Marketing's Holy Grail is coming soon
For Madison Avenue, the Holy Grail is television commercials targeted to individuals on a home-by-home basis.
Now, a company called Invidi, using technology developed at legendary television pioneer Sarnoff Corp., is preparing to introduce the Holy Grail to the marketplace.
"The emergence of the digital set-top box allows us to present targeted ads in this fashion," said David Downey, Invidi CEO and president. "We can provide different commercials to individual residences."
Invidi's technology allows television to replicate the direct marketing industry model.
"Just as direct marketing sends advertising to individual homes via the mail, cable television and satellite operators will be able to send targeted commercials to specific homes," explained Downey.
Invidi's product is currently under development. The company's plans call for a trial with a yet-to-be-named cable system in the fourth quarter of this year or the first quarter of 2003.
The technological basis for this service was developed in the labs of Sarnoff Corp., an Invidi partner with an equity position in the company and an active member of the Invidi development team.
Bruce Anderson, Invidi chief technology officer and a former Sarnoff employee, explained that Sarnoff has critical intellectual property for the bitstream splicing and manipulation and MPEG coding that enables the desired switching with minimal latency.
"No one else has the ability to do this with low latency," said Anderson. "With our tuning algorithm there is no more latency than one experiences with spot insertion at a cable headend. Essentially these ads are inserted via a channel change without the viewer realizing it.
"This is the same group that put DirecTV on the air," he said. "Sarnoff has been working on bitstream analysis tools and bitstream manipulation for a number of years. And, of course Sarnoff is the place that invented color television. It's a pretty good pedigree,"
Anderson explained that the set-top box has a unique ID that is analogous to a street address. Targeted ads can therefore be sent to each set-top box. The box makes a request and the computer system in the cable or satellite system headend responds. The headend sends a suite of ads to the set-top box, and it is the box that chooses which ad to play.
A profiling engine running in the set-top box determines which ads are played in a particular household. The box is given an initial profile and it then gathers information based on the household's television viewing habits. Anderson emphasized that this information never leaves the set-top box.
"Any digital platform can address these boxes," said John Currie, director of Digital Media Markets at Sarnoff explained. "These ads can live anywhere in the digital multiplex and can be used in analog as well as digital channels. All digital set-top boxes can be used in this way."
MADISON AVENUE'S NEEDS
The strength of television as a mass medium is its ability to reach millions of viewers at one time. The flip side is that it is an inefficient way to tailor ads for individual viewers. An example provided by Invidi is that 90 percent of Lexus ads are seen by viewers who will never buy a Lexus. With targeted ads, only those viewers likely to buy a Lexus would see Lexus ads. For Madison Avenue this is a much more efficient and cost-effective use of advertising dollars.
Downey pointed out that it impossible for viewers to make a purchasing decision based on a single 30-second spot. It might take a suite of five or six commercials to entice a viewer to purchase a product. With targeted ads a viewer will see the first spot in that suite the required number of times and then go on to next spot in the cycle.
Within the car industry, according to Downey, this ad cycle is known as a funnel. And in the world of targeted advertising, the viewer's position in the funnel determines which ad the viewer will see.
"If you've just bought a car, you might see an ad that reinforces your decision and that ad might reference the vehicle's warranty or anti-lock breaking system," explained Downey. "On the other hand, if a viewer is in the 34th month of a 36-month lease, they will see ads that will highlight favorable interest rates and rebate programs."
Invidi says there is an upside for viewers. The company says viewers will only see ads relevant to their lifestyle and will not experience repeated airing of ads for products for which they have no interest.
Invidi, very sensitive to privacy issues, points out that a tremendous amount of demographic information is readily available, and cable or satellite operators need not do anything special to develop the baseline profile that is loaded in a viewer's set-top box.
"All the information from the 2000 census is available for free from the United States government, " Anderson said. "No one is out in front of their mailbox with a shotgun to prevent direct marketers from distributing targeted print advertising. Yet with television, there is a greater level of concern."
Invidi says its system is designed to assure privacy. "The system never knows what the viewer is watching since the headend never knows specifics about what the set-top box is doing," said Anderson. "And we never associate the set-top box address with a physical home address,"
The biggest barrier to rolling out this technology has been insufficient deployment of digital set-top boxes. As digital set-top deployment is about to reach critical mass in cable and satellite systems, Invidi believes its technology is ready for the marketplace at just the right time.
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