VIAB Viacom Inc

By Alexandra Bruell 

Major TV programmers are starting to advance on the $2 billion addressable-TV-ad business, which lets advertisers serve different commercials to different households watching the same shows.

Network owners including Viacom Inc., CBS Corp. and Fox Broadcasting Co. are having discussions with pay-TV providers to start selling a small percentage of their national commercial time as targeted ads . That would mean an automotive company could buy a national ad and serve a minivan ad to pay-TV-subscriber households where data suggests there are large families, for example, while showing an ad for a basic passenger car to the rest of the country watching the same show at the same time.

The efforts come as TV's decades-old model for ad sales based on age and gender demographics is being disrupted by both ad-free streaming services and digital giants like Google and Facebook. Marketers have gotten used to being able to easily direct their digital ads toward highly specific consumer targets based on a wide variety of data.

The conversations are early and the amount of inventory in play is small, according to people familiar with the matter. Many of the networks are also having conversations with technology companies that enable ad targeting for smart TVs.

Viacom, which owns cable networks such as MTV and Nickelodeon, has deals with various pay-TV providers that distribute its programming, the people said. The company has been testing targeting with in-house promotional ads and will soon start making it available to advertisers, they said.

CBS is exploring a similar capability, intending to make it available to some advertisers over the next 12 months, according to people familiar with the matter.

Fox is also looking to introduce targeted-ad capabilities for its live programming, holding talks with pay-TV providers and technology companies that enable ad targeting for smart TVs, said an executive at the company. Fox parent Fox Corp. and Wall Street Journal parent News Corp share common ownership.

AT&T Inc., meanwhile, has expressed ambitions to sell part of its ad inventory on WarnerMedia networks, which include TNT and CNN, on an addressable basis.

TV networks now sell most of their own commercial time, roughly 14 minutes per hour, to marketers whose ads then air in every home that is tuned in. Pay-TV distributors such as Dish Network Corp. or Comcast Corp. have the data and technology to simultaneously send different commercials to various ZIP Codes and even households, a capability they offer for the two minutes per hour they typically control. The networks are exploring ways to provide that targeting to their advertisers.

"We have advertisers that want it," said one executive at a TV network. "We have constrained inventory we have to get more yield from. We can only get a certain rate of change on demo buys each year, and can charge a premium for addressable ads."

Programmers' addressable offerings aren't quite ready for prime time, and most won't be offered in this year's upfront marketplace, an annual event at which networks try to secure ad commitments for the coming TV season.

Addressable-TV-ad spending surpassed $2 billion in 2018, and is expected to exceed $2.5 billion in 2019, accounting for 3.7% of total TV ad spending, according to a report from eMarketer. The figure measures TV ads delivered on a home-by-home basis through cable and satellite boxes, including video on demand. It excludes connected TV, smart TV and over-the-top viewing.

"It's still a little unproven and there are definitely some steps that need to be taken to scale the solution and execution of it," said Kevin Arrix, senior vice president at Dish Network's Dish Media. "I do expect that to accelerate in the next 12 to 24 months."

The early version of the addressable offering from programmers will likely be available to advertisers that purchase an entire national ad slot, and use the time to send different versions of their ads to different households.

A targeted ad will likely be much more expensive than standard ads that are seen by everyone, including customers an advertiser isn't trying to reach.

The TV networks' project is a messy endeavor. Just as advertisers now have to deal with many TV distributors if they want to target commercials nationwide, the networks have to ink deals with as many parties to assemble a national targeting capability.

"It's a very small test at this point," said Mike Law, president of Dentsu Aegis's media buying group Amplifi, of the TV programmers' addressable efforts. Advertisers will work with whomever is best at offering targeting in the greatest number of markets, whether that is the programmers or an alternative such as a joint effort from the cable operators, he said.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

(END) Dow Jones Newswires

May 13, 2019 06:14 ET (10:14 GMT)

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