AdvAdvertising - Media Economics

The new economics of
customer reach:
advanced advertising
Taras Bugir, Sun Microsystems
White Paper
April 2009
Abstract
Advanced advertising features in the trade press, articles, marketing papers, and conferences with
increasing regularity. The phrase often is used so casually, and put forth with the underlying assumption
that the audience has a thorough understanding of what is meant by the term. However, different
media organizations, vendors, and media buyers all have different perceptions. This white paper covers
the landscape of advertising techniques and technologies, paying specific attention to contextualizing
advanced advertising in terms of the infrastructure required to realize it, and the economics of potential
customer reach. By ensuring that the interests of the ad buyer, seller, and consumer are balanced with the
cost of deployment, the fundamental elements of a successful business model are presented.
Sun Microsystems, Inc.
Table of Contents
Executive summary.............................................................................................. 1
The disruptive force of the Internet Protocol.......................................................... 1
Implications of multiscreen marketing.............................................................. 2
Defining the edge of influence.......................................................................... 3
Target economics................................................................................................. 4
New behaviors, new business models................................................................ 5
Who or what is the target?............................................................................... 7
Target pricing and value................................................................................... 8
Mediums and their infrastructures...................................................................... 10
TV-centric advertising..................................................................................... 12
Client-centric advertising................................................................................ 12
Webification.................................................................................................. 12
Conclusion........................................................................................................ 13
Appendix A. State of the Industry Over the Last 90 Days.................................... 14

For more information......................................................................................... 23
1 The New Economics of Customer Reach: Advanced Advertising Sun Microsystems, Inc.
Executive summary
Recently, the term advanced advertising has slipped into the industry vernacular,
becoming an euphemism for targeted advertising. It seems to be trying to mask
the very personal, perhaps intrusive, nature of personalized advertising. The term
attempts to portray a sophisticated, more user friendly, less threatening, high-tech
way of marketing and selling. This white paper uses the term targeted advertising,
not for any philosophical reason, but more for its descriptive nature. The media
business is fundamentally all about marketing. Marketing is about defining and
targeting the right audience for the product—plain and simple. There is no need for
any window dressing, however well intentioned.
In spite of all the talk
about narrowcasting All advertising is not created equally, and neither is the technology required to
and targeted, specialized deploy it. This is especially true of targeted advertising. Organizations focused on
content, there will delivering content to the consumer understand that knowing their audience(s) and
building a relationship with them is the key to increasing revenue, regardless of
always be a role for
whether their revenues are fundamentally subscription- or advertising-based. This
broadcasting.
translates to targeting at one level or another.
It is commonly accepted in the marketing world that better, narrower targeting

is an absolute good, if not the holy grail of advertising. Yet, in spite of all the talk
about narrowcasting and targeted specialized content, there will always be a role for
broadcasting. The reasoning is very simple and intuitive. If everyone sells to targeted
audiences, how would anyone cross-promote? Where would one find new customers
for those targeted products and services? True marketers understand that to create
awareness, a mix of media is essential. However, even broadcasters target. So what
does targeting really mean?
If one has a clear understanding of targeted advertising, then the real problem
becomes one of execution. Effective execution results in building an infrastructure
that supports a healthy marketing mix, aggregating the right audience, driving
economic value, and accurately delivering correctly formatted content.
The disruptive force of the Internet Protocol

When an industry is undergoing substantial change, market leaders hoping to thrive
must adapt their business models to the new industry’s realities. As simple as that
may sound, most organizations are not flexible enough to meet such challenges.
This is borne out historically, by the rise of new players as industries change.1
In the current landscape, the ability for a media organization to aggregate an

