Cable Feels Heat from Online Ads

  |  September 14, 2006   |  Comments

A report from Kagan Research finds that pressure from advertisers wanting more interactive ads and better viewer data is changing the cable advertising market.

The rise of online media is causing major changes for the cable advertising market, pushing them to become more interactive and to provide better viewer data to advertisers, according to Kagan Research.

"We believe an inflection point has hit, with advertisers finally starting to get comfortable with new media," Derek Baine, senior VP of Kagan Research, said in a new report, "National Cable Ad Buyers Pensive."

Baine points to watershed deals like the one between Viacom and OMD as an illustration of the increasing demand from advertisers and agencies for multiplatform ad deals. That deal gives OMD clients preference on MTV's digital assets, and also includes a research element to study engagement and transference, which are critical to future success of digital ads, he said.

While many ad agency execs have stuck with tried-and-true prime time network TV buys, which generate a safe ROI, their clients are growing impatient to experiment with new media ad opportunities, Baine said. Those agency execs that do not adapt will soon be replaced by a new generation of media buyers that do not have the same qualms about new media ads, he said.

Besides online ads, advertisers are interested in things like video-on-demand (VOD), podcasts, digitized billboards, and long-form Web and mobile content, he said. These technologies still reach a relatively small audience, with less than 10 percent of the adult U.S. population regularly downloading audio podcasts and less than 5 percent downloading video. Additionally, fewer than 25 percent of U.S. homes have access to VOD. But they are still worth pursuing, Baine said.

"These audiences are still small, but growing rapidly, and early adopter advertisers will likely ride a hockey-stick growth curve," he said.

Many advertisers are pushing cable networks to provide more detailed demographic data about their viewers, to keep up with the level of data available for online ad buys. Local cable and VOD are more likely to meet these demands, Baine said, since interactive ads and deeper metrics are much closer to reality for those networks than for national cable networks.

"On the local side, ad-insertion technology and middleware in set-top boxes are letting advertisers make spots more interactive as well as demographically targeted," he said.

For example, several cable operators are pooling their VOD viewing data, which is then aggregated and reported on by business intelligence software provider Rentrak, he said. Nielsen is also working on a VOD measurement product, with Comcast and Insight as its first clients, he said.

Niche cable networks, especially those with a strong Web or VOD presence, are most likely to succeed in the upcoming ad environment, Baine said. "Going forward, we see high growth ahead for networks like the Scripps family of channels such as Food and HGTV, which have the kind of tightly defined audience advertisers find attractive," he said. "Losers, we believe, will be more generic general-entertainment networks, which some advertisers now view along the lines of the broadcast networks, with spot rates that are too high given their broad audience.

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ABOUT THE AUTHOR

Kevin Newcomb

Kevin Newcomb joined ClickZ in August 2004, covering search marketing and other online marketing topics. He has been reporting on web-based businesses since 2000.

Before the bubble burst, Kevin was a marketing manager for an online computer reseller, handling copywriting, e-mail marketing, search marketing and running the affiliate program.

With a combination of real-world marketing experience and years of business journalism, Kevin brings to ClickZ a unique ability to deliver news and training materials that help online marketers do their jobs better.

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