Home & Office

Jurassic advertising: the rise of one-to-one broadcast

The future of broadcasting will teem with one-to-one opportunities and challenges. Are there hurdles, potholes and skeptics? Absolutely. Will the specific brands described in this story still be standing when success comes? No one can be absolutely certain.
Written by Peppers , Contributor and  Rogers Group, Contributor
The asteroid crashes, seas boil, volcanoes spew, skies darken; say goodbye to the tyrannosaur. Now careening toward the world of broadcast advertising is a dazzling array of rapidly evolving technologies.

Digital video recording devices (DVRs, like TiVo, Ultimate and ReplayTV), video-on-demand (VOD), interactive television (ITV, such as Wink or AOL/Time Warner's WebTV), even pixel manipulation (enabling logo and product placement): they're in near orbit now, and they're going to hit. When they do, broadcasting environs as we know them-and in lockstep, broadcast advertising-will never be the same.

What's in store? Though the image is becoming clearer, substantial evolution will take place before it's perfectly in focus. Broadcast advertising had its roots in mass marketing, but the playing field of the future is decidedly one to one.

Consumers will watch what they want, when they want to. Middlemen like TiVo, ReplayTV and Wink-though vigilant regarding privacy-will have precise information on viewer income levels, spending habits, viewing habits, interests and preferences. Still, consumers won't share this information with just anyone, and will increasingly begin accepting advertising only from organizations of their choice. The principal observation?

The future of broadcasting will teem with one-to-one opportunities and challenges. Are there hurdles, potholes and skeptics? Absolutely. Will the specific brands described in this story still be standing when success comes? No one can be absolutely certain.

Things, obviously, are changing. The first 50 years of television broadcasting favored advertisers with a mass-marketing bent. Create a product, create a commercial, then broadcast everything-on one of three networks-to as many eyeballs as possible. But the broadcasting environment of the near future is not only far more fragmented (featuring hundreds of programming choices in an on-demand environment), it's also voraciously interactive. That's a primordial soup for one-to-one strategies.

DVR, ITV, VOD: these aren't traditional one-way broadcasts, they are two-way interactions. TiVo and ReplayTV "know" which programs their users watch or record, and even what they transfer to VCR tapes. Wink knows which commercials and related services a customer chooses to interact with.

As VOD takes hold, expect its providers to enjoy precise knowledge of individual viewers' actions, interests and preferences-knowledge gathered over time and in relatively complete context.

Though always honoring individual household privacy, these technology-enabling middlemen will be increasingly well-positioned to direct demographic and transactional data to appropriate advertisers. Eventually, with the permission of customers, this precision will evolve to a point where anonymous yet specific customer information is actually shared with advertisers. DVR, ITV and VOD providers become data aggregators.

Reflect for a moment or two longer about what was just said. Advertisers traditionally use broadcasting to reach groups of demographically profiled, yet still largely unknown, prospects. But as ITV and DVR take hold, relatively anonymous prospects become known quantities. These are the customers of firms like Wink and TiVo, and to the extent these customers agree to be pitched to by relevant advertisers.

The world now shifts from broadcast advertising to middleman-assisted one-to-one prospecting. As the Pentagon might describe things, advertisers put away the shotgun and take out the sniper rifle.

These new technologies obliterate the economics of traditional broadcasting. But at the same time, the potential for a profound evolution in the relevance and effectiveness of advertising, a new economics of broadcasting, is a one-to-one futurist's dream. Imagine the ability to precisely target advertising.

Imagine one household with three TV receivers-a main set in the living room (for the adults) and a set in both of the children's rooms. All three might be tuned to the same program (it could happen), but each might receive different advertising. Mom and Dad see the Volvo spot, the 15-year-old son sees the latest PS2 game from Eidos, while the 13-year-old daughter (and her visiting friends) catch a JCPenney fashion promo.

As compelling as this sounds, it's still a bit of a Catch-22. Technologies like DVR and ITV afford unprecedented knowledge of individual households' interests and preferences; at the same time, viewers now have control over what they watch-and given the choice, most choose not to watch commercials. So the question becomes: how will advertisers entice viewers to (a) share information (through middlemen) and (b) accept commercials?

