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Video services

Plugging the Ad Drain

'Under siege'
The goal is simple: "How do we increase cable's share of that advertising business? This is not a tomorrow thing. This is a yesterday thing. We have to begin now," said Arthur Orduña, the SVP of policy and product at Advance/Newhouse and moderator of Tuesday morning's session on advanced advertising.

The latest estimates show the ad pie to be worth about $65 billion, with cable operators getting roughly $5.8 billion of it. By contrast, the Internet ad business is about $19 billion and growing.

Traditional TV advertising remains cable's lifeblood, but "traditional advertising is under siege," insisted John Morrow, VP of strategy and business development at Cisco/SA.

"In many respects, the Internet is an advertiser's dream come true," he said, citing its "hyper-targeted" addressability and campaign management and measurement capabilities.

While that's the bad news, the good news is that cable is positioned to match and perhaps surpass what Internet advertising can do, because the TV experience is still generally preferred by the ad community, he said.

TV "is a unique medium; it creates emotion," said Vincent Dureau, head of TV technology at Google (Nasdaq: GOOG), which has been testing an ad sales automation system with Astound Broadband of Concord, Calif. for about 18 months. TV ad spending will ramp up again when "we can combine the addressability of direct advertising with the accountability of the Internet," said Dureau, a former OpenTV Corp. (Nasdaq: OPTV) exec.

If cable could provide second-by-second commercial viewership data, advertisers would pay only for the impressions that are actually delivered, removing "make goods" from the cable operator ad equation, Dureau said.

How much can operators expect to reap from these capabilities, considering the investments required to put them in place? Morrow presented a hypothetical model showing an operator could boost ad revenue from $400 million to $800 million per year, effectively increasing its market capitalization from $11.5 billion to $22.8 billion.

Adam Tom, EVP of business development and founder of RGB Networks Inc. , said MSOs can start to build those opportunities now using digital overlays that "reshape" how the cable industry and its advertisers present linear, 30-second spots.

His company is proposing a network-based architecture that plays across myriad set-top platforms by inserting customizable information in the native MPEG domain of the video. Because the overlays are not limited by the processing power of earlier-generation digital set-tops, companies that advertise on cable can cost-effectively place more localized, graphically rich information into their spots. (See RGB Takes On Terayon .)

Those overlays, Tom added, can also support interactivity, such as a "visual trigger" that, if executed by a button on the remote control, would give the viewer access to some long-form content about the product being advertised.

Panelists agreed that it's imperative for cable to build a centralized system that makes the notion of advanced advertising simple. "What I worry about is the time it takes to get there," said Guy Cherry, the chief architect of video systems at Arris Group Inc. (Nasdaq: ARRS), who joined the company after its merger with C-COR. (See Arris Sews Up C-COR.)

— Jeff Baumgartner, Site Editor, Cable Digital News

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