There is a natural symbiosis between IPTV and advertising, argues Tony Hart.  He looks at what it might mean for telcos

When it comes to IPTV, two of the biggest challenges facing service providers are a) how to generate revenue and secure some kind of return-on-investment; and b), how does IPTV differentiate itself in markets where it is competing against other TV delivery platforms?   This is why more and more industry players are turning the spotlight on the role of advertising across IPTV networks.   In return, the flexible nature of IPTV promises to breathe new life into tired old TV advertising formats and help to halt the declining TV ad revenue in some Western markets.

Targeted advertising... addressable advertising.... personalised advertising... call it what you will, but this new approach to TV advertising could help to give consumers a more relevant experience, while at the same time helping to attract advertisers to this new delivery medium and generating revenue for the service providers involved.   Nor is this just hot air: in the past year, operators in Europe have already conducted addressable advertising campaigns across terrestrial TV channels, with further campaigns planned.

Annelise Berendt, of industry analyst firm Ovum, has previously gone on record saying:  "The IPTV platform offers advertisers the best of both worlds.  It offers the immersive and proven impact of traditional television with the added benefits of being able to enhance it with interactivity.  It also offers the addressability and accountability of advertising in the Internet world, enabling the targeting of individual homes, personalized advertising and measurement of an advertisement's impact."

Before we delve further into what addressable advertising is all about, let's be clear about the definition of IPTV being used here.  In this article, we are talking about IPTV in the sense of TV delivered across a private IP network to a subscriber's broadband access point, to then be viewed on a television set.  This kind of IPTV -already being delivered by the likes of BT, Orange France Telecom and Telefonica - is not about web TV (or Internet TV as some people call it), which unlike IPTV, cannot guarantee the quality of service that viewers associate with TV. 

There will be some overlap between IPTV and web TV (such as being able to access Web pages from a TV screen, associated with a specific TV programme).  Furthermore,  the growth of Web TV has changed the way we consume video-based video for ever,  meaning that the viewer is in charge of ‘when and where'. It is even possible to interact with content via social websites.

At the moment, many consumers in early markets typically receive IPTV services as part of a package, rather than actively demanding the technology.  After all, consumers are generally only interested in the content, not the delivery mechanism.  However, this is not enough, particularly for operators competing with traditional terrestrial, cable and satellite.  As Ashley Highfield, Director, Future Media & Technology, BBC has said on the corporation's web site: "The winners will be the IPTV aggregators who offer truly complementary, differentiated services to those which people can find on their TVs...what IP-delivered TV should be about are the things that traditional television struggles at: amplification,  global distribution, rediscovery engagement, collaboration, innovation and navigation." With IPTV, service providers have massive opportunity to provide integrated services, more personalised content and user-generated content are all possibilities.

In addition, advertising on IPTV has the potential to be dramatically different to the ‘traditional' TV experience.  IPTV enables content to be targeted according to different factors, the first of which is geography. Because of the bi-directional nature of IP, it also becomes possible to discover viewing behaviour in ‘real time' without the consumer having to give away any potentially sensitive personal data. In this way the service provider can tell whether the IP address associated with a particular device is consistently watching a genre of programmes.  This information can be used not only to offer certain kinds of content, but also to help service providers to offer advertisers a means through which to deliver more relevant advertising.

For instance, a household that is clearly a regular consumer of holiday programmes - but never watches any children's TV - could be targeted to receive ads about holidays but de-selected to see any ads aimed at families.  Furthermore, if consumers also ‘opt in' to provide additional information themselves, then profiling of ads could become even more detailed. 
This tailored approach has advantages all round. It excludes the danger of advertisers falling into a ‘spray and pray' approach to TV advertising.   ‘Frequency capping' can be used to ensure that a viewer only sees an ad a certain number of times, or to create serialised ads where viewers see ‘episodes' in sequence.  The same brand ad could have different sequences depending on the viewer (for instance, city hatchback car with one message for young people, then a different message and visuals for an older audience).  In this way, viewers are less likely to skip ads, even when using PVRs.  Research from Nielsen has shown that while viewers do skip or fast-forward ads, ad-skipping habits vary according to the show or whether the programme is watched live or later.  When watching Survival: China, just under 20 per cent of the 5.16 million ‘live' viewers ad-skipped, while of the 6.51 million who recorded and watched the programme up to three days later, 5.23 million did not ad-skip.

As far as IPTV operators are concerned, these new, more engaging formats can help to attract the advertisers who are becoming increasingly disillusioned with the return-on-investment from TV advertising.  Addressable advertising means less wastage, which apart from being more cost-effective for big brand advertisers, also brings TV promotion within the grasp of a whole new pool of businesses who would have previously found TV too unfocused and expensive.  Finally, the data of viewing habits of different IP addresses can be used to create the basis for more sophisticated measurement tools.   Moreover, the same ad avail (or timeslot) can be targeted to different viewers and most importantly, sold to different advertisers, making this a highly attractive business model for broadcasters.

Of course, the viewers themselves also benefit from seeing more relevant and hopefully more enjoyable advertising.  If consumers are presented with more relevant advertising then they are more likely to accept its presence outside of traditional TV.  This in turn makes advertising a more valuable revenue stream for service providers. For example, many mobile TV services are expected to be loss leaders and offered to consumers for free.  If the operators behind mobile TV can hope to recoup some of their investment through advertising, then their business cases are in better shape.

Some IPTV operators, broadcasters and advertising agencies have already been exploring addressable advertising opportunities.  The world's first targeted TV advertising campaign over IPTV took place in late 2007, involving UK broadcaster Channel 4, the UK IPTV network Inuk, media agency Mediacom and Packet Vision.  Using an ad from an existing financial sector client, the campaign ran daily on Channel 4 for two weeks.  It specifically targeted at university students across the UK so that during the same 40 seconds in which the ad spot ran, students saw an ad from a different brand to the rest of the general viewing population.  The targeting was made possible by installing Packet Vision's IPTV advertising solution, the PV1000 (which involves services, software and hardware, including a single rack mounted unit in the telco's network, providing splicing, routing, ad insertion and management features) within the Inuk Freewire service, an IPTV network that provides triple play services to universities across the UK.  

Rhys Mclachlan, Head of Broadcasting Implementation at Mediacom said at the time: "We've delivered a pure targeted campaign for a client through television advertising on terrestrial broadcasting for the first time.  Packet Vision offers an opportunity for advertisers wanting to reach a specific demographic without screening copy to viewers who fall outside of the intended audience.  We also see advertisers with restricted budgets using this service on a regional basis for the delivery of cost-effective campaigns."

Another example in the summer of 2008 involved Channel 4 via Inuk again, but this time using Dollond & Aitchison, one of the UK's leading eyewear providers and its agency Arena BLM.   Arena BLM was keen to exploit the targeting potential of IPTV for its client.  It booked a campaign which features a D&A lifeguard saving a woman who is drowning in a sea of glasses, to run on Channel 4 and to be seen only by students.  Caroline Binfield, Business Director of Television at Arena BLM said, "This innovative technology allows our client to target niche and highly relevant audiences, which will drive improved efficiency of the advertising campaign."

These early experiences are just the beginning.  To earn its place, IPTV cannot just be yet another ‘me too' delivery vehicle: it has to offer something different, as well as make money for its stakeholders.  Addressable advertising could be the key to making IPTV a truly profitable medium.

Tony Hart is Business Development Manager with Packet Vision

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