DirecTV to Launch Targeted Ad Service in 2011

Mike White - DirecTV CEO - 2010
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Satellite TV-service provider is eyeing an August or September debut.

It may finally be time for targeted ads to take over personal television set.

The Wall Street Journal reports that DirecTV will be rolling out what they call “addressable ads,” which will allow advertisers to reach almost 10 million homes with targeted commercials.

The TV service provider has teamed up with Starcom Media Vest, which purchases ad time for companies like Procter & Gamble and Coca-Cola, and it has been reported that between $10 million to $20 million will be spent by Starcom. Best Buy, one of Starcom’s clients, has already agreed to purchase targeted ads.

According to the Journal, DirecTV is eyeing a August or September debut for its new service.

“We are finally at the tipping point,” Laura Desmond, chief executive of Starcom, told the Journal. “Advertisers’ biggest complaint so far has been that many tests of this service haven’t been big enough in terms of scale.”

In DirecTV’s new service, an advertiser identifies the types of households it wants to advertise to, the satellite TV-service provider then looks at its subscriber data (which includes income, gender and recently purchased items) from third-party sources (an example is Experian) to indicate who best fits the profile and that data is then stored on the respective household’s DirecTV box. When an ad is to run, the box chooses which is the best commercial to run from a plethora of ads stored on the DVR.

However, the information used to indicate which ads will be shown will not include a household’s viewing habits.

The rollout has been in the works for three years. DirecTV svp of ad sales Bob Riordan told the Journal that about one-quarter of the provider’s ads (two minutes of ad time are given to DirecTV per hour for more than 105 cable nets it carries) will be sold as “addressable.” Riordan notes that the deal with Starcom isn’t exclusive and that other companies may participate.

In a test done by Comcast and Starcom in 2009 that reached 60,000 households revealed that those who received targeted ads switched channels 32% less than homes receiving regular commercials.

The Journal reports that companies will spend $11.5 billion in targeted ads by 2015 in the U.S. Alone, according to projections by Bank of America Merrill Lynch.

There has been issue with targeted ads, one of which is concerns about privacy. DirecTV and Starcom make a point to say that data used for the targeted ads will only come from “reputable third-parties,” and DirecTV plans to allow its subscribers to opt out of receiving “addressable ads.”