How Google might change the TV commercial

A century or so ago, retailer John Wanamaker uttered what has since become an industry cliche: “Half my advertising is wasted, I just don’t know which half.”

Can Google, the company that built itself into a half-trillion-dollar colossus by hitting web surfers with the right ad at the right time, ditch the half (at least) of TV spots that go to waste?

It’s trying. The company’s Google Fiber division has been testing TV commercial sharpshooting in Kansas City for 15 months, tempting advertisers with pinpoint placement to deliver commercials to an audience that actually wants to see them.

Advertisers see game-changing promise, a leap toward only reaching the audience they want rather than just the audience of any particular show.

Two TVs in the same home could be tuned into the identical program over Google’s fiber-optic cables, but one commercial plays in the man cave while another airs in the kids’ room. What’s more, if a show is recorded on Monday when one commercial was scheduled, the DVR playback could swap in an updated spot when you watch the show on Wednesday.

“Everybody wants to be as granular as possible,” said Brian Bennett, a cable TV analyst with Kersey Strategies. “If you can narrow down viewing habits, you get more out of your commercial.”

The higher-tech approach to scheduling commercials has so far only made ripples in the business — not a tsunami. That’s partly because Google Fiber sells TV to only a fraction of the midsized Kansas City market, making it harder to justify such small-scale ad campaigns.

Analysts say it’ll take imitators of the Google Fiber model, or growth of the company’s TV customer base, for an advertising revolution to take hold.

Still, the move toward more targeted TV commercials appears increasingly inevitable. The technology has advertisers imagining a fast-approaching world where watching television feels more like cruising the internet — where ads tend to reflect your interests.

“It’s a wise way to target,” said Amy McNeall, senior media buyer and planner for Trozollo Communications.

Her firm had particular success placing targeted ads for financial services aimed at “c-suite executives,” people with high-ranking job titles and corresponding incomes. The ads ran during live broadcasts of basketball games in March, but didn’t show up for everyone. Instead, they appeared on the screens of Google Fiber TV customers who watch lots of golf, history, news, sports talk and financial shows.

“We don’t know if they made a phone call based on the ad they saw on Google Fiber” — the way online ad performance can be tracked, she said. “But we saw a surge.”

Target practice

It’s one thing to generalize about who watches the Royals. Lately, it’s been almost everybody. It’s quite another to sandwich commercials between innings based on all the things somebody tunes into when the ballgame isn’t on.

The technology represents a powerful remake of TV advertising — marrying the power of video with the media consumption dossier that’s made online advertising so attractive.

Advertising agency eyes lit up in early 2015 when Google Fiber said it would track viewing habits and team that with the ability to target commercials by neighborhood.

“If you’re a local business in Kansas City, just as with digital ads, you’ll only pay for ads that have been shown, and can limit the number of times an ad is shown to a given TV,” Google Fiber said in March 2015.

TV customers have the option to opt out of the targeted ads by changing the settings for their accounts.

Cable companies have explored what the industry calls “addressable TV” for years. Time Warner Cable experimented with it in Orlando, Fla., in the mid-1990s. Now the proposed merger of AT&T with Time Warner Inc. (the company has separated from Time Warner Cable) has been touted for how it would bring together great stores of data about customers to deliver advertisers newly precise targeting.

“Advertisers and advertising agencies have always been interested in targeted advertising the best that they can,” said Kirk Kirkpatrick, who for years produced local and national television commercials at Kansas City ad agencies.

But he doesn’t see Google Fiber-style targeting as a magic bullet for advertising. Narrowing down an audience when buying time on TV could mean spending less on advertising. Advertising firms typically draw a commission for the advertising time they purchase and use that money to pay themselves and cover the cost of producing a commercial. Smaller ad buys will translate to tinier production budgets, Kirkpatrick said, and more amateurish-seeming commercials.

