Web’s Interactivity a Threat, Model for Cable TV

Cable TV and advertising

WASHINGTON — For more than a year, the nation’s largest cable companies have been staking their hopes to thrive in a data-driven, interactive advertising market on Canoe Ventures. Born Project Canoe, the venture aims to cull the vast troves of data that cable companies have about their customers, from subscriber demographics to the clicks of a remote control, to bring Web-like ad targeting to the television platform.

Here at the Cable Show, the annual conference hosted by the National Cable and Telecommunications Association, Canoe CEO David Verklin proclaimed that his firm is ready for prime time, with its first product set to roll out in the next six weeks.

“We’re going to turn television into a platform,” Verklin said in a panel discussion with several cable executives.

Canoe’s forthcoming product, called community addressable messaging, will enable an advertiser running a national TV campaign to customize it with local insertions to reach targeted demographics defined by data supplied from the cable providers. Verklin hailed it as the first application of local insertion technology to a national campaign.

Canoe aims to give advertisers “the ability to put a dog food ad only in a house that owns a dog,” Verklin said. “That’s one of the promises of this technology.”

Cable companies have thus far weathered the economic downturn better than their broadcast counterparts in terms of advertising dollars, but they continue to grapple with new revenue models in response to the seismic disruption brought on by the Web. As people increasingly expect entertainment content to be available at any time on any device, the entertainment industry writ large is struggling to balance the evident consumer demand with the baseline business reality that it might not make sense to start giving away what you can sell.

“The challenge for all us is it’s clear that, behaviorally, people are starting to [find] consumer content on other platforms,” said David Zaslav, president and CEO of Discovery Communications. “We have to be careful not to train people to consume [content] on platforms that’s going to put us out of business.”

Canoe’s plan to tap the data stored inside set-top boxes, where each channel change is an expression of consumer’s preference, promises to bring cable providers into a new strain of the ad-revenue economy.

One of the selling points of online advertising is that it’s measurable. Since the advent of the Web, advertisers have been shifting their budgets to online both because people are spending more time online, and because they have a better sense of how effective their campaign is when they can view reports on the actions people took after seeing an ad.

“We need to compete with online,” said Jeff Gaspin, president and COO of Universal Television Group. “Having the set-top box with the data you can get on the PC, we can all support that.”

Mining and parsing the information stored in tens of millions of set-top boxes will be no easy feat. The panelists suggested that Canoe could end up outsourcing much of the backend data processing that will be needed to remake TV advertising in the mold of the Internet. One panelist even floated the idea of tapping Google, the company credited for so much of the sturm und drang gripping the cable and entertainment industries.

Any effort to cull precise information from mammoth data warehouses about what consumers like to watch on TV or look at on the Web online is bound to raise some privacy concerns, the panelists acknowledged. It wasn’t even a year ago that a startup ad-tech firm called NebuAd found itself in the crosshairs of privacy-conscious congressmen for a new scheme to bring ISPs into the online-advertising revenue stream with a targeting technology that to many seemed borderline illegal.

Privacy concerns aside, the panelists were generally enthusiastic about the prospects of Canoe, though how soon the venture will be able to deliver on its promise remains an open question.

“I just think the data right now is too generic,” said David Levy, president of Turner Broadcasting Sales. “I’m not exactly sure how we’re going to monetize it.”

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