Replacement cycles

There have been several news articles recently that incorporate quotes from people lamenting lower than anticipated sales for new technological innovations. These articles on Smart/Connected TVs and the Nintendo 3DS are but two examples.

As everyone knows (or at least should know), technological superiority is not enough to guarantee success. Hence the Beta-Max not succeeding over VHS or the Atari Jaguar or Neo-Geo losing out to their 16-bit incumbent predecessors.

Nevertheless, too much attention is paid to the specific product when predicting future success. A combination of technological innovation, strong branding, suitable distribution and attractive price point may prove a compelling package. Yet this may not correspond to sufficient demand.

Even if an organisation pays sufficient attention to the market and adequately segments and targets a particular group of consumers, there is still no guarantee of success.

Randomness aside, a major – and what appears to be to be overlooked – factor is replacement cycles.

Once early adopters have been sated, a product will only move into mainstream penetration if the general public find a compelling reason to upgrade their existing kit. Since most, if not all, new devices are evolutionary rather than revolutionary, this can be a tough ask.

(NOTE: Looking at it from a purely technical perspective, one could argue that the different 3D technologies are revolutionary. However, from a consumer perspective it is fundamentally evolutionary. At heart, it is the same service but with a graphical innovation).

Smart TVs do face a particularly tough challenge, as they are entering the market just after the majority of the mainstream have recently gone through a replacement cycle. This cycle was unusually synchronised due to the twin forces of legislation – digital switchover – and technology/manufacture. Flat screen HD TVs may show the same channels, but larger and lighter screens offer twin benefits of better picture (when compared to analogue equivalent) and easier placement (e.g. wall hanging) and transportation (transporting a 50 inch CRT up a flight of stairs was possibly one of the most painful experiences of my life).

Smart TVs may have additional services that appeal to the mainstream, but since the core proposition – watching live TV – remains unaltered, I don’t perceive many mainstream viewers as being eager to adopt their recently acquired HD TVs.

On a similar note, now that the market is already saturated with set-top boxes, second screens and such like, it may prove difficult for both Youview and Google TV to offer a compelling upgrade proposition (Nigel Walley has written an interesting piece on Google TV here)

The 3DS was always going to be a tough sell – the DS was massively successful among casual gamers who were unlikely to upgrade because of a novelty gimmick. But it also points to the wider trend in gaming of extending the life cycles of consoles and platforms. Interestingly, this is supply side rather than demand side – the costs of investment are so great that developers want a longer life cycle to maximise their profitability.

Looking at other forms of technology, I’m particularly intrigued to see the effect of replacement cycles for tablet computers. I was quite sceptical about the chances of mainstream success for the iPad to begin with. While it has undoubtedly been successful (and profitable) among the early adopters, I’m still not convinced iPads/tablets (market share means they are effectively synonymous) will permeate the mainstream before all laptops become touchscreen.

As such, what will happen when everyone who is likely to want a tablet computer already has one? Will tablets need to work on the same principle as mobile phones, which are effectively rented for the duration of a contract and then swapped for a new one? Given the additional cost of manufacture and purchase, I’m not sure how feasible this is.

In fact, perhaps the mobile industry points to way to shortening upgrade cycles. With the trends toward digital consumption, we are slowly being accustomed to not tangibly owning things. Perhaps this could be extended to hardware. Do we still need to own our TVs and games consoles, or could we rent subsidized devices over a period of time, before swapping them for the latest models?

Rental shops have had a bit of a bad reputation for ripping off the old and poor, but perhaps a rejuvenated version could be due a comeback.

sk

Image credit: http://www.flickr.com/photos/mgat/3282519651/

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Broadcast in a multi-platform world

Last week I attended the Mediatel Media Playground 2011 – the first session of which was Broadcast in a multi-platform world. Below are my notes.

Notes for the other sessions will follow later in the week. However, I found this seminar the most enjoyable and thought-provoking due to the sector being highly competitive with players who would traditionally be in separate markets, and the willingness of the speakers to engage in debate on this.

Details

According to the website, the themes of the debate were:

Platforms, content owners, broadcasters, manufacturers and the confused consumer too – the new broadcast world.

• How are consumer viewing and listening habits changing?
• What is Connected TV? How will it best be sold to the consumer?
• How will broadcasters and programme makers stand out in a world of TV clutter?
• How should VOD be sold to agencies and advertisers?
• The role of the EPG
• Who needs who most? Are these uneasy alliances going to come crashing down?
• Is YouView just too late now or the catalyst to Connected TV taking off?

