(Corrects in paragraphs 7 and 8 that DirecTV's ad targeting
does not take into account specific TV shows viewers watch)
By Liana B. Baker and Lisa Richwine
June 27 U.S. cable companies and satellite TV
providers, locked in battle with broadcasters and online sites
for advertising, are taking a page from Google by using
data on their subscribers' tastes to serve up tailored
In Los Angeles, a 35-year-old female DirecTV
subscriber with a cat might get a spot promoting cat food while
the satellite provider would beam a car advertisement to her
next door neighbor, a bachelor watching the same channel.
DirecTV combines data it collects from viewing habits from
its customers' digital video recorders with information from
third-party market researchers in categories such as income,
gender, age and buying habits. This is how it figures out how to
send the right ad to the person on the other end of the pitch.
"We can target based on demographics, household income,
geo-targeting, home owners versus rental - a wide variety," said
Paul Guyardo, chief revenue and marketing officer for DirecTV.
This makes commercials more relevant to customers and "can
move dollars back into national television because we can
provide the same targeting as online ads," Guyardo said. DirecTV
said it keeps this data anonymous and in "aggregate form" so it
does not invade its customers' privacy.
Dish Network Inc and cable providers Comcast Corp
and Cablevision also let advertisers create
"addressable" ads, using third-party data on demographics and
buying patterns to aim for certain types of subscribers.
DirecTV and the other providers said they do not target ads
based on specific shows their customers are watching.
Part of the information DirecTV uses comes from data on
which customers pay for premium subscriptions, watch shows on
demand or how much they spend on movies.
Dish's senior vice president of media sales Warren
Schlichting said his company is taking a more conservative
approach than DirecTV by choosing not to target ads based on
behavioral viewing habits. Dish's Schlichting said this is
because Dish does not want to make any customers uncomfortable.
As it relates to privacy, "the rules need to be worked out
as companies and viewers get used to this new approach in
advertising," Dish's Schlicting said.
Comcast declined to comment about why the company doesn't
use TV viewing data to tailor ads.
Pay television providers say the data they use is kept
anonymous and aggregated, which blocks them from connecting a
name and address with specific details about a household, and
that customers can opt out from receiving targeted ads.
Even so, some consumer advocates bristle at the amount of
data TV providers can use to target ads to viewers.
"They have more information today through your TV viewing
than they have ever had before," said Jeff Chester, executive
director of the Center for Digital Democracy. "Consumers are
getting little in return except an invasion of privacy."
TWO COMMERCIALS PER HOUR
Technology to deliver customized ads is widely used online
by companies such as Google and Facebook, but is
only now starting to get a foothold among TV providers.
In January, DirecTV allowed 40 of its advertisers, including
Allstate and Volkswagen, use its addressable technology to send
DirecTV's agreements with the cable channels allow the
satellite operator to intercept and replace an average of two
minutes every hour with its own commercials on such heavily
watched channels as Walt Disney Co's ESPN and AMC
. It can beam addressable commercials for those
advertisers to 12 million of its subscribers who have digital
DirecTV is on track to generate more than $60 million in
revenue from those ads by year's end, according to a person
familiar with the matter. That figure is up from zero a year ago
and growing by a double-digit percentage.
In March, premium movie channel Starz tested addressable
advertising for five days by targeting ads using data from
DirecTV to pinpoint movie fans between the ages of 35 to 54 who
also were subscribers of rival HBO. Those customers got an ad
tailored for them promoting the Starz service for $12.99 per
Starz saw a "huge lift" in sales, according to Ed Huguez,
president of affiliate distribution at premium movie channel
Starz. Sales jumped 49 percent among the targeted viewers
compared with another group who were less likely to watch movies
and whom Starz pitched with a more general offer.
That prompted Starz to invest a "meaningful amount of money"
in a two-week campaign in June to use commercials promoting
different offers tailored to its target audience. For instance,
discounts were offered to those consumers Starz considered less
likely to subscribe.
"We have multiple offers based on who we know will get that
commercial," Huguez said. "If you're going to spend tens of
millions of dollars to promote and drive your business, you want
those dollars to be spent on those who have the highest
probability of buying."
Dish Network, DirecTV's satellite TV rival, is signing six
and seven figure deals with advertisers for its addressable
technology, which now reaches 7 million homes, according to
Cable provider Comcast also has started offering addressable
options to advertisers. One credit card provider used data from
market research firm Experian to send TV commercials to Comcast
customers in zip codes with a larger number of households
earning $150,000-plus and credit scores over 700.
Online credit card applications in those areas more than
doubled, said Andrew Ward, a group vice president for Comcast
Spotlight, the advertising sales division of Comcast Cable.
Comcast plans to use the technology to make its TV own
advertising more efficient, it says, by avoiding ads that
promote its "triple play" offer -- combining phone, Internet
and cable services in a single package -- to subscribers who
already take it. Instead, those customers might get a pitch for
Comcast's home security offering.
The ads have potential, but there are hurdles before the
technology becomes widespread, said Jeff Minsky, director of
emerging media at media agency OMD.
Buying the custom ads currently requires an extra step of
signing an agreement with a cable or satellite operator and
prices still run high, said Minsky, who has some deals for
tailored ads in the works.
"I would like to have that personal conversation with the
consumer," Minsky said, "but sometimes it's more cost-effective
to just have a mass-market, national commercial."
(Reporting By Liana B. Baker in New York and Lisa Richwine in
Los Angeles; Edited by Ron Grover and Leslie Gevirtz)