TV networks and advertisers alike have long been looking for ways to make ads more relevant to consumers prone to skipping, or simply ignoring advertising. This quest has become even more urgent with the advent of new advertising opportunities online that are increasingly rivaling the 30-second spot. Personalized TV advertising is an obvious solution in theory; making it a reality however, has proven to be difficult, with major efforts to develop the technical infrastructure to serve different ads to different consumers stalling.
UK-based pay-TV solutions provider NDS has come up with a new approach to personalized advertising that’s not only much more feasible than previous efforts, but should also please privacy advocates worried about the implications of behavioral targeted marketing. In fact, the technology is so simple that it could easily be rolled out to millions of consumers tomorrow — if it wasn’t for the fact that it forces cable operators and TV networks alike to rethink a major part of their business.
Personalized advertising is not a new idea. In fact, major industry players including Charter (s CCMM), Cox, Time Warner Cable (s TWX) and Comcast (s CMCSA) started to collaborate on a project code-named “Canoe” two years ago with the goal of building a system that would allow them to deliver targeted ads to their cable TV customers. Comcast even built a 500TB data warehouse to aggregate data about the viewing habits of its subscribers, and use this data to deliver relevant ads. However, Canoe couldn’t actually get the personalization to work so instead shifted to interactive advertising, which it still hasn’t rolled out, either.
NDS has been developing a number of ad insertion technologies dubbed NDS Dynamic that include more traditional ad swapping and personalization features closer to Canoe’s initial plans. But the company has also developed a product called Ad Agent that would avoid much of the overhead that’s been slowing down Canoe by bringing the whole process straight to your set-top box.
The Ad Agent would essentially turn your cable box or DVR into an ad recommendation engine, monitoring all your interactions with the box. Cable networks would just send a number of ads to your DVR, where they would sit on your hard drive until it deemed one of them to be relevant to your viewing behavior and the programming currently running. The Ad Agent uses a SQLite database optimized for set-top boxes to utilize this kind of targeting and gradually builds up your profile through pre-defined rules. Which means it might give a little more weight to the sports category every time you tune into ESPN. Watch a game every Sunday, and the device will soon have you categorized as a sports fanatic.
Of course, what’s really interesting about this approach is that all of the behavioral targeting takes place in the box, so the data about which shows you’re watching never leaves your home. That should be a major relief for privacy advocates, who have increasingly expressed worries about behavioral targeted advertising.
There’s also an interesting business aspect to distributing the Ad Agent closer to the end user. The technology would not only be able to capture much more data than any centralized effort, but it could also use a lot of otherwise unavailable data to profile users. Cable operators would obviously not be able to swap or personalize ads on channels that they don’t have the right to monetize to, like your local NBC (s GE) affiliate.
However, your cable box could easily measure any of your interactions with NBC and make use of this data to build up its model of your likes and dislikes. You’re regularly watching Heroes and Community? Then don’t be surprised to get some ads targeted towards comic book-loving 30-somethings the next time you turn into a cable channel, even if you’ve never watched that channel before. “It allows an operator to capture an audience, and then wait until they have an opportunity to utilize that knowledge,” said Nick Thexton, senior VP of R&D at NDS.
Thexton’s company is getting ready to deploy a simpler version of NDS Dynamic next year. Getting the Ad Agent out in the field won’t be that hard, either. “The agent invokes very little processor and memory overhead,” he told me. The complete code is just about 140kb, something any current DVR should be able to work with. However, the bigger challenge is to get operators to adopt this type of technology.
Making ads not only measurable, but also addressable would make the traditional 30-second spot that gets blasted out to everyone, no matter how many people actually tune in, much less valuable. Add to that the fact that ad buys nowadays are often negotiated months in advance as part of upfront sales, based on programming and not on audience, and it becomes clear why these 140kb of code could prove to be quite disruptive.
However, Thexton believes that technologies like the Ad Agent could eventually help to aggregate increasingly fragmented audiences. “Using knowledge of the schedule, it would now be possible to take audience X and glue it to audience Y, based on viewing data of two mutually exclusive programs,” he said.
Related content on GigaOm Pro: With TV Apps, Over-the-Top Video Gets New Backers (subscription required)