INVIDI TECHNOLOGIES CEO DAVID DOWNEY has been long been dining out on John Wanamaker’s now ancient and clichéd quote: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
It’s been a key portion of Downey’s presentations to investors and industry folks for years. Now Wanamaker, the innovative American department store pioneer (he’s said to have invented the price tag and the “sale”) died in the 1920s, so one would think that we have progressed beyond the late retailer’s ad spend calculations over the century or so since he spoke those words.
One would be wrong.
Most advertisers know that when using a mass medium such as television (Wanamaker’s was probably newspapers), at best half the people watching are not their target market. Likely even less. Of course, that doesn’t mean the Leon’s furniture spot that airs during the Simpsons, for example, are bad buys, it’s just that the teens watching it probably don’t want a new leather sofa like their moms might. The media buyers aren’t making poor decisions, it’s just not as efficient a process as it could be. Nor as profitable.
Explains the multi-tasking Downey in a recent interview with Cartt.ca: “I just saw a Chips Ahoy commercial here in the background and I haven’t eaten a Chips Ahoy cookie in 15 years… You could run that Chips Ahoy commercial in front of me for the rest of my life and I’m not buying… so that was just a complete waste of air time and it didn’t have to be.”
Downey’s company offers a way to maximize the buy for advertisers and potentially, to dramatically increase revenue for the entire industry.
Invidi’s technology can direct targeted ads not just to neighbourhoods, but to individual set top boxes, so the teenager watching the Simpsons in the rec room might see an Xbox ad while mom upstairs sees the couch spot. The broadcaster, on the other hand, has sold the same 30 seconds to two companies. More, if they’re really aggressive.
The industry has dubbed it dynamic ad insertion and the term has come to encompass slipping new ads into VOD and even PVR streams that the consumer watches. The current BDU policy written over a decade ago could not even contemplate such things and will certainly address this.
It’s not an unfamiliar technology for the Commission either as Downey recently made a presentation to CRTC staff so that they more fully understand it and can ask good questions about it during the hearings beginning next week.
The technology – to which Downey says Invidi owns all of the patents – will open up much larger possibilities for broadcasters, buyers and agencies. And cable companies, too.
Suddenly, the “’sold out” top 10 shows have much more inventory available for sale and even those not sold out, or on specialties, can multiply their ad time inventory along appropriate demographics. “The advertisers should get a slight benefit in terms of maybe slightly lower cost for the actual participation on that commercial. For example, says Downey: “If Mercedes-Benz was paying $1,000 for a television commercial, now they may be only paying $800 for the same commercial because they gave up some audience. But that (part of the) audience was never going to buy a Mercedes so they didn’t really care. So for them, that reduction was a good thing.
“But suddenly Volkswagen buys that same commercial break during the same program. They would have had to pay the same $1,000 Mercedes did, but they paid $800 and they hit the exact people they wanted. So, now the break’s at $1,600 and we still have 20% of it left for the Minivan crowd to sell to families of four,” says Downey.
Sounds like the perfect solution, right? Well… Notsofast.
The technology rides on the distribution platform (cable, satellite, telcoTV, doesn’t matter) and while distributors are clamoring for this, eyeing a (significant) share of any potential new revenue, broadcasters are far more leery, not wanting to share much revenue, if any, with the distributors. And there’s the not unimportant matter of privacy, where the consumer might come to think, “hey, if they can target different ads for my bedroom TV than for my kitchen TV, that’s a little chummier than I care to be with my cable company.”
(Downey says the company’s technology gathers no personally identifiable information and can be dialed up or down in terms of privacy limits, based on whatever the laws of the lands they run in, are.)
While the parties haven’t committed to who should get what in terms of a revenue split, Rogers executives are on record saying they have no wish to begin selling the ad time on VOD or linear TV, wanting that to remain the broadcasters’ purview.
“We are not interested in disrupting the value chain," said Rogers Cable’s David Purdy, vice-president and general manager, television, in a story on Cartt.ca last year. "We want to add value to all three parties (content creators, broadcasters and cable)."
Broadcasters are a little circumspect on the issue. I mean, who doesn’t want additional revenue, right? But they worry about how much more the BDUs will want for performing these insertion services.
On the video on demand platform however, broadcasters are more direct about it, saying that if it they provide ad supported VOD content to BDUs, that “it would be entirely appropriate for broadcasters to keep all of this revenue,” reads the Canwest reply submission from February, quoting an earlier Commission submission from the company.
Right now, VOD rules stipulate that ads can’t air on that platform unless they have already aired on linear TV somewhere first – a rule that ultimately benefits no one. It may prevent cable companies from selling ad time, but broadcasters can’t monetize the extra distribution and advertisers worry about stale ads airing too far past their best before date.
“I think if there’s going to be advertising and if programming’s going to be purchased, non-feature film, it should be coming from a licensee,” said Paul Temple, senior vice-president, regulatory and strategic affairs at Pelmorex (home of The Weather Network and MétéoMédia) in an interview. “And that licensee should place the advertising and have that as a source of revenue. Otherwise, we’ll just end up with BDUs getting around genre (protection) or other policies and just having a proliferation of their own VOD channels.”