The session was chaired by Torin Douglas, Media Correspondent for the BBC and the panel consisted of:

• Dara Nasr, Head – YouTube & Display at Google
• Oli Newton, Head of Emerging Platforms at Starcom Mediavest
• Dan Saunders, Head of Content Services at Samsung
• Jeff Siegel, Head of Advertising at Rovi
• Nigel Walley, CEO of Decipher

Notes

My notes are chronological, so will broadly follow the themes above. All “quotes” were hastily scribbled down, and so are subject to error and misinterpretation.

Introduction

Nigel Walley opened by saying that in many ways new media isn’t that different to old. “Broadcast is the original recommendation engine” albeit editorially driven rather than through algorithms.

He also said that we are now in a “post VOD world” where new media is a support to broadcast and not an alternative. This is actually a boon to live TV as those time-shifting need to actively avoid mobile and laptop to keep away from spoilers.

Oli Newton said that consumers don’t realise what technology they already have and what it can do – he used games consoles as an example of this. He sees the children being the main educators in spreading these forms of behaviour.

Dan Saunders talked about the rise of connected TVs (Smart TVs, in Samsung parlance). Samsung sell 1 in 4 TVs in the UK, and 75% of these will be connected. He says that smart TV isn’t a separate category but a price point in the overall line-up between HD and 3D.

Jeff Siegel notes that worldwide 50% of connectable sets are now connected (though Mat Watson of ITV disputed this for the UK, saying it is much lower)

Dara Nasr believes that digital and broadcast empower one another and the online/offline divide has disappeared

Consumer understanding

Nigel Walley believes it is a confusing time for consumers as there are different technologies, different players and different acronyms (DTRs/PVRs/DVRs).

For instance, an average household could have an IPTV for the Olympics, Virgin for their TV and broadband, a PS3 for the kids and a DVD player for Mum. All of these can play iPlayer but the BBC has done no strategic development to say which one is better. Nigel thinks Virgin should be the priority as it the best platform to correlate VOD viewing to the broadcast audience.

Unsurprisingly, Dan Saunders disagreed. He thinks a TV tuner with an internet connection allows viewers to augment broadcast to something meaningful – thus Samsung comes to the fore in Freeview homes.

Dara Nasr said that Youtube follow the user. To be a TV company they need to be on TV, though at the moment it is mobile that is growing their audience.

Nigel Walley questioned his strategy as on the same device there can be multiple versions of Youtube. Dara countered by saying this was because their API is open to external developers. They “want to be accessible everywhere, and see what wins”.

Oli Newton said it was not about names but what gives the best viewing experience. “It is being of the web, not on the web”.

Jeff Siegel agreed in that we should focus on features and not on definitions. On TV, the quality of the video is the main thing – scores and additional information can be mobile if necessary.

Nigel Walley feels the quality of the interface has been the main problem in the past but this is improving. In future, he sees Sky and Virgin could be the dominant app on a TV rather than a separate device, “but there is a technology race to go through first”. This might change how they are used – for instance Youtube is used differently on a TV to how it is on a PC

Nigel noted that another problem to date has been a lack of promotion of connected TVs. For instance, stores don’t have internet connections to enable them to demo it.

Oli Newton said that consumer understanding is the most important thing – they need to be able to ask the right questions in store. Apple’s “ad-ucation” has been good at this – even non-users know how to work an iPhone.

Impact

Nigel Walley sees the film industry as being most under threat as connected TVs can deliver a better experience. It will be hard to break through the system of broadcast promotions, trailers and TV guide features that build up a linear broadcast schedule.

Dan Saunders argued that connected TVs can only have a positive impact for companies like ITV – people are buying TVs to watch TV after all.

Nigel Walley then accused TV companies of not understanding the difference between customers and consumers. Sky and Virgin have customers with transactional records while BBC and ITV are trusted brands to consumers – thus they should treat BSkyB as a business partner rather than a competitor.

Role of EPG

Nigel Walley argued that platforms aren’t doing enough to promote channels. The EPG is dull and boring and wastes all the promotion that goes into a channel launch

Dan Saunders questioned the role of the EPG. It isn’t being used effectively for advertising and there is currently too much on the front page

Jeff Siegel feels it has to be consumer friendly before you can even consider advertising

Oli Newton feels that if you have a smart TV, you don’t care about the channels but the content – that’s where the power of the EPG is. The EPG is the best place to advertise “but has been woefully let down”

Nigel Walley concluded that “the EPG is still software, it is not yet a media”

Competing platforms

Oli Newton noted that there “content sinkholes” e.g. the Channel 4 programmes available on Youtube are different to those on 4oD and again different to those on TV VOD services.

