Google’s CEO Eric Schmidt stood up this week at an investment conference and said that Google is chasing what most believe is a $70 billion plus TV advertising market, by offering addressable advertising. It has conducted tests with cable operator Astound Broadband in Concord, California and this week the Wall Street Journal revealed details of the secret trial for the first time.
And already the cable operator market leader in the US, Comcast, says that it is interested in the technology. Comcast is the largest cable operator in the US serving some 23 million homes, and already has its own trials going on with more traditional technology suppliers to the cable industry. But it says that addressable ads on cable are unlikely to be seen until well into 2008.
Schmidt said that TV advertising is wasteful because advertising is not targeted and predicted that the next generation of set-top boxes would be addressable Internet devices allowing the right adverts to go to the right homes based on the interests of their occupants.
To us not much of this is new. Addressable advertising is the holy grail and technically the delivery of different advertising to each different home, and the creation of intelligent demographic software by which this can be driven, is already possible, but not quite ready for large scale deployment. There are different schemes in place, mostly in IPTV services and obvious in internet advertising, where this is being worked on and if it is not already actively being used, then that’s only a short period away.
Mobile TV is also looking at the issue of addressable advertising, and cable (rather than satellite which has separate in-built IP path) is the likely next stop and there have been various technology companies target this space in the past two years, but without significant uptake. The difference with Google is that it has the power and scale to make things happen and it already has initiatives going on in national newspaper and radio, which it can be merged with.
The aim eventually for advertisers is that they could lay out a message in multiple formats and say how many people, and what status and demographic they would want to reach, and when they want to reach them, irrespective of whether the advertising reached them via instant messaging, a web site, a TV program, within a console game or on their mobile phone. A single system that could target all of these formats is certainly the end game for both Google and also for Microsoft with its AdCenter software. This concept has been behind the acquisition by Microsoft of in-game partner Massive.
Google is also known to have advertised for a head of national TV sales to work with a new type of advertising system, which has been taken as confirming the details of Google’s entry into this market.
The existing TV advertising market is just the tip of the iceberg. Addressable advertising makes for two major changes. It means that more advertisers are paying more for each individual they reach, because they know that person is a valid target for their advertising. So in effect the total advertising markets increases. But it also means that local advertising is possible, which means companies that currently use radio and local newspapers could instead use TV. The effect would be to more than double the size of the revenue for TV advertising in any given country.
The Concord trial uses just a small group of advertisers and is really just testing the network requirement and the software, rather than stress testing the system under load. The advertisers use an auction system to select and value the advertising slots.