But targeted ads in the VOD stream and on linear TV would bring television into the 21st century say carriers. Well-aimed marketing is the reason why web advertising is growing at an exponential pace.
“Advertisers for the most part don’t want to do as much brand advertising as they used to,” said Rogers Communications vice-president, regulatory, Ken Englehart in an interview. “So, the idea that Sparkle detergent makes your clothes sparkly clean just is not as compelling anymore. They want targeted advertising that’s reaching their target audience. And what they really want is… interactivity where they have some sort of measurable way of showing why or how those ads are being viewed. That’s why a Google is worth upteen billion dollars.
“As long as TV is sort of stuck in their analog mindset, they’re not going to be able to get that same level of money from advertisers. What they really need is a way to make their advertising more like Google and we can actually do that with the digital cable boxes,” Englehart added.
It’s also worth noting that Downey’s Invidi technology (a company that got its start in Canada and has a base of operations in Edmonton) is not pie in the sky or “what might be,” either. It’s real. A number of large U.S. cable operators are about to do a mass roll out of the dynamic ad insertion technology in a number of big cities within the cable channels’ local avails – those two minutes an hour American specialty channels open up for MSOs to use for local advertising.
While Downey, due to an NDA, couldn’t say just which ones will roll out the targeting ad technology, recent U.S. reports say Comcast, the biggest MSO, is launching it this spring. The local ad avail market, says Downey, is worth about US$9 billion and there, the MSOs can launch it on their own platform without any need to consult or split revenue with the broadcasters.
This nicely segues us to another Canadian distributor demand concerning advertising: Permission to be able to sell that time in the Canadian market just like American cable companies do. Right now, the policy says 75% of the time must be given at cost to Canadian programmers while the rest can be used to promote BDU services like video, Internet and wireless. It isn’t allowed to be sold but the BDUs see the huge revenue stream Stateside and want a piece of that action, here.
The larger broadcasters are saying “nuh-uh, and by the way, we’d like to know why the ‘cost recovery’ of inserting those ads is all over the place, depending on the cable company.”
“To what benefit are they bringing into the broadcasting to further dice up the already finite pie?” asked CTVglobemedia’s vice-president of regulatory affairs David Goldstein in a recent interview with Cartt.ca. “The destruction of the advertising market is not worth the contribution that this could possibly take to the broadcasting system.”
Many past submissions on this topic have been made over the years (like this one dismissed last year by the CRTC) each saying millions of dollars are being missed – of which a percentage could go to Canadian production.
The smaller independent broadcasters don’t want to just limit the local avail rules to what they are now. They want to repeal the changes made over the years that allowed for cost recovery by the BDUs and that let those carriers advertise their own services. When A&E and CNN and their ilk first came to Canada, the local avail policy was to give all of that time to Canadian broadcasters at no charge to promote their channels.
“We actually dug out the original Rogers filing,” says Pelmorex’s Temple, (who didn’t have to dig too hard since he wrote the original Rogers Cable request to add the U.S. cable nets in the 1980s when he worked at the MSO), “and it said that they’d be free, not cost recovery, and that they’d be made available to promote Canadian services and Canadian content. It just seems over time they’re morphing into something else, so maybe it’s time to go back and say hey, what was your original intent?”
Adds Cal Millar, vice-president and general manager of Channel Zero – owners of Movieola and Silver Screen Classics: If the Commission were to allow ad sales on local avails, “not only would BDUs control all the access to the consumers in terms of distribution, now they’re competing with us head-to-head with free inventory versus cost inventory.”
But given the amount of potential revenue at stake, letting carriers sell the avail time should be a no-brainer, added Shaw Communications regulatory chief Ken Stein, in an interview. “Why wouldn’t you say this is a positive thing, that this is something that we should be doing rather than just letting them sit there? I mean this is the… argument that the broadcasters and the specialty services use, which is ‘we’ve got a shrinking pie therefore you can’t dig into it.’”
Quoting recent BDU financial results, the Canwest submission adds: “There is certainly no case for an additional revenue stream for the BDU sector.”
Shaw president Peter Bissonnette doesn’t like that criticism, saying need has nothing to do with it. The remaining restrictions on inserting more ads and earning ad revenue – be it through local avails or dynamic ad insertion or advertising on the community channel – is just pointless lost potential. “Our company is all about maximizing our opportunities. I mean we’ve grown over the past five years from 7,000 employees to 9,000-plus – and the broadcast industry is going the opposite way. We don’t feel we should be dragged down with that,” he said in an interview.
“The great tragedy of Canada is that instead of the broadcaster working to reshape their business model to bring in more revenue by working with the cable companies on something like digital ad insertion, they’re wasting all their creativity and energy fighting before the regulator to get a handout from the cable company with (fee for carriage),” adds Englehart, (which is foreshadowing our next story).
“This is an example of how our overly regulated market has kind of poisoned everyone’s business plan and prevented them from acting rationally,” he continued. “Unless they get with the program, they’re never going to create big value for themselves. But, if they do get with the program, they can do very well because over-the-air still has the big mass reach.”
TOMORROW, WE LOOK at the issue that has the potential to drown out the whole proceeding: Fee for carriage.