Oli also feels that Youview “is a bit pointless” – other serices, that already had a head start on the interface and simplicity, are now occupying this space.

Nigel Walley said that the original Youview scope was great, but that was in 2007. Stores are already discounting things that are better than Youview.

Nigel finished by saying that with devices and manufacturers battling it out, broadcasters are now further down the value chain. However, they have the valuable content that lets them punch through.

sk

Five big things in media

We at Essential were having an internal discussion yesterday, over what we think the five major things to happen to media and communications will be over the next 12 months within the UK.

We all know that trends are notoriously difficult to discern and predict, since they are gradual rather than binary. Something like Digital Switchover might be the exception to the rule (when implemented correctly), but generally these things tend to sneak up on you.

Take the “Year of Mobile” as an example. Although Mary Meeker’s definition of a mainstream inflexion point as being 20% penetration (slide 8 of her latest trends report) would suggest 2010 is the Year of Mobile, I’ve noticed a large shift from people saying “Next year is the Year of Mobile” to “Last year was the Year of Mobile”.

So with that in mind, I spent five minutes thinking about various issues and came up with the following five trends

• Location-based information gains traction among a niche – through tools such as Foursquare Layers
• Narrowing distinction between broadcast and web-based offerings – Youtube Leanback, Project Canvas and multi-platform media players from the likes of BBC and Sky blur the boundaries between delivery mechanisms
• Persistence of the blockbuster – despite media fragmentation, the social aspects of media and entertainment mean blockbusters are becoming even bigger to compensate – whether The Lost Symbol, Avatar, X Factor or Call of Duty Modern Warfare 2
• Decline of critic proof content – This will be a gradual affair, but eventually rotten offerings will become more visible earlier due to social media. For instance, Sex & The City 2 did considerably worse at the box office than its predecessor
• PR becoming more proactive – Twitterstorms are showing the dangers of trying to sweep things under the carpet. Ask Trafigura or BP

The big caveat is that this took me five minutes. It was therefore things from the top of my mind, and is probably a bit skewed towards recent announcements (Foursquare Layers and Youtube Leanback having been announced within the past week).

If I’d spent a bit longer, I’d have probably mentioned privacy/personal data – though reading Scott’s post earlier, it would seem that this isn’t such an issue for the general public.

As a quick thought exercise, I’m fairly satisfied with what I came up with, though they are so amorphous and vague that it might be difficult to say whether these trends have progressed at all. Nevertheless, I’ll revisit these in 12 months to see if any movement has been made

sk

Image credit: http://www.flickr.com/photos/barkbud/4165385634/

The persistence of channels

Channels and stations have existed for almost as long as the platforms that host them. Andrew Jerina, writing in this post, believes that channels are a waste of money, given the nature of our on-demand world. The post was in relation to BBC 6Music, and he makes some valid points, but I wholeheartedly disagree that channels are redundant.

Channels still play a valuable role in the navigation, identification and selection of content and I strongly believe that channels will persist.

This response is largely centred on television and radio stations, but several of the points are equally valid to other media – particularly print.

The rise of on demand and the “emancipation” of content won’t destroy the need for channels. Content is integral, but it is not the only constituent of a channel. A channel’s identity is the sum of its distribution, content, branding and audience. And channels maintain several advantages that cannot be as easily or effectively replicated through other means.

These include:

Incumbency – As I stated in my prior review of the books 2.0 event, I dispute the notion that friction is friction. Behaviour is highly entrenched and difficult to change. We are path dependent people and will rarely end up with what might be considered an optimal solution. Instead, we move to a better situation to our current one, if we move at all. We are comfortable with navigating by channel surfing, and it is unlikely to ever disappear

Belonging – As the outcry of 6Music shows, people relate to channels. Certain channels are seen as “for me” – whether E4, Scuzz or Radio 3. This isn’t necessarily a unique strength to channels, but a strong channel identity can facilitate a more coherent and longer-lasting relationship than a programme or platform brand can.

Signifier – Near-unlimited choice is an overwhelming prospect. The paradox of choice means we can be paralysed with uncertainty over making the wrong decision. This is also why Sky and Virgin offer channels in bundles – it simplifies the choice. Channels (either individual or groups) offer a simple filter to act as a starting point. Rather than search individual programmes or personalities, we search through channels. Even then, people aren’t going to surf through 600 odd channels. We have repertoires. A strong, coherent channel brand – whether Discovery, 1Xtra or Disney, projects a certain image that can be more impactful and relevant than a genre label such as “drama” or a single programme strand.