audience is becoming an increasingly Quixotian2 task. As channels, mediums, and
entertainment opportunities proliferate, audience fragmentation disproportionately
accelerates, exacerbated by the technology variants in the consumer’s arsenal of
1 Jumpstarting Innovation:  Using Disruption to Your Advantage, Lynda M. Applegate, Harvard Business School,
September 4, 2007.
2 Alonso Quixana is an older gentleman who lives in La Mancha, in the Spanish countryside. He has read many of the
books of chivalry and as a result, he has lost his wits, and he decides to roam the country as a knight-errant named
Don Quixote de La Mancha. Quixote gets involved in several altercations and violent disputes while traveling on the
road and even attacks a windmill, believing it to be a giant, destroying his lance in the process.
IP-based networking—a gadgetry. The consumer is increasingly dividing time across home media networks
comprised of gaming consoles, personal computers, digital cameras, MP3 players,
standard, seamless way
DVD players and recorders, and media hub hardware in addition to traditional TV.
to plug into the world—
All of these devices are becoming Internet Protocol (IP)-enabled and networked
is driving behavioral to the world at large. As they do, bits spill out, leaving a crumb trail leading back
changes and is the to the consumer. This trail reflects a decreasing span of attentiveness3, with a
disruptive force behind correspondingly increased craving for the latest digital morsel recommended by their
the media industry. social network peers.
The key here is that all of these consumer devices are now IP-enabled. This drives
networking of devices, people, and content. People with devices, devices with
devices, people with people, and both devices and people with content.
IP-based networking—a standard, seamless way to plug into the world—is driving
behavioral changes and is the disruptive force behind the media industry. The
natural consequence of this technology and behavioral change is that ads can be
placed in the delivery channel far closer to the consumer more cost-effectively4 than
ever before. Further, over 70% of the world is not yet connected5. Imagine what it
will be like as greater than 30% of the world comes on board.
Implications of multiscreen marketing

As consumers spend time with a greater number of devices, a few challenges
emerge:
• How do we measure consumer activity? After all, in order to market to them, we
need to know where they are congregating, when they go there, and how long
they stay.
• Is it the same consumer? Some devices are more personal than others, and those
less personal devices may not be the subject of the consumer’s attention at that
moment.
• Is the consumer’s interactivity with the device a true measure of interest at a
given point in time? Perhaps the content is generating misleading responses.
As the consumer interacts with more devices, these tracking and aggregation issues
become commensurately more difficult. Correspondingly, the fewer devices that a
service provider can service, the more audience time—and therefore attention—is
lost, as are the opportunities for driving advertising revenue.
Until we see a trading mechanism of user profiles emerge, targeting is not

synonymous with unique personalized advertising. The dream of one-to-one
marketing is really one-to-group marketing, where the consumer belongs to many
3 The Paradox of Choice: Why More is Less, Barry Schwartz, HarperCollins, 2004, ISBN 0-06-000568-8.
4 A Platform-Based Approach to Managing the Media Supply Chain, Taras Bugir, John Delay & Ben Peake, IBC
Amsterdam, September 11, 2006.
5 Here Comes Trouble: The Human Network, Daniel Berninger, www.GigaOM.com, January 8, 2008.
such groups. It just so happens that those groups are narrower than the broad
demographics that have supported the industry for many years. They are more akin
to direct marketing with immediate measurable feedback.
Multiscreen marketing should be viewed more as an audience aggregation and

less as a targeting exercise. The aggregation approach drives recommendations of
context-appropriate content to the target group. The individual is targeted as a result
of group behavior. While it creates the illusion of uniquely targeted advertising, it is
far less complex and more cost-effective to deliver:
• A focus on groups, with fewer unique ad insertion models to manage individually
• Less variation of content to produce, manage, and splice
• Consumers that belong to several groups and attract ads, rather than explicit,
individual targeting
• Privacy issues that can be more easily respected
Defining the edge of influence

If the value of targeted advertising increases as we get closer to the consumer,
then we must define the intersection point of consumer-device-content interaction.
I define6 this as the Edge, reflecting the edge of network influence over that
unique consumer or consumer group. Figure 1 illustrates a model of video content
distribution from a central network owner’s perspective, and how that initial unique
content source encounters variants in the geographical distribution across the U.S.
The Edge of Influence marketplace. As well, global variants on this model are in play in international
is the final insertion media markets.
point to target from an Depending upon where you define the Edge of Influence—the final insertion point
audience perspective. to target from an audience perspective—it becomes quite apparent, even for this
simplistic hybrid model of distribution platforms and population, that the number of
unique targeting opportunities grows quite quickly. More importantly, this creates
another set of considerations:
• What is the target? It may in fact be different at each level, and there well may be
different organizations at each level targeting a different audience with the same
content.
• What is the cost to provide an infrastructure to insert advertising at each level? It
may be grossly uneconomical for a network-focused organization to do the actual
insertion at each level, particularly if the revenue at each level decreases with
audience size.
• The number of unique ad or content schedules utilizing current workflow
technologies and practices required to deliver targeted ads is not scalable below
the zone level.
6 Advertising, Exploiting the Power of IP, Taras Bugir, IPTV Asia-Pac Forum Shanghai, September 2006.
It is clear that with a Web- or client-centric model it is easier to aggregate up, than it
is for a traditional network distribution model to dissect down.
The Edge of Influence needs to be defined with the following in mind—balancing the
audience size, the value of that audience, and the transactional cost of delivering
to that resultant target audience. However, if new automated techniques for ad
insertion and content delivery were to be enabled, then the transaction cost could
be dramatically lowered. As such, the impediment to having an Edge of Influence at
the consumer’s device would not be quite so onerous. This can only be effectively
done with a device- and medium-agnostic IP infrastructure.
TV Model Network 1
Unlikely any existing traditional Ad Sales

