.
You were quoted in a story last February as saying you are hoping the TV industry can be 100% addressable-enabled by the end of the decade. What progress is being made to meet that milestone?
Of course it's an ambitious goal, but I'm thrilled to say we are making great progress; 2012 will be a very pivotal year.
The two major satellite companies, DirecTV and Dish, have already taken outstanding strides in enabling household addressability. Add to that Cablevision's full deployment, and the potential to reach approximately 20 million households with individual messages-anonymously delivered to each household in a relevant manner, based on the wealth of available data-becomes a reality this year.
I believe this foundation, coupled with the potential support of a few national cable networks such as NBCU, Viacom and Turner, will cause us to reach a tipping point.
It is clear, however, that other media owners and distributors will need to come on board to reach our goal of 100% addressable-enabled TV by the end of the decade. Cable, telco and over-the-top [OTT] providers will have to find a way to participate in this marketplace and I know several that are actively pursuing their options. For OTT providers like Netflix and Hulu Plus-whose combined reach is well over 20 million home-it has become commonplace to stream video to a TV through a multitude of devices, from a connected TV itself to a gaming console like the Xbox 360. All of this content is streamed using unicast, one-to-one delivery-the type of system we need to enable addressability.
The bottom line is that both media owners and distributors need to find new ways to grow their business. Even with a short-lived rate increase, media owners are struggling to keep revenues flat, due to shrinking TV audiences, and with distributors reaching a subscription-price ceiling with consumers, both need a new model for growth. At the same time, marketers are exploring all available options to improve the efficiency and efficacy of their media investments; they too are looking under every rock to find a solution.
So what is the best solution for all of the above? I believe the only answer is addressability. I have been working on addressability for more than a decade now and one thing I've learned is that this is neither a sprint nor a marathon: 100% addressable-enabled is more like an Ironman triathlon...and we are only a mile into the swim.
What is the status of your testing with DirecTV and what progress have you made there?
We signed a pioneering deal with DirecTV about a year ago with the intention of developing a platform that will ultimately drive heavy client investment. We anticipated that the product development phase would last about 15-18 months.
Following the industry release, we started working immediately with their engineering team to develop a truly groundbreaking product. Addressability changes the fundamental approaches that we, as an industry, have used for decades and every day our combined team works through the challenges of deploying the first nationally-addressable platform at scale.
DirecTV began with applying addressability to local inventory in a partnership with NCC. Since its launch last year, they have been able to play in the local cable sales business for the first time. I'm very excited that the product is live and functioning beyond expectation. This is a true milestone for DirecTV.
In the second quarter of 2012, Starcom MediaVest Group will begin to use the exact same technology to target campaigns at a more granular, household level. There are a lot of issues to tackle and we have done a lot of work in areas such as system integrations and targeting criteria that will be utilized. We are beyond excited by the progress that has been made and we are ready to get started.
Can any one media agency company or group get the industry going on addressable or does it have to be an industry-wide effort?
I do believe a few pioneers can create the momentum, but there is no doubt that it will take an all-encompassing effort for addressability to reach its potential. I'm a huge believer in collaboration and my role in The Pool, an industry-wide initiative to accelerate spending on proven approaches within new media platforms, supports this fact. We have worked in collaboration with more than 100 blue chip companies in six countries to find better ways to advertise on platforms such as online video and tablets. All of our findings are shared openly with the entire industry.
We also launched a choice-enabled online video ad model, ASq, as part of The Pool over a year ago with the intention of industry-wide usage to ensure investment in the best online video ad model for advertisers, publishers and consumers. Other agencies and holding companies have leveraged this model and we couldn't be happier. Just over a year later we've run over 150 ASq campaigns with 40 advertisers across 11 publishers and the results have been outstanding.
The entire spirit of VivaKi and its Nerve Center entity is based on collaboration and fluid partnering between agencies and other industry players. As an industry, we need to move past silos and working behind closed doors to deliver open, industry-wide solutions. Partnering with today's leading players will help us move forward faster.
Some networks have said that their priority is TV Everywhere and getting that technology in place, and that addressable advertising is less important. Do you agree or disagree with that?
In this rapidly changing media landscape it is a requirement to be able walk and chew gum at the same time.
In my opinion, operators need to focus on two priorities: authentication and advertising innovation. In terms of authentication, or what the industry has coined "TV Everywhere," operators must follow the consumer to whatever platform they choose. This is simply a smart defense. Operators cannot let subscribers drift off to other companies' offerings to access the content they would normally get from their current subscription fee.
Simply put, operators must embrace TV Everywhere to protect their core business models and, given that subscriptions are generally more than 90% of their revenue, it does make sense that that is their priority. But how do you grow your business by offering consumers more without charging more?
If they want to increase overall revenue, they must focus on the reinvention of their advertising business, and addressability is what clients need. It allows current advertisers to get more value for their investment, niche brands to embrace TV for the first time (think Corvette or Volt) and provides a new platform for the mammoth, $50 billion direct mail industry.
How passionate are clients about getting the addressable model up and running?
There is a reason addressability has been referred to as the "Holy Grail of Advertising." After we announced the DirecTV news, we held over 60 client and account team meetings to brief them on the opportunity. Every single one has expressed interest in being a part of this initiative. The concept behind addressability is exactly what clients are looking for: improved efficiency and effectiveness. We know this is something marketers are hungry for and we intend to work collaboratively with the right players to help bring this opportunity to market.
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