Destination – Following on from that, a channel in itself is a destination. Rather than queuing up a selection and making individual choices, we can just turn on a channel and remain there. Families may spend an entire evening watching ITV1 and a workplace may keep Magic FM on for the entire day.

Halo – A channel brand may be strengthened by its content, but equally the programmes can benefit from the channel identity. X Factor may be huge, but would it be as huge if it were on another channel? Even if it were on BBC One, I suspect not. A content brand is never as big as a channel brand. Hence Channel Five being unaffected by the loss of House to Sky One, or Channel 4 not seeing a significant decline in audience for other programmes during the Shilpa Shetty/Jade Goody incident. Richard & Judy succeeded in changing terrestrial channels, but couldn’t take an audience with them to digital.

“Goldilocks” size – the Goldilocks principle is where something is just right – neither too hot, nor too cold. A channel is about the right size to promote its programmes – and trailer are one of the primary ways we still find out about new shows and whether we think we will like them. Most production companies won’t have the scale to cross-promote its offerings, while the competition for space at the platform level would mean that space would be dominated by those that have the resources to pay for it

Open access – channels are additive (unless the spectrum capacity has been reached). Having access to Radio 2 won’t preclude access to Radio 4. However, this isn’t the case with platforms. With a couple of exceptions – notably Hong Kong, with its fragmented media landscape – we tend to have one platform and stick with it (e.g. Sky or Virgin). Either-Or. If platforms control content, they would be more likely to prevent it being on the other platform in order to increase their own sales (Sky Sports, for example). With channels competing across and within platforms, this isn’t the case.

This has been quite a one-sided post, and of course there are drawbacks to channels. But I strongly believe they will continue.

In future, could we create our own channels? Yes we could – our systems could be highly personalised with social or semantic programme recommendations. But, as with online consumption, this can create balkanisation (which I’ve previously written about here. It also requires an acceptance of rationality and logical choices, and an element of user input to define the parameters. Things not necessarily congruous with the lean-back medium of television or the audio wallpaper of radio.

My point of view may not resonate with the online masses, who largely seem to be of the opinion that social-powered on-demand is the way of the future. I don’t think I’m a Luddite, a conservative, or a traditionalist. But for something to become not just mainstream behaviour but standard behaviour it needs to offer a clear improvement on something. And, personally, I think channels are just fine.

sk

Image credit: http://www.flickr.com/photos/the-g-uk/3755118573/

Five predictions on the future of TV

1. Scheduled broadcast television will always constitute the majority of viewing
2. The majority of viewing will always be passive
3. Simultaneous social media activity will remain niche – it will primarily be a substitute for when people aren’t physically in the room with you
4. A form of modified Pareto principle will persist (maybe not 80% of viewing on 20% of channels, but 60% of viewing on 5% of channels is believable)
5. Watching TV on a “computer” will peak in a few years – it will be doubly squeezed by web enabled “television” and “mobile” devices

Any other predictions, or disagreement with the above?

sk

Would you compromise on your TV picture?

A project I recently worked on looked at the concept of IPTV and web-enabled TV services. It was a great project that, since it was commissioned and thus proprietary, I sadly can’t go into details on. However the issues involved are fascinating, and pose some difficult questions for companies looking to operate in this space.

Background

Traditionally, TV pictures are transmitted via a designated area of spectrum. There is a finite amount of space that channels can purchase, and then their content is broadcast to anyone within range.

IPTV sees the bottleneck reversed. There is near limitless space to upload content to and then transmit, but the delivery – via broadband pipes – is finite and limited.

The issue

When we watch TV, we expect a certain standard of delivery. And our expectations are pretty high. Unlike computers -with viruses, server downtime and dodgy connections – TVs just work.We have a good, uninterrupted picture, and the hardware shouldn”t fail us.

What constitutes a decent picture on our TV sets is pretty subjective. We all have different standards, and the picture we are used to receiving depends on a couple of factors

• Method of transmission: Satellite generally broadcasts in higher quality than terrestrial, which is more variable
• Quality broadcast in: As well as standard definition, we have varying qualities labelled as high definition (I believe 1080p is the benchmark?), while people watching on their computers will be used to lower quality
• Size of the screen: The bigger the TV screen, the worse the picture (in terms of sharpness) as the same amount of information is stretched over a larger area

The picture you receive becomes a problem if IPTV becomes popular. With more people using their broadband to view TV shows more often, there is a chance that the broadband will reach capacity, and that the transmission will stall or fail.

