A paradox: In today’s fragmented media and micro marketing environment, TV advertising may lose ground to other media especially to the Internet. Nevertheless it is still a multi-billion dollar industry and as such, it is significant. The question is: for how long?

This type of industry discussion – and the new technologies it is based on – helps explain why TV advertising is on the verge of change.

“There is no question that TV advertising has to change,” said NDS CEO Dr. Abe Peled in an interview in the (London) Financial Times on October 30, 2007. According to Dr. Peled, pay-TV companies are three to five years away from introducing technology that will allow advertisers to target viewers according to their viewing habits.

Targeted advertising is based on delivering ads containing information which individuals are interested in. The introduction of targeted advertising will keep advertisers from spending money on audiences unlikely to be receptive to their sales pitch.

“We believe the enabling technologies will soon find their way to set-top boxes,” says Gideon Gilboa NDS Product Marketing Manager for Advertising Solutions. He explains that with the introduction of digital technologies such as DVR, HD, and hybrid set-top boxes that combine both broadcast and broadband, TV operators are laying the groundwork for introducing targeted advertising capabilities. “In the next few years we expect to have mass deployment of technology enabling delivery of a specific ad to a specific viewer at a very specific time,” he says.

Understanding TV viewers

“In this new world of almost unlimited viewing choices, advertisers and media buyers must better understand how consumers watch TV advertising,” Gilboa says. “Targeted advertising is the next step but granular measurement should be there first.”

“The second-by-second reports on viewer interaction with STBs that STB-based measurement provides includes linear TV viewing, time-shifted viewing, as well as usage of DVRs and Video on Demand, EPG navigation, and interactive applications,” he says.

Today these systems provide advertisers with a better understanding of how viewers respond to and interact with new technology like DVRs and to advertising on these platforms.

Tomorrow’s measurement technology will become the heart of targeted advertising systems.

“The deployment of STB measurement technology will allow the monetization of advanced models like targeted DVR advertising and will also be used to fine tune these future models when they are launched,” Gilboa says. “If you can’t measure it you can’t sell it.”

How does this work?

Advertisements relevant to specific viewers can be stored on their DVR’s hard disk. When an ad break begins an alternate ad can be pulled from the disk to replace a “live broadcast” ad that is not relevant to the particular viewer. The replacement ad more closely matches the viewer’s demographics and interests.

Gilboa explains another possibility. “Once we have the ability to store targeted ads in a DVR then we can also think about presenting them not only for the right viewer but also in the right context. In this scenario the first ad in the break will be determined by the content that was previously viewed.” For example, a few minutes into a news broadcast viewers who had been watching a travel channel will see an ad for vacations.

Fewer, more relevant ads

So where are we headed? How will these technology advancements impact our viewing experience?

“When viewers watch a prime time TV show today the majority of the ads that come with it are not relevant to them. This obviously has a negative impact on their viewing experience. What we anticipate is that with the introduction of targeted TV advertising, viewers will see fewer, more relevant ads on TV,” Gilboa says.

The result will be that consumers will have a more positive experience, advertisers will deliver their messages more efficiently and cost-effectively, and TV operators will be able to generate more revenue from targeted ad spots.

“The bottom line is that targeted advertising will create a win-win situation,” Gilboa says.