DMA 1 DMA n 210 1
System could cost effectively generate and
deploy schedules for a large ad insertion
deployment below this line - need
eed a
Zone
one 1 Zone n
different approach
Zip 1 Zip n
42,000+ 2
Zip+4
ip+4 1 Zip+4
Zi
ip+4
p 4n
HH/STB 1 HH/STB n 111,400,000 1
Web Model
Individual 1 Individual n 302,654,075 3
Unique Addressable Ads

1
Nielson Researrch, Aug. 2006
2
US Postal Service, Mar. 2006
3
US Postal Service, Aug. 2007
Figure 1. Searching for the network Edge of Influence
Target economics
The following quotes from advertising agencies shed light on the consumer’s value
attributes and agency approaches to garnering that value for their clients: the
advertisers.
• “The difference is that building brands today requires a keen understanding
of how new communications technology, new channels, vibrant creativity and
insightful consumer research combine.” – www.ogilvy.com
• “We believe that time is the new currency. The more people who spend time with
a brand the better.” – www.jwt.com
• “The proliferation and influence on communication channels is the most dynamic
variable in driving consumer change.” – www.universalmccann.com
The fundamental It turns out that the three most valuable items that a consumer has to trade for
content are:
takeaway is that
targeting is becoming • Privacy—the extent to which they’ll trade their personal information
the normal way of • Money—how much they’ll pay for a service

advertising. • Time—the amount of their personal time they are willing to invest in a service
All media business models are derivatives of these three currencies. Targeting
enables the precise measurement and relative valuation of each of these currencies
in order to optimize the bundled value to the advertiser.
• The fundamental takeaway is that targeting is becoming the normal way of
advertising.
As audiences become increasingly fragmented, that fragmentation naturally
creates more target audiences. As a result of this fragmentation, more inventory
is created. However, not all of that inventory will be of a perceived high quality.
In order to derive value from advertising, these audiences need to be more
accurately aggregated and valued.
• Advertisers will increasingly aggregate audiences, rather than dissecting them…

We are moving from a multicasting world to an aggregate of unicast consumers.
New behaviors, new business models

Changes in viewing habits and technology are clearly affecting the way businesses
are marketing and advertising products. A quick review of the last 90 days provides
ample qualitative and quantitative data to support this claim. (See Appendix A.)
Change is accelerating, and the media market is converging across mediums and
distribution verticals. Advertisers are looking for new ways to market products and
services through branding techniques that include audience aggregation vehicles.
Five years ago, Larry Light, McDonald’s chief marketing officer, stated at
AdWatch:Outlook 20047, “We don’t need one big execution of a big idea. We
need one big idea that can be used in a multidimensional, multilayered and
multifaceted way.” While he may not have been specifically talking about audience
fragmentation, the point is still insightful and relevant to today’s marketplace.
Years ago it was important enough, and cost-effective, to hire one person to manage
the ads in a particular program reel. Their job was to ensure that each expensive
ad got to air, no matter what happened. Today, marketing it is not about one big
expensive ad, but about many cheaper ads, which in aggregate garner the same
audience and hopefully at least as much revenue as that single expensive ad of long
ago.
7 AdWatch: Outlook 2004 is the third annual conference hosted by Advertising Age and TNS Media Intelligence/CMR
that features the exclusive release of first half and full year advertising spending estimates. Key buyers, sellers,
agency representatives, and analysts participate in panel discussions throughout the conference focusing on the
media industry’s most pressing issues, including market turnaround, ROI, and the future of advertising, marketing,
and media.
The only way to The average cost of the transaction has been lowered over the years due to
automation. Correspondingly, the economics of advertising have changed as a result
automate effectively
of technology. Pushing to the Edge of Influence leads to the following:
across mediums is
• If you cannot place the ad, instruct it, and manage the content cheaply and
to have a common
effectively, then your margin erodes (Figure 2).
infrastructure.
• Organizations have consolidated in the hope of getting larger audiences and
inventories. As a result, they must handle more diverse ads. Unfortunately, they
have inherited cost structures during these acquisitions that are not conducive
to delivering a multimedia campaign—the very reason for acquisition in the first
place. The only way to drive efficiencies is to automate.
• The only way to automate effectively across mediums is to have a common
infrastructure. You cannot have different workflows for different mediums in a
consolidated business. It costs too much.
To achieve a common infrastructure, you need:

