SMG has dibs on addressable TV ad inventory at national scale.
Starcom MediaVest Group clients like Procter & Gamble and GM have been clamoring for targeted TV ad offerings with reach. An agreement with DirecTV gives Starcom exclusive first dibs on addressable TV ad inventory at national scale.
Starting early next year, the companies plan to test ads targeted across the country by geography, customer segments, and using third-party sources and advertiser data. Following the trial period, the system will roll out, allowing advertisers to reach around 10 million households with DVRs through addressable ads.
"The industry handed us a lemon with the DVR, but now it's time to make lemonade," said Tracey Scheppach (pictured), SVP and innovations director at SMG Exchange. "We're actively working as a consultant to DirecTV to help them build the product from the ground up."
According to Bob Riordan, SVP DirecTV advertising sales, the companies are working together to develop an industry standard platform for linking data and media buying systems to enable ad buying, management and billing.
The deal allows advertisers to reach DirecTV users through two minutes of pre-emptable ad inventory the satellite television company controls per hour. At first, the TV firm will run the ads across the 25 top rated cable networks. Rather than running a low-value ad for The Snuggie, for instance, a targeted ad sold at a premium might be put in its place. Riordan said the company is dedicating "about 25 percent of our available inventory" to the project.
The agency has tested addressable television since 2005, and expects advertisers that have been hesitant to use targeted TV ads to jump in now that there is national reach. When the agency first began testing targeted television spots, it could reach just 8,000 homes. "This is a huge step forward in terms of the amount of homes that television addressability will be available to," said Scheppach.
The system will operate in conjunction with third party data firms like Experian. DirecTV will provide its consumer data to third party firms which will apply traditional direct mail attributes to it (which DVR is associated with a home that has a dog or kids, for instance). Up to 120 30-second ads will be stored in each DVR and play within the live stream when they're called up by the system. The targeting is based on audience segments and attributes rather than context of programs; however, Scheppach said advertisers can block their ads from delivery during specific shows.
"This will be an interesting transition. [Television advertisers have] never really been able to buy audience."
She stressed the agency's first right of refusal for ad inventory associated with the deal. For instance, many advertisers will want to reach Moms, and this deal gives its clients the ability to buy that targeted inventory first.
DirecTV considers Starcom its lead agency on the project, but anticipates opening it up to other agencies in the future, said Riordan. "Eventually we will be going out across the entire industry," he said.
So far, around a dozen Starcom advertisers have tested the targeted DirecTV ads. In the future, Scheppach hopes to work with other digital television services to expand reach for advertisers. "The value associated with addressability... opens up a whole new class of advertisers to TV," she said, suggesting that once advertisers can reach the bulk of U.S. households - currently around 114 million - it could bring in $10 billion in incremental ad revenue to television. She believes that could happen by 2015.
Though money may be plucked from other budgets, Scheppach said the majority of addressable TV ad dollars will come from current direct mail budgets. For example, she suggested catalog companies will send fewer print catalogs to consumers, and spend money on targeted TV ads "to reinforce with a sight, sound, and motion message with video."
Some money could come from online display ad budgets, but she thinks most will come from direct mail, in addition to radio and newspaper budgets. "I don't think it's going to impact the online video budget," she continued.
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