A new way

Google Fiber launched its new way of selling commercial time through Viamedia in August 2015. The media seller said the project first needed to get ad agencies to look at new measurements. Instead of placing commercials during a specific program based on ratings, advertisers were paying for every time a television was tuned into a commercial — whether during a live broadcast or on a DVR recording — for at least 15 seconds.

“It’s 100 percent cost per view. There’s nothing like that in the industry,” said Kevin Cates, the area vice president for Viamedia in Kansas City. “There was an education curve that had to take place because it was new and nobody had seen anything like it.”

Faced with new billing metrics, some advertisers were at first slow to buy in, he said, particularly large outfits where purchase decisions had to clear several levels. But Cates said that advertisers ranging from a Kansas City restaurant with just two locations to national car makers signed on.

What Viamedia and Google Fiber were selling was viewers rather than programming. Particularly with what it bills as “audience extension,” it mattered less what a TV box was tuned to at a given moment and more what types of shows it pulled in as a habit.

He gives himself as an example, a car enthusiast who watches tons of auto shows. But he also has a thing for “Oprah Presents Master Class” on OWN, the Oprah Winfrey Network.

“There isn’t an advertiser in the world that would buy that show to catch a 53-year-old car guy,” Cates said. But with audience extension, a spot for car tools might show up.

The catch is that the chance for such odd-fit commercial placements is rare, because someone like Cates spends so much more time hanging out on the Speed channel than visiting Oprah’s network.

“There are fewer chances for audience extension to kick in,” Cates said. “It’s absolutely, ridiculously cool, but the proper use of that in (an advertising) campaign is just a little harder to come by.”

That super-targeting is also less attractive at the scale Google Fiber can offer, advertisers say. In the Kansas City market, for instance, Google Fiber started selling commercial time when it reached about 30,000 homes. Now it sells TV to more than 70,000 homes. But by comparison, and although its numbers are dropping, Time Warner Cable plugs into about 324,000 households in the market.

So drilling down to a super-targeted audience that’s already just a fraction of the potential customers advertisers want to reach becomes less worth the trouble.

“We really like it … but I’m excited for when they have more market share,” said Stacy Sanderson, media director at MBB+hippo advertising agency in Kansas City.

She talks enthusiastically about much of the Google Fiber way of selling commercial spots — the ability to swap in fresh commercials to DVR recordings, an option to cap the number of times a consumer sees a spot “before we get annoying,” and the clarity of knowing how many times something will show up when the TV is turned on.

Her clients include two hospitals and the Kansas City T-Bones minor league baseball team. In one respect, Google Fiber’s targeting should be ideal. It allows advertisers to concentrate ads by ZIP codes — near the hospitals and close to the ballpark — and by viewing patterns. But target too tightly, and there’s just not that many Google Fiber customers who fit the bill.

“When you get so small, advertising begins to make less sense,” Sanderson said.

Smaller universe

The limited reach of Google Fiber is one reason why the Bernstein-Rein ad agency hasn’t yet advertised there. Vaughn Erickson, the director of media buying for the firm, said the Google Fiber digital-style model tempts in the way it both targets spots and charges only when someone actually sees an ad — assuming the viewer doesn’t walk out of the room during a commercial break.

“It is a change,” he said. “It’s not a quantum leap” because set-top boxes are collecting far more data on viewing patterns than advertisers had just a few years ago.

But Google Fiber brings an advantage to the game. The gear it’s installed in consumers’ homes is new and relatively uniform. Cable companies like Comcast and Time Warner Cable or AT&T, by contrast, have older set-top boxes of myriad varieties that would be far harder to program for ad targeting.

Targeted TV commercials will only become more common. But analysts say the practice will bump into limits and some advertisers already worry that focusing commercials to a narrow audience will steer messages away from unlikely, but potential, customers.

“If you target so well, you could end up targeting just people who already have the product,” said Larry Gerbrandt, an industry analyst for Media Valuation Partners. “You can get yourself caught in an advertising cul-de-sac.”

This story was originally published November 24, 2016 at 5:04 PM with the headline "How Google might change the TV commercial."