By Graeme Newell

Just as Google delivers custom ads designed to the user’s personal tastes and desires, the cable industry is building a new generation of hardware and software solutions to deliver the perfect ad to the perfect prospect at the perfect time. The ultimate goal is elimination of ad waste. For example, smart cable boxes will know that a viewer only buys pick-up trucks and will eliminate sedan ads from their TV viewing.

The New Technology is being Defined Right Now
The MSOs are pouring millions into ad targeting technology. The hardware development is well underway. The technology can be implemented from either the cable head end, or directly from the set-top box. Today, more than 70% of American homes have smart cable boxes capable of at least some sophisticated ad targeting. That number will continue to increase as old boxes are retired.

The Long-Term Vision for Smart Cable Boxes
The boxes will be able to monitor every nuance of TV viewing. They could integrate demographic information using zip code, public records, even things like credit scores. They will watch how long a viewer lingers on specific program guide listings, or the specific segments he watches on Sportscenter. By watching each person’s individual programming choices, it will silently identify every member of the family and understand everything about each person’s tastes and buying preferences. It will gather data every minute, making constant conclusions based on what the person seeks or avoids.

For example, the box could notice that the TV is usually off during the day. Then suddenly, the TV is in use for long periods during the day. The box also notices that the DVR no longer skips ads for local trade schools, job fairs and loan companies. An analysis concludes that someone in that household probably lost a job. Because most of the daytime programming consists of Sportscenter, Spike and Clint Eastwood movies, the box could figure out it is probably dad. So the ad mix during the day will now be customized to a 40-something male who is out of work.

Privacy is Still a Big Worry
In 2007, Facebook’s Beacon ad targeting system created a huge privacy backlash against the social media giant. The cable industry does not want to make the same mistakes and is moving forward cautiously. That means figuring out how much each subscriber is willing to share, then giving that customer more control over their own disclosure preferences. The more private information the consumer reveals, the more customized the ad. Customized ads create a better viewing experience, and generate higher profits for the cable companies.

Cable companies will have access to enormous amounts of data from multiple sources, but should they use it? They could pull detailed information from credit bureaus, tax records, zip code profiling and of course, each person’s viewing habits. But let’s say that a viewer has a secret dalliance of late-night racy movies after the kids have gone to bed. Do they want that information used in serving up ads?

Permission Marketing is the Way Forward
Currently, 49% of ads targeted at the 18-49 demo are wasted on people who don’t want to buy the product. – women watching Viagra ads, men watching make-up ads. The smart boxes will allow the customer to pick the ads she wants to see. When she sets up her box, she will be presented with a list of interests, hobbies and other preferences. She can permanently zap the categories that bore her.

The cable industry predicts it will increase CPM yields from 300 to 500%. That means it can jump its rates into the ozone and advertisers will gladly pay. Proctor & Gamble will have the tools to better target people in the household who do laundry, and not waste ad dollars on the couch potatoes. Better ad targeting will deliver one rifle shot straight to the laundry room, not a grenade that blows up the whole house.

Graeme Newell is a customer loyalty expert who shows organizations how to build deeper, more passionate relationships with their viewers. He turns complacent viewers into passionate groupies. Graeme is a world-renowned speaker, consultant and thought leader in emotional marketing. Check out his free white papers, training videos and articles at the 602 Communications website.