A new technology that is coming to Canada next year claims to answer a problem that has long bedevilled television advertisers - how to make sure their money isn't wasted on the wrong audience.
University students don't buy luxury cars, and higher-income people don't usually buy the cheapest brand of beer. But TV advertising has always been a blunt instrument. In an attempt to solve the issue, Cogeco said Monday it will begin a trial run of a system that will split up a single 30-second spot into any number of different ads, each one targeted to specific geographic areas, households or even to demographic segments of a particular neighbourhood.
Cogeco is set to begin the trial some time in 2011, providing targeted advertising for the Hamilton, Ont., channel CHCH.
What it means is that two people in different parts of the city could be watching the same episode of Everybody Hates Chris, but during the commercial break a student living near the McMaster University campus might see a alcohol ad, while her professor across town might see an spot for a home improvement store.
The upside? The channel gets to sell more ads without making viewers watch more, and can charge a premium for targeted ad space. The cable company gets a slice of those sales through a revenue-sharing deal with each channel.
The company behind the technology, Invidi Technologies Corp., will develop licensing fees or further revenue-sharing deals on its end, if it can prove that it works. That potentially expands the value of the Canadian television ad market, which in 2009 was worth $3.1-billion, according to CRTC figures.
Cogeco's move illustrates the fight by broadcasters to maintain their share of an advertising market that is increasingly moving to the Internet. While TV is still the dominant advertising medium, the Web is grabbing a bigger slice of ad budgets because it allows companies to target their message to users.
The Invidi technology gives TV ads a taste of the Web. It knows where your set-top box lives the same way your Internet provider gives away your approximate location through an IP address. It sends TV advertising that it deems to be most relevant to the demographic you most likely belong to, based on census data and other research by third-party companies that track consumer behaviour - just as advertisers do on the Internet.
There is "absolutely" a market for that kind of targeted TV, said Dennis Dinga, the vice-president and director of broadcast investments for media buyer Universal McCann Canada. "A lot of people, when they're talking about television, say it's too spread out, it's too big. But at the same time, nothing does what TV does, in terms of the reach it has."
Still, Mr. Dinga has his doubts about the Cogeco trial run because it's in a very specific market. Advertisers will need to see the technology in play on a national basis if they're going to be convinced of its merits, he said.
Though Invidi is now based in New York, the technology was invented in Canada, and the company still has an Edmonton office focused on research and development. The deal with Cogeco is the first in Canada, though Invidi's "Advatar" technology is already being tried out by DirectTV, Dish Network, and Verizon.
Starting with a local broadcaster and a relatively small cable company, the technology that started here is not getting the flashiest debut in Canada. But it has some big backers: NBC Universal, Motorola Inc., global marketing and communications firm WPP, and Google are all investors.
"We're all investing in something that could be revolutionary for the broadcast system," said Cogeco's vice-president of product development and project planning, Tom McCutcheon.
Invidi is in talks to expand its presence in Canada, as well as globally. The technology will have real value once channels have the power to divide their ad sales not just for certain cable subscribers, but for all their viewers.
"Our goal from the very beginning has been to have a universal footprint," said Invidi's executive vice-president Michael Kubin. "What you're trying to do as a marketer, is reach the largest number of people in your target audience as efficiently as possible. Our long term picture is to unify all digital platforms."
How it works
At the source
Invidi has built technology the allows cable and satellite carriers to air more than one commercial in the same time slot, tailoring them to different groups of viewers. "It sounds like an easy thing to do, like if you're the cable company you could do it yourself. It turns out, it's really, really complicated," Invidi's Michael Kubin said.
On the way
In Canada, a Markham, Ont.-based company inserts the ads so that they are delivered only to the areas and homes chosen for each one. Capital Networks Limited already manages locally specific TV listings which cable and satellite firms provide to subscribers, as well as other TV ad delivery.
In your home
If your cable or satellite provider buys into this technology, Motorola firmware that can communicate with the Invidi system is downloaded to your set-top box. The channel you're watching can then deliver an ad targeted to you, based on income brackets in your area as well as demographics and other consumer data tracked by research companies.