Individualized Ads on TV Could Be One Result of AT&T-Time Warner Merger

Individualized Ads on TV Could Be One Result of AT&T-Time Warner Merger
By SAPNA MAHESHWARI
Oct 26 2016
http://www.nytimes.com/2016/10/27/business/media/targeted-advertising-time-warner-merger.html

Targeting people with individualized TV commercials using cable or satellite boxes has been promoted as the future of television for at least a decade. But the business, known as addressable TV advertising, has remained on the fringes, usually limited to two minutes of local commercial time an hour on cable shows.

Now, AT&T and Time Warner are pointing to targeted advertising as a major benefit of their proposed $85 billion merger. Jeffrey L. Bewkes, the chief executive of Time Warner, and Randall L. Stephenson, AT&T’s chief executive, highlighted the vast trove of consumer data their combined companies would have in a call with investors on Monday, and its usefulness for both marketers and consumers.

Viewers, with new subscription options, could enjoy fewer interruptions and see ads for “the products you’re interested in, not the ones you don’t need to see,” Mr. Bewkes said. National advertisers would presumably pay more to reach them and have an alternative to spending on Google and Facebook.

Targeted advertising has become commonplace on streaming services like Hulu or platforms like YouTube, where, for example, women in their 20s may see ads for birth control, pregnancy tests or certain movie trailers. Advertisers hope things could potentially move even beyond that on TV, with people seeing ads based on, for instance, their location or individual interests, much like what happens on the internet. Still, skepticism over whether the AT&T-Time Warner merger will normalize the practice for traditional TV is rife within the ad industry.

“As to the question of whether this is a new route for advertising and another opportunity for targeted addressable TV advertising, the answer is it’s going to take a significant period of time,” said Martin Sorrell, chief executive of the advertising giant WPP, pointing to the risks around regulation and combining the two companies. “It’s possible, but implementing it is not going to be easy.”

Tailored advertising is a generally accepted part of the internet experience — consumers see it daily on Facebook or through banner ads, where it has become common for a specific shirt or bag placed in an online shopping cart to haunt a person for weeks, even after it has been purchased. But traditional TV has largely continued to advertise in broad swaths, showing ads to demographics like 18- to 49-year-old men.

Rishad Tobaccowala, chief strategist for the Publicis Groupe, questioned whether new targeting capabilities could improve the health of the TV ad business over all, pointing to this season’s reduction in commercials on “Saturday Night Live” and the drop in ratings for National Football League games.

“The reality of it is, we’re moving into a world where consumers are turning against advertising,” Mr. Tobaccowala said.

Stephen B. Burke, chief executive of NBCUniversal, speaking on Comcast’s earnings call on Wednesday, said that the TV group has been working to developing advanced advertising products but that the process was difficult.

“But it’s clear what advertisers want,” he said. “They want to combine the data intensity of internet advertising with the clear value and ability to change peoples’ perceptions that you get with a television ad.”

Others see great potential for advertising in the merger, which would marry AT&T’s more than 100 million subscribers across its wireless, broadband and DirecTV properties, with Time Warner’s offerings, which include CNN, TBS, Cartoon Network, the website Bleacher Report, HBO and Warner Bros. Pictures. On Tuesday at WSJD, a technology conference organized by The Wall Street Journal, Mr. Stephenson said that, starting next month, the company would offer a 100-channel internet-based premium television service that would cost $35 a month and allow people to watch video on their mobile phones and other devices.

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