IPTV and Local

A handful of articles came out today that together triangulate some interesting points on the future of IPTV and local.

The New York Times examines a few automated ad platforms and services that are following the trail blazed by Spot Runner. We’ve always recognized Spot Runner as a game changer for bringing television ad creation and placement within the grasp of small businesses, but it’s also interesting to note how it can allow national advertisers a more cost-effective way to reach local audiences (Spot Runner CEO Nick Grouf will keynote at The Kelsey Group’s upcoming Drilling Down on Local conference).

According to the article:

The new systems threaten some of the roles that advertising agencies have traditionally played. National advertisers, mainly in the retail, real estate and auto industries, are using the systems to make their messages more relevant on the local level.

This is the logic behind some of the deals Spot Runner has formed with national Realtors such as Coldwell Banker that gives its far-flung Realtors and constituents these ad creation and placement capabilities.

They can automatically add names of local sales agents or dealership addresses, and they can change the content of the ad, depending on where it is showing, to appeal to various demographic groups. Among the companies that have used these services are Wendy’s, Ford Motor, Coldwell Banker and Warner Independent Pictures.

The article also talks about Fort Lauderdale-based Zimmerman Advertising, a subsidiary of Omnicom Group that seems to be a smaller Spot Runner-type play. Its automated ad creation engine, called Pick-n-Click, is currently only available for automotive advertisers, but it has many of the customization features of Spot Runner, such as voice-overs and text.

Targeting Local Audiences

The automation and cost effectiveness of creating ads is only half the battle; the ad targeting we’ve come to expect from online search will take this to the next level.

If there’s a man and a woman watching television in two different houses and you are Procter & Gamble, it would be more efficient to show one of them an ad for a Gillette’s men’s razor and the other a woman’s ad,” said Mark Read, director of strategy at the WPP Group, an advertising holding company that has invested in Visible World and Spot Runner. To customize ads, the companies, to a varying degree, link ZIP codes with census and other third-party data to develop local demographic profiles, isolating viewers more finely than typical cable operators.

Still, this misses the point. Yes targeting will be possible, but the potential here will be much greater than using ZIP codes and census data. This is where the technology exists today, but the real story is where IPTV could take this (referring to telco-delivered IPTV service packages). The “switched video” architecture of IPTV will be much like the Web. Every time a viewer switches the channel, it will be like clicking on a Web link  that channel will be called up from a server. This contrasts with cable’s architecture, which crams into one pipe 300 channels that are there all the time for users to surf.

Long story short, IPTV’s architecture will let us go from ZIP code targeting to IP targeting. In other words, the question of what ads come on and when will come down to the set-top box level rather than the neighborhood level (no more Craftmatic adjustable bed commercials because of your geriatric neighbors). There are many other legal, organizational and cultural hurdles to cross before this scenario is realized, but this is where we’re headed with IPTV.

The other wild card here is looking at what IPTV’s architecture could do for the economics of ad inventory. Because one channel is called up at a time, as mentioned above, there are no technical limitations on the amount of channels you can have  unlike with cable. This opens up lots of space for content and thus ad inventory. An increased supply could yeild falling prices and a long-tail effect that will make television ad inventory more affordable for small businesses and more efficient for national brands (eMarketer reports today on an Accenture study showing the growing enthusiasm among executives for the idea of IPTV targeted advertising). Combine that with the lowering cost of video ad creation and distribution, a la Spot Runner, and this starts to get very relevant to local.

Of course there are other factors preventing the creation of thousands of TV stations, such as content creation, licensing and the control that IPTV providers such as AT&T will no doubt exert. But this could change over time as some consumers sidestep the telcos and watch Web-delivered video (the jerky, low-res quality of YouTube-like video clips will improve with higher broadband speeds, and adoption will rise when you can watch this content on your television set  see AppleTV). Regardless of these other factors, if you look at IPTV’s technical specifications and the possibilities they bring, it starts to get interesting. We’re not there yet, of course, but it’s certainly time to start talking about it.

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Related: B&C reports that local television revenues are up 41 percent. This is attributed to strong growth in local advertising and more SMEs in auto and real estate verticals coming around to the idea of television advertising to augment or replace newspaper and Yellow Pages ad spends.

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