There is essentially a trade-off between the quality of the picture you receive and the likelihood that the service will fail. The lower the picture resolution, the less data is transmitted and the less chance that capacity is reached at your local broadband exchange.

FYI: In terms of the picture we currently receive; on standard TV it is 2500-3000KB/s (I don’t know the exact number). Online it is generally anything from 500KB/s upwards (though there may be services offering rates below this)

The options

A trade-off isn’t necessarily the right word, because the issue doesn’t rest on an A vs B matter. The situation could be potentially resolved by any of the following:

• Offering IPTV at a continual lower standard than “regular” TV
• Offering IPTV at regular definition with viewers accepting transmission may be intermittent
• Using a technique called adaptive bit rate where the quality of a stream varies according to your broadband speed (though this could result in noticeably poor quality at times)
• Innovating other areas of delivery, such as viewers having to partially or fully download a programme before watching
• Forcing other programmes using the internet connection (e.g. online gaming, torrents) offline to give IPTV sole access
• Restricting access to IPTV only to those that have a certain broadband speed (e.g. 8MB/s)
• Restricting access to IPTV to a finite number of people on a first-come first-served basis

These all have benefits and drawbacks. But would any be acceptable to the viewing public? These measures run contrary to the trends of hi-definition pictures on massive flatscreen TVs – can IPTV take off?

Largely, it depends on what the IPTV service is. If people are buying a new service on the promise of thousands of channels, then they may be a bit disappointed to find that Youtube XL is still broadcast in grainy quality. But if it is an additional channel or service on an already existing platform (and most platforms have, or are getting, internet connectivity) then they may be more forgiving.

A solution?

What would I choose? I couldn’t stand an intermittent service and I am in favour of everyone having the right to choose. A decent picture is important when watching TV, but if I really want to watch something I will tolerate it (case in point: watching England-Andorra in 500KB/s on ITV.com). So I’d actively choose and use lower, or adaptive, quality.

Would you watch IPTV if it meant having to compromise on what you were seeing on your TV screen?

sk

Image credit: http://www.flickr.com/photos/31333486@N00/

Green button advertising approaching launch

Channel 4 have announced that they are going to be marketing upcoming shows through the green button service on Sky. Sky’s own forays into green button – originally planned to launch last summer – are imminent.

The green button service is an interactive feature whereby viewers can bookmark content as they view (in real time or recorded). An advert that is interacted with – along with associated content (extended cuts, behind the scenes etc) – is downloaded onto the DTR hard-drive to be watched at a later date. It is effectively advertising on demand. This differs from red button services, which immediately transport you from the content you are watching to the interactive area.

Will it work? The idea is initially counter-intuitive. People choosing to watch more advertising? But we know from the viral/spreadable media successes that viewers can choose to watch adverts.

That is online, where people can remix and repurpose content. Will viewers interact to the same degree on TV? An article in the New York Times says that the market isn’t yet ready for internet TV due to cost, reliability and questionable demand.

But interactive services aren’t the same as having full internet capability, and viewers do seem willing to experiment. Figures from Sky show that more than 93% of digital satellite households pressed red to interact with their TV in 2007 – 16% interacting with adverts.

Although the most viewed interactive advert in 2007 was Cadbury’s Gorilla the campaigns using red button tend to be response-led, with relative success measured by requests for vouchers or for further information. Sky said that 40% of its interactive campaigns are from car manufacturers, who are able to measure sales conversion from the ads.

The appeal of green button appears less about direct response and more about branding. It is essentially viewing advertising as content consumed for entertainment. This is not going to be suitable for all brands or categories, but offers an interesting challenge to companies seeking to broaden their involvement in content marketing and storytelling.

Not only will advertisers have to convince viewers that their content is worth watching and interacting with, but with an on-demand service they also have to move from impulsive to considered consumption. I may see a potentially interesting ad and bookmark it, but will I choose to go back and watch it later?

Downloading content also contrasts with the current trend of streaming. Whether it is putting everything in the cloud, or Spotify emerging as a potential challenger to iTunes’ dominance, owning is partially being supplanted by streaming/renting. Unless I can actively edit or mash-up an advert, is there any benefit to having it stored on my hard drive?

