Digital, Interactive and Web TV

Implications for the Advertising Industry Part 1

[Introduction] [New Advertising Models]: [Micro Advertising] [One to One Advertising] [Portal Advertising]
[Payment by Results] [Affiliate Advertising] [Cross Marketing Alliances] [In Programme Promotion] [EPG Promotion]

Part 2: [Multi-medium Distribution Channels] [Knowledge Acquisition] [Integrated Processes]

Introduction

In the short term the proliferation of channels will drastically reduce advertising rates, forcing industry consolidation and the introduction of new advertising models, multi-medium distribution channels, knowledge acquisition and integrated processes that approach and support customers in a coherent way.

"All of these new technologies will make it possible to conduct a more personal dialogue with the Consumer. And once that's possible, the Consumer will expect it. The mass audience will be transformed into a mass of individual audiences. To talk relevantly and persuasively to those audiences - whether you're offering them a packet of peas, a social benefit or a political party – will take a great deal of skill and sensitivity. And I know this - one of the means of doing it will be advertising." - Sir Michael Perry, Chairman, Unilever plc, January 1996 - from Zenith Media

New Advertising Models
 

• Micro Advertising: Digital TV, with it's 100's of channels, means the end to blanket mass advertising. Advertisers will need to match the buyer profile to the most suitable channel and specific time of day or programme. Data Mining by both the client (on existing customers) and by the channel provider (on their customers) will identify matching micro segments that can then be specifically targetted.
  • For example, an insurance company discovers from an analysis of its customer database that those who invest in unit trusts are clustered in particular postcodes. They talk to a number of channel providers and find that a cable TV company has a high penetration in that area and that many of their viewers watch the 10 pm business day round-up programme. Further, the channel provider has other data showing that these customers have a high disposable income, a varied portfolio of investments and good grasp of financial matters. The result is an advert for Managed Unit Trusts targetted to cable TV customers in those specific post codes.
• One to One Advertising: Using the next generation of intelligent set-top decoders, advertisers will be able to specify an audience profile and have the adverts delivered, by the channel provider, to specific households, even delivered to a particular person and personalised with their name and shown when they next view - true One to One Marketing. When working at this level of granularity it will be essential to match style and mood of adverts to individual behaviour.
  • For example, adverts for Tracker Unit Trusts would advertise low risk and be targetted at clients with low or modest savings or with a natural propensity to be cautious.

  • "The ultimate promise of the Internet is the ability to generate TV-sized
    audiences and to target a single individual.",
    Joe Kraus, founder of Excite, one of the web's top portals and search engines.

• Portal Advertising: The WWW has seen the huge rise in the power of the portal: Microsoft Network, Netscape, Yahoo, Excite, AOL and Lycos are leading portals. For these players, advertising is a significant revenue stream (e.g. Yahoo's $203m income vs $92m expenses). The major Digital TV providers also intend to become portal, in some cases only providing access to their selected suppliers. Similarly, AOL plans to distribute via Web-TVs. Besides their mass pulling power, another advantage of portals is their ability to better target adverts.
  • Visitors to the search engine Alta Vista are presented with adverts according to the keywords they are searching on. Enter the word insurance and the chances are you will see an advert for insurance. One life insurance advert even presents a premium calculator.
    

  • click to enlarge

• However, portal advertising is expensive, with estimates of $20-$40 to acquire a new customer. Some of this can be offset against lower distribution costs, the ability to have a continuing dialogue with the customer and the resulting increased life time value (LTV), and during the early stages of e-commerce, referrals from customers who enthusiastically talk about their use of the new medium.
• In the long term, there are likely to be only 3 or 4 major portals plus a number of niche portals. This is same as the print world, where there are a few general daily newspaper and numerous specialist publications. Marketers need to decided whether to go for the mass audience portals (expensive) or niche portals (risk). Customer profile matching is key.
• Payment by Results: With targetted adverts, the number of viewers will reduce per advert and the unit price per view will increase but so will the quality - i.e. the response rate. In many instances the channel provider will be handling the viewer's telephone calls, either making the sale (see US Shopping Channel) or passing on warm leads to the client. As the experience and knowledge base of the channel provider increases, then they will increase their charges. To offset the perceived risk to the client, channel providers will move to payment by results. Clients will need to ensure persistency is taken into account. Such business models are more likely where a high degree of trust has been established over time.
• Affiliate Advertising: Major e-commerce companies like Amazon.com have affiliate programmes. Other sites refer their visitors to Amazon and if they buy then the referer receives commission. This is also a form of payment by results.
  • Alta Vista visitors are presented with a referral to Amazon according to the keywords they are searching on. Enter the word law and you will see an advert to click here to search Amazon for books on law. Equally it could say click here for legal insurance.
• Cross Marketing Alliances: Expect many players to form cross marketing alliances to promote each other goods and services. Whilst this is not a new technique, the interactive facilities allow each party to drive viewers to the others channel. See the box for examples with the Sega - BSkyB being a good example of using the interactive facilities.

  The Money Channel Prior to its demise, the Money Channel said that it will consider taking an equity stake in advertisers instead of actual payments. In March 2000 it took £20,000 shares in the software company Updata in return for providing 360 slots of 30 seconds.   Sega - BSkyB Alliance around Dreamcast Sega will advertise its Dreamcast console on BSkyB including a 90 second "infomercial" and also give BSkyB a significant presence on its Dreamcast internet portal site. In return BSkyB will promote the Dreamcast console on its internet portal www.skynow.co.uk as well as provide editorial content for the Dreamcast portal and links to Sega's online shop. Together they will offer a combined Dreamcast + BSkyB Set Top Box. They are also investigating creating a Sky Sports football game. Channel 5 In March 2000, Channel 5 agreed to swap £1m of advertising for a stake in Rapidinsure, an unknown insurance company operating solely on the Internet. In return Channel 5 will advertise the insurer every day for a year in 30 second slots before and after the prime time evening weather reports as well as other slots and programme sponsorship.

• In Programme Promotion: With Digital TV we may well see the return to the original Soap Opera with advertisers paying to sponsor the programmes. Another option would be for the goods to be used in the programme. Viewers could then press the appropriate remote button to see more details and purchase the product.
• Electronic Programme Guides (EPG) Promotion: With Digital TV and its hundreds of channels, viewers will become reliant on the EPGs. Just like the Radio and TV Times, there will be opportunity to advertise within the EPG but the real advantage is that adverts can be pre-programmed to only display when certain criteria programmes are displayed or selected.
  • For example, viewers who select the BBC 2 Money Programme could see an ad for the Standard Life Bank High Interest Savings Account.

Implications for the Advertising Industry - Part 2:

[Multi-medium Distribution Channels] [Knowledge Acquisition] [Integrated Processes]

Next is Implications for Financial Services

External Resources
 

1. Cooper, Alan, 1998, TURNED On, Tuned in, Internet Business, November 1998.
2. Cooper, Alan, 1999, Customer Knowledge Management and Mass Customisation, Internet Business, April 1999.
3. Cooper, Alan, 1999, New Advertising Models and Opportunities in the Interactive Age, presentation to National Association of Advertisers (ANFO), Oslo, 24 November 1999
4. Digital News, Number 10, September1999, Digital Television Group.
5. Wyatt, Jill, 2000, Feeling like Chicken Tonight?, Marketing Business, May 2000
6. See the full list of resources for this web site for other related resources.

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