By Mike Shields and Suzanne Vranica
AT&T Inc. executives say their proposed $85.4 billion
acquisition of Time Warner Inc. would deliver innovation to
advertising.
While ad industry executives love hearing such talk, they say it
is unclear exactly what it could mean for them.
The combination of AT&T and Time Warner would bring together
huge amounts of viewer data with content, which could serve as a
catalyst to make TV advertising a lot more targeted to individuals,
similar to the way digital advertising is now.
In addition, AT&T's data from its 90 million wireless
subscribers and DirecTV households could be leveraged to target
people with ads across devices, including TVs, laptops and mobile
phones, some ad executives speculate.
Both approaches are potentially powerful for marketers but not
without hurdles, including privacy concerns.
Yet cable and satellite TV operators have long promised
marketers would be able to target TV commercials to individual
homes. Such addressable, or targeted, advertising uses set-top
boxes to route commercials to specific households or neighborhoods
based on data about income, ethnicity, gender or other
characteristics. For example, families with children could be shown
minivan TV ads while a single person in the same town could be
shown a TV spot for a sports car.
"Addressable advertising has been two or three years away for at
least 10 years," said analyst Craig Moffett at
MoffettNathanson.
The tactic historically has been very manual to implement and
patchwork, limited to small pools of ad space in specific areas of
the country.
"It has been at the kids' table," said Tim Hanlon, a former
ad-agency executive and founder and chief executive of Vertere
Group, which consults with ad and media companies. "It has been
very difficult to scale in a sizable way."
AT&T CEO Executive Randall Stephenson said the merger with
Time Warner could change that, highlighting addressable TV ads as a
key opportunity. "When you combine Time Warner's content with our
scale and distribution...[and] put that with our customer insights
and the addressable advertising opportunities that flow from that,
we think we build something here that's really special," Mr.
Stephenson told investors on Monday.
Currently, companies like AT&T are limited to running
addressable TV ads within the two minutes an hour of local
commercial time in cable programming sold by the pay-TV
provider.
If the proposed deal goes through, AT&T could expand this to
all of the ad space on Turner networks like CNN -- albeit only in
the AT&T households with the capability.
It would give "addressable TV a significant increase in
inventory that advertisers can now buy," said Tracey Scheppach, an
executive vice president at Publicis Media, an ad-buying firm owned
by Publicis Groupe.
If that happens, ad executives said the deal could encourage
other cable giants to make addressable TV advertising more of a
priority.
The dream is that addressable TV ads become more national in
nature, making them attractive to more advertisers.
However, that is a big if. Major broadcast and cable networks
control their own national ad sales and have been inclined to sell
expensive ads designed to reach large swaths of the country.
Brian Wieser, a senior research analyst at Pivotal Research
Group, said he remains skeptical about addressable advertising.
"Turner's advertisers generally need to buy their video/TV ads
cost-effectively, and need units that reach all parts of the
country, not only those who are AT&T subscribers," he wrote in
a note. "This means that enhanced ad units that AT&T may offer
when ads are delivered on its platform are of limited use if those
enhanced ad units are not available through other
distributors."
Although addressable TV advertising is growing rapidly -- and
projected to more than double this year -- it is still a small
piece of the overall TV ad business. Advertisers are expected to
spend almost $1 billion, about 1.3% of TV ad spending, on
addressable TV ads in the U.S. this year, according to
eMarketer.
A more national addressable TV ad footprint could be
kick-started by DirecTV's direct-to-consumer streaming offering
that is launching later this year, as well as other services aimed
at cord-cutters. Unlike the traditional pay-TV landscape, where
addressable TV ads are funneled through set-top boxes, TV delivered
over the internet allows for more weblike ad delivery that isn't
limited by region.
The other big potential advertising synergy to exploit is the
use of data to target consumers across screens, which would help
the company to more directly compete with Facebook and Google.
"Targeting people from device to device is one of the most
vexing challenges in the marketing ecosystem today, and this
alignment would be a meaningful step in that direction," said David
Cohen, president of North America for ad-buying firm Magna
Global.
Write to Mike Shields at mike.shields@wsj.com and Suzanne
Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
October 25, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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