Green button appears to be in direct competition with the Youtubes and microsites that facilitate streaming. Youtube already offers advertising-on-demand, with people able to interact with, share and comment upon advertising. The environment may not be suitable for all brands, but it is cheap. Microsites and branded areas aren’t’ so cheap, but the entire experience can be micromanaged. Green button services are going to have to find a USP that differentiates them and justifies a price premium.

That function may be targeting. I’ve already covered targeted advertising in detail but demographic information could be the pull. If Sky are able to integrate their Skyview panel information with green button, advertisers will know exactly who is viewing and interacting with their content. And that information is valuable.

It remains to be seen whether green button services can make an impact in the period before television and the internet fully integrate, but I anticipate some innovative case studies emerging in the field over the next couple of years.

And not just those looking to prove their environmentally friendly credentials by using “green” advertising.

sk

Image credit: http://www.flickr.com/photos/barbietron/

Online video working with TV

Far from being a replacement to the traditional broadcast model, online video acts as a strong complement. Online video can be used to increase both reach and frequency, and the highly immersive environment offers multiple benefits.

2008 was a watershed year for online video. Ever faster and more reliable broadband connections are improving the online experience, with people now more likely to view the internet as a source of entertainment as well as information. This has helped fuel massive growth in video consumption across the year, both in long form and short form video.

As online video consumption becomes more common, we are seeing an increase in diversity among those viewing. Online video is no longer the sole preserve of tech-savvy students – two thirds of the online audience aged 55 or older have ever watched a video clip, while a third have ever watched a full length TV programme.

The distinction between clips and full length content is an important one to make, as each offers a different proposition. People watching TV shows online are catching up on content that they have missed. This is not replacing TV viewing – the online experience still has some way to go before it can match the widescreen, surround sound, HD offering of the living room. It is instead about taking control of the schedule. People catch-up on content they missed – either because they were away from their TV or watching something else. This suits some content better than others. Sport and reality entertainment are about the live experience; while the frequency and habitual nature of soaps are also best suited to TV. However, entertainment and drama flourish. Particularly shows that have a strong word of mouth following or ones that are aimed at an active segment difficult to pin down to a TV schedule. Ultimately, catch-up is about improving reach.

Short-form content, such as clips of outtakes or interviews, is about increasing engagement. Those that watch additional content online are likely to be the biggest fans of a TV show and heavily invested in the plot and characters. Short clips, with instant gratification, can be enjoyed multiple times and are very social, with people sharing links and commenting on them. This level of social recommendation adds further interest for the viewer.

Online video is a different platform to broadcast television, and thus the effects of advertising change. TV benefits from the powers of event broadcasting – shared experiences among masses of people at the same point in time, creating watercooler moments. Online viewing is just as social, but it is asynchronous. With closer proximity to the screen and people actively choosing to interact with certain content, levels of attention are generally high.

Preliminary lab tests indicate that advertising around short-form clips perform stronger than long-form content in traditional advertising metrics such as awareness, affinity and purchase propensity. Furthermore, advertising around identical long-form content performed stronger when broadcast online than when broadcast on TV. This doesn’t mean that online video is better than broadcast TV. It simply means it is different. It also highlights their complementary nature. TV excels at mass reach and watercooler moments; online video has a smaller but highly engaged audience eager to share content and information asynchronously. The next step involves quantifying these complementary benefits.

sk

Image credit: http://www.flickr.com/photos/lollyknit/

Could targeted ads work on TV?

I’ve been exploring the concept of targeted advertising on television. Loosely defined, it is the ability to purchase advertising space against a diverse array of groups that go beyond the traditional trading audiences.

This post accumulates the background information I’ve collected on the topic and speculation (mostly mine) on how theory may become reality.

Because it is such early days, I’d love to hear the thoughts of people (media side, client side, planners, buyers, researchers, interested parties) on the subject. Do you think it will work? What would you like to see and what would you like to avoid?

(Disclaimer: I have no involvement in targeted advertising – this is purely background research. This is preliminary work and any errors are fully attributable to myself).

1. Background

Traditionally, trading television advertising is a complicated beast, but Thinkbox have a gentle overview of the topic here. Essentially, there are several criteria that advertising can be bought against – channel, time of day, region (for analogue channels) and so on. Specific trading audiences can also be bought but unlike other criteria they can only be estimated.

To use a simple example, I may want to purchase 300 ratings against Women on ITV1. My advertising would be placed in shows that would be expected to deliver the required number of female viewers. However, only when BARB viewing figures become available do I know how many ratings were delivered. If ITV1 delivered more than 300 ratings that I am in debit; if they undelivered then I am in credit. The difference is carried over to the next advertising campaign I run.

