Sizing Up the Next Big Thing

Cable operators and vendors love to pump up advanced advertising as The Next Big Thing for the industry. They wax on about the industry's ability to use interactive, on-demand, and addressable technologies to transform, if not revolutionize, the TV advertising business and generate gobs of fresh revenue for cable.

Such bullish thinking recently prompted the six biggest U.S. MSOs – Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), Cox Communications Inc. , Charter Communications Inc. , Cablevision Systems Corp. (NYSE: CVC), and Bright House Networks – to launch an ambitious effort called Canoe Ventures. Headed by Madison Avenue veteran David Verklin, this joint venture is designed to support various advanced advertising solutions, including interactive TV applications, dynamic ad insertion for video on demand (VOD) programming, and geographic and demographic targeting of viewers.

All of which sounds very good. One looming question, though, is just how big a thing advanced advertising really could be for the cable industry. In a Cable Digital News webinar on the subject earlier this week, "Advanced Advertising for Cable: Winning Back the Ad Dollar," we finally began to hear some concrete answers to that key question.

Speaking during the webinar, Paul Delzio, director of on-demand product strategies for Arris Group Inc. (Nasdaq: ARRS), estimated that a mix of interactive TV, targeted, dynamic VOD, and request-for-information (RFI) ads could produce at least "a $6 billion revenue upside" for cable operators. In fact, he set the figure at slightly over $6.3 billion, or $67 per cable home passed, which is more than the $5.9 billion that the industry now makes on local cable advertising.

Delzio also outlined six basic types of advanced advertising that cable operators could tap, including interactive TV ads, commercials on linear programming targeted by networks and set-top boxes, digital video recorder (DVR)-based ads, dynamic VOD ads, RFI messages, and overlay graphics. In particular, he identified dynamic VOD ads as a promising area because of the surging popularity of on-demand programming.

Another looming question is whether cable technology is up to the complicated, daunting task of developing, managing, splicing, and inserting all these new types of ads in the right places. Not surprisingly, cable technologists insist that it is.

In the webinar, Philip Jacobs, senior engineering manager of the corporate business development group at Cisco Systems Inc. (Nasdaq: CSCO), contended that cable's new SCTE 130 technology standard can do the trick. Explaining how SCTE 130 works, he stressed that the standard is "designed to be extensible" so that it will always be "ready to handle something new."

Of course, time will tell if this assessment is correct. But it's clear that most cable operators are gearing up for the advanced advertising era. In a poll taken during the webinar, more than 53 percent of respondents indicated that they are either deploying advanced advertising solutions now or will do so within the next year.

So The Next Big Thing definitely seems to be on the way. We'll check back in a few months to see how big it's really going to be.

— Alan Breznick, Senior Analyst, Heavy Reading

For more information on this subject, see the Cable Industry Insider "Telcos Beware: Cable Takes Aim at Targeted Advertising."

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