The beauty of being a subscription-based broadcaster like BSkyB is that you can modify the advertiser-funded television model without worrying too much about how it will affect revenue.
When BSkyB launched its Sky+ PVR digibox, the fact that only 8% of its cash came from airtime sales meant the threat of ad-skipping was someone else's problem. Far more important was the opportunity to get customers to trade up to a new box. Sky's experimentation does not always spell trouble for advertiser and agencies, though. Last week, for example, the pay-TV heavyweight unveiled plans for an ad-serving technology that could allow advertisers to forge a powerful fresh relationship with audiences.
Sky is planning to use Sky+ to offer advertisers and consumers the opportunity to opt in to targeted ads from 2011. Using data from Sky homes, brands would, for example, be able to aim beer ads at men or cosmetic products at women. Families could be super-served with screechy toy ads, while men could hear Pele discuss erectile dysfunction ad infinitum.
When Sky's technology goes live, it will be the first time targeted ads have been wrapped around UK linear TV, says Sky Media managing director Nick Milligan, who unveiled the system at the TV industry's Thinkbox forum. 'The Sky+ box will store ads, which can be substituted into scheduled breaks,' he says. 'If clients and customers decide to join in, irrelevant ads can be replaced by targeted ones: if you don't have a dog, no more dog food ads.'
Milligan stresses that this will not replace the current broadcast model that turns shows such as I'm A Celebrity into good brand-builders, 'but it does mean advertisers will also have a one-to-one relationship with customers.
TV can pitch for direct marketing revenues and more brands will be able to afford the medium. It might even reduce ad-skipping.'
Success will depend heavily on the quality of the data that Sky secures, but based on his experience with Sky View, its 33,000-home viewing panel, Milligan does not foresee a problem. 'We're talking about people getting more relevant ads in return for supplying data,' he says. 'Besides, people are prepared to tell you about themselves in return for clear benefits.'
Procter & Gamble's head of marketing, Roisin Donnelly, gave the system an immediate thumbs-up at the conference, calling targeted ads 'her greatest wish', but observers such as VivaKi UK group trading director Chris Locke are more cautious. 'Retailers, car brands and banks might insert copy changes to target people by postcode or age, but targeted ad breaks mean greater complexity in reporting and measurement,' he says.
Furthermore, ad substitution would need to be handled carefully, adds Locke - to ensure that viewing is not undermined by overlength ads running into shows, cheap-looking local copy add-ons or irritating pauses.
Milligan agrees substitution needs to be seamless, but believes the concerns will be overcome. 'My phone has been red-hot with advertisers wanting time-lines for launch,' he says. 'When agencies see how keen their clients are, they'll embrace the system's potential.'
Further support comes from Gary Goodman, managing director of recently launched web-based trading platform MediaEquals. 'ROI from targeted TV advertising is the Holy Grail for traditional media budgets. Sky is definitely strengthening its media in a fragmented market. This could even develop into an offer where TV serves ads based on behavioural targeting metrics,' he says.
A more serious stumbling block is likely to be Sky's ability to secure buy-in from broadcasters such as ITV, Channel 4 and Virgin Media - which is already trialling targeted ads via its video-on-demand platform (see box). If rivals are uncomfortable using Sky's proprietary technology, the nascent system could find itself limited to Sky channel viewers, warns Locke. N
Virgin's targeted ad trials
Virgin Media is trialling targeted ads from Kellogg, John Lewis and Royal Mail via its video-on-demand TV platform. Using technology from SeaChange, ads are inserted before and after VOD content in real time, allowing campaigns to be kept up-to-date and specific to daypart or region. Virgin Media chief commercial officer Mark Schweitzer says the trial 'will help us explore the best ways to reach the audience with engaging and relevant advertising'.