However, as we all know, TV is changing. On-demand and IPTV, to give two examples, are changing the concept of what TV means.

The concept of targeted advertising emanates from this seachange. As it is still (largely) a concept, definitions are loose and the vague. Targets could theoretically be grouped according to demographics, lifestyle, behaviour, attitudes or a combination thereof. While an internet connection is the likeliest means of delivery, it is not the only option.

Whoever delivers effectively targeted advertising first will have a tremendous competitive advantage. The future is up for grabs.

2. The Players

In the UK, the platform providers are best positioned to introduce targeted advertising

• Sky have said that they plan to introduce targeted advertising by 2011 by storing them on the Sky+ harddrive and inserting them into programming remotely
  
• Virgin have trialled targeted advertising, though at programmes rather than specific audiences
• “Project Canvas” is in development, with BT saying that they can use broadband user information to deliver targeted advertising
• Freeview+ and BT Vision have been quiet (though they are involved in Project Canvas), as have Tiscali TV (which may be looking for a new buyer now Sky are reconsidering)
• Inuk (closed IPTV over university campuses) has trialled addressable advertising on Channel 4

In the US, Project Canoe is looking to develop consistent metrics which in theory could then lead onto targeted advertising

It is also theoretically possible for non-platform providers to offer targeted advertising. These could include

• TV manufacturers – at the recent CES there was a lot of chatter on upcoming web-enabled televisions, while Sony BRAVIA already gives access to sites such as Amazon, Youtube and Daily Motion (ad free, I think)
• Google – Google TV currently only sits on one satellite carrier, but it could theoretically expand
• Phorm – still involved in targeted advertising. Their technology could be used across multiple platforms

3. Strengths and weaknesses of targeted advertising

With the concept still fluid, it is difficult to come up with specific answers but broadly speaking: (NB: Several of these came from a Mediaweek piece by Barry Llewellyn of Packet Vision)

Strengths may include

• Ability to target a more tightly defined audience – less wastage
• Greater relevance for viewers
• If ads are interactive, there will be greater accountability for direct response
• Frequency of exposure can be capped
• Advertising watersheds could be removed in adult-only homes (e.g. alcohol advertising in the afternoons)
• May be more affordable for niche advertisers with small target audiences
• Greater flexibility in pricing options – pay by impressions or acquisitions?

Weaknesses may include

• The whole concept will succeed or fail on the quality of the information captured
• Different platforms offering different options could hugely overcomplicate matters; can a consensus model emerge?
• The current pricing model will be completely destroyed; with a near infinite number of targets a new system, such as Google style keyword auction bids, will need to be introduced and accepted
• Similarly, how will total advertising audiences be audited? Everyone could be seeing different adverts around the same programmes. BARB would also need to be overhauled
• No-compete clauses can severely inhibit the ability to target e.g. a beer brand may pay a premium to ensure it is the only beer brand in the spots they have identified as being key
• Unpopular targets may get the same few ads on continual rotation e.g. will 65+ C2DE spinsters only get ads from the COI?
• Serendipity of appealing to people outside of the perceived core audience is lost – do targeted ads have the same attraction to brand-based advertisers as direct response?

4. Potential methodologies

Largely speculation on my part, but potential ways to target ads include

• Geographic/geodemographic information – the most basic targeting option. Homes can be targeted geographically through IP address or MOSAIC/ACORN postcode information. Geo targeting may only be attractive to local advertisers, but these could make up a long tail of demand. Alas, these methods are far from flawless. I’m a male 16-34 ABC1 (highly desirable, if I do say so myself) yet live on a council estate – would I ever see Leffe, Audi or Playstation 3 adverts?

• Registration data – when homes purchase a new TV or set top box, they could be asked to register not only demographic information but also lifestyle/behavioural information (additional information would need to be opt-in). This gives a richer understanding of viewers beyond demographic profile, but there will be ambiguities over individual and household information and usage, and the data needs to be regularly refreshed in order to be useable (for instance, my cat may die and I may get a dog instead)

• Return path behaviour – Interests can be inferred from the types of programmes that are watched, or the types of website that are visited. For instance, if I watch a lot of DIY shows, an ad for Ikea may be suitable. This is achievable but it is an art rather than a science. What if it is my girlfriend watching the DIY shows, not me. I could get all the DIY ads during football, and she wouldn’t get any during Hollyoaks. This type of targeting can be quite transparent and with an uncanny valley, is the method most likely to irritate.