And the answer, though challenging in practice, is relatively simple. If traditional broadcast advertising is to remain effective, it will have to achieve a significantly greater-even tangible-value proposition for the consumer. In other words, there will have to be significant incentives for consumers to share information and watch commercials.

So what are the incentives the advertiser of 2010 can deliver? The big two are relevance ("this is a product you definitely need") and outright subsidy ("we'll pay you to hear about it").

The first, most compelling and probably most demanding value proposition for any advertising is relevance. Why should a would-be consumer watch this or any other promo?

The ideal response would be because it's in his or her best interests-it perfectly matches the viewer's interests. Certainly, as trusted middlemen like TiVo garner enormous amounts of highly specific information about individual households, and this information is shared with advertisers, the ability to achieve relevance improves. (Meanwhile, by the same reasoning, consumer tolerance for irrelevance evaporates.)

Consider the following. DVR tells the middleman: both our household and the household across the street love police dramas. But from there, the similarities end. My household has three teenage boys, a single-parent father, a steady and often visiting girlfriend, three horses, four cats and one dog. This home does not need or want ads for adult undergarments (not yet) or toys/clothing for young girls.

We're in debt up to our eyelashes, and college is just around the corner, so why not save everyone some time and avoid showing us ads for luxury cars. Instead, how about telling us about college loans, soccer camps (hopes for a scholarship never die), vacation discounts or deals on auto repair/maintenance?

As for our neighbors across the street: they're grandparents, he's about to undergo an operation that might require the use of the aforementioned undergarments, they regularly buy presents for their nursery school-aged granddaughter, and their Lexus is showing signs of wear.

Same neighborhood, same gross income, same viewing preferences-but totally dissimilar commercial interests. To achieve relevance, broadcast advertisers of the near future will have to pick up on these not so subtle variations. Leading companies practice one to one with their customers. Increasingly, they'll also use television to do the same with their prospects.

We know that viewers will pay for HBO, Showtime, Cinemax and even the occasional pay-per-view event. But just how badly do they want their MTV-or, for that matter, A&E, ABC or even The Discovery Channel?

In a world where commercials can be blocked and broadcast advertisers can pare back or even eliminate their spending, we may soon see. Sans advertising, viewers would have to decide whether they're willing to begin paying for programming.

What this does is attach an explicit price to commercial-free viewing (I'm blocking all commercials) and privacy (my DVR knows me, but I won't allow my DVR to tell any access-seeking advertiser anything about me). Certainly, some percentage of the population might be willing to pay for the right to be "above it all." But couple viewer resistance to paying for something that was once free with the value to advertisers of highly profiled/ qualified prospects.

The bottom line: advertisers, DVR/ITV/VOD providers, broadcasters and even the creators of programming will work cooperatively to create a set of value propositions that viewers won't be able to refuse.

In other words, viewers probably will not have to pay significantly more, as a variety of subsidized viewing arrangements will begin to emerge. For example, watch this program, click on this icon, view these ads, answer these three questions (to prove you saw the ads) and the sponsors will pay for the viewing.

Alternatively, one can imagine a broadcast channel sponsored exclusively by a Procter & Gamble or a family of sponsors-with unblockable advertising (sounds like the way broadcast advertising began). Subsidies will evolve in myriad forms, but the point is, broadcast technology is evolving to the point where advertisers will do all they can to get the right messages to the right people at the right time.

What happens when climate changes radically?

Creatures with specific attributes that are complemented by the new environment become relatively more successful. Broadcasting, by definition a one-way medium, is becoming decidedly interactive. So the coming world of interactive television will tend to favor companies that understand the importance of and know how to act upon customized, interactive relationships.

No, we cannot forecast precisely how these technologies will affect the broadcasting arena-we're merely speculating. But the win/win/win potential is evident. For example, there may be fewer commercials overall (viewers win). Meanwhile, advertisers may need to pay more for each contact (broadcasters win). But because the ability to match individual messages to prospects is greater, advertisers also win.

Yes, we are certain that change is coming. These technologies shatter traditional mass-marketing models. At the same time, they make each individual ad more effective. These are favorable conditions for CRM, and to the extent they migrate their business strategies to the airwaves-and capitalize on these rapidly evolving interactive technologies-one-to-one- oriented companies will become the tyrannosaurs of broadcast advertising.

Editorial standards