• Panel information – whether a panel like Skyview or an extension of BARB, a sample of viewers can be recruited, with advertising targeted around their behaviour. This could be extrapolated to all viewers through programme audience profiles or registration information. However, this would only effectively be targeting a small proportion of viewers, with the majority guesstimated. With around 35,000 Skyview homes representing over 4m households with Sky+, the level of accuracy may not be high enough.

• Opt in system – give people the choice to submit information – either through an in-depth registration or regular surveys. By communicating the benefits, people may actively choose to receive targeted ads, creating value for everyone. This could be achievable, though the proportion of those opting in may be too small to be useful. With an opt-in, several additional steps could be taken to ensure accuracy e.g. a BARB style remote control (each viewer needs to “sign in” by pressing a button) could be introduced so advertisers know exactly which members of the household are watching.

• Social profiles – Bringing social networking to TV – such as this BBC/Microsoft prototype – offer a lot of information that could be harvested. People like to communicate their favourites, and this could be utilised. And with users logged in to their profiles, advertisers will be sure of at least one viewer in the room. This could work – Joost is currently the number one contributor to Facebook Connect – but again, it would only be a limited dataset and a lack of take-up may prohibit effectiveness

5. Implementation

We should be seeing several prototypes and trials following in the wake of the Inuk experiment. Due to the difficulties of implementing targeted advertising within live broadcast, I believe targeted ads will initially concentrate on on-demand and interactive content (whether red button or the electronic programming guide).

There appears to be a first-mover advantage, and so the stakes are high. Virgin would seem the best placed to lead the way – the internet is already connected to the box and with subscription fees they are partially shielded from any effects to advertising revenues – but I wouldn’t rule out any of the other players leading the charge.

Indeed, the first implementation may not even be within advertising. What if I could let Sky know which sports I like and dislike, and then get a customised news ticker on Sky Sports News? I’d certainly opt into that.

6. Further thoughts

This is an early stage outline of how targeted ads appear from my perspective. I’m really keen to hear other people’s views on the subject. Do you think targeted ads will take off? What would you like to see? What problems do you envisage?

Any feedback would be greatly appreciated

sk

Image credits: http://www.flickr.com/photos/pbo31/ and http://www.flickr.com/photos/melilab/

Keeping up with catch-up

I don’t own a DTR (it is a heritage from working with Digital UK in the past that I persist with that name, even though most people I speak to use PVR) or DVD Recorder, and my VCR only works when the TV is turned on (it is a combo). I also happen to spend more evenings out than I do at home.

In the past, this made watching TV series difficult. Particularly with the trend towards series narratives rather than standalone episodes (am I correct in thinking that X Files was a major influence on this move?). There would be little point even attempting to watch a series.

I would end up waiting for the DVD. With a show such as Spooks, that was risky. The DVD would come out a fortnight before the new series started on TV. I would be in a race to finish the DVD before the new promo shows were published. “Who’s that person”? “Where has that character gone?”. Very frustrating.

However, that was in the past. I now have online video to catch up.

This means that, for the first time ever, I was able to keep up to date with Spooks. Indeed, I was even home last Monday night and so got to watch the final episode on TV.

And I can also look forward to watching Demons next year without worrying about whether I am home when it is broadcast.

Demons is a new drama series, and this highlights two other benefit of catch-up. Series stacking and wait-and-see.

My prior reliance on DVDs has influenced my viewing behaviour. Particularly with cliffhanger shows such as 24 or Lost, I have to watch several episodes at once.

SIDENOTE: This may be the reason why I didn’t think Series 2 and 3 of Lost were as bad as other people say. Watching 4 or 5 episodes at once dulls the effects of the odd terrible episode.

And given that I am out quite a lot, I have limited time to watch TV shows and am wary in investing in a show that turns out to be terrible.

Catch up gives me time to measure up a show through listening to reactions of critics and views. The iPlayer has enabled full series stacking for some shows (including Spooks) and the 30 day window on ITV.com and 4oD means that I can wait until 4 episodes in to decide if a show is worth watching.

I lose the “watercooler” chat the following day (for the interim period), and some spoilers may be revealed, but this is a trade-off I’m happy to make for some types of programme. Liveblogging and office banter may make Event TV shows like X Factor even more interesting, and to some extent these shows are “VOD proof”. But other shows benefit from their exposure to catch up.

For me, using VOD to catch up on a drama or comedy either that week or that series has actually led to me watching more TV. I may not be the most representative viewer out there, but this isn’t something that should be overlooked.

sk

Image credit: Me (I rent – the curtains aren’t my choice)