• Open, scalable platforms to accommodate constant change at an affordable price.
These platforms must be able to coexist with the current infrastructure until such
time as it is effectively amortized.
• Accurate, scalable processes that leverage metadata to drive rules. Software is
needed to interpret those rules that help produce, distribute, and track content
usage to control the inevitable proliferation of content.
• A common industry language to transact common media currencies. The
language must be tied to content management, consumer behavior, ad
awareness, brand vitality, and sales and profits.
Ad Booking Ad Content Ad Instruction
It costs money to manage that content

in getting it from the point of creation
to the SP, and then it costs the SP to
$ ($) ($) manage and move that content to the

right insertion point in the workflow
The revenue is generally ‘booked’
as the order or contract is placed,
because the inventory is consumed
Medium (SP)
Not only does it cost money, people, and
processes to track the instructions, if the
content usage instructions are not followed,
then the SP can lose money, because the
Consumer ad contract was not fulfilled correctly
Figure 2. What is an ad, and what does it cost to deliver it?

The realization that Until now, the industry has largely focused on technically solving the infrastructure
problems that have emerged as a result of the digital transition and audience
sales organizations and
expectations. A quick look at NAB or IBC conference topics confirms this reality.
research departments
The realization that sales organizations and research departments must evolve
must evolve concurrently concurrently with multimedia content delivery models is increasingly coming to
with multimedia content the fore. These organizational disciplines must consider targeted marketing, ROI
delivery models is measurement, advertainment strategies, interactive television, pay-for-play, and
increasingly coming to the effects of device proliferation on consumers. More than ever, service providers
the fore. must engage in marketing and promotion of their own capabilities, with their own
inventories, more than ever before in a bid to retain audiences.
Organizations that leverage metadata upstream in the value-chain are better able
to enable greater automation and scalability of downstream workflows. Accordingly,
metadata collection, enrichment, and management should ideally extend across
the enterprise. This approach ensures that departmental activities such as sales,
scheduling, customer relationship management (CRM), subscription management,
access management, rights management, and financial systems all complement
their behaviors to drive the business and support the business model.8
Who or what is the target?

Today, the target largely depends upon the capabilities, processes, and systems
employed by the organization in each respective medium. However, Table 1
summarizes the primary marketing (targeting) approaches.
Note that the approaches, along with their highlighted examples, make no mention
of medium-specific subtleties. Often these subtleties have been institutionalized by
work practices or consumer-medium interactions, or imposed by the constraints of
the medium’s infrastructure capabilities. Consequently, the more different mediums
consolidated by an organization’s business model, the more difficult it is to price,
offer, deliver, and measure multimedia advertising offerings to buyers. Even more
difficult is to create meaningful cross-medium targeted buys.
8 Extending Metadata into the Enterprise, Taras Bugir, SMPTE Brooklyn, October 25, 2007,
http://wikis.sun.com/download/attachments/10388082/Extending+Metadata+into+the+Enterprise.pdf
Table 1. Targeting an audience.
Traditional targeting of consumers based upon commonly accepted

Demographic
media currencies, such as age, gender, income, and ethnicity.
Targets a consumer in a certain geographic area using location data
mined from the ISP or IP address. This is a powerful tool for local
Geo-targeting businesses to leverage new rich-media ads. This approach enables the
display of local product inventories to customers, and is especially
valuable for promotional and impulse buys.
Sometimes called profiling. It works by tracking the actions of large
numbers of users as they surf the Web and aggregates their behavior
for trends. These patterns signal behaviors that become the basis for
targeting and often include purchase history. For example: a visit to an
Behavioral online car site can be the basis for serving an auto ad after a consumer
continues on to a non-auto-related site. Behavioral targeting allows a
Web publisher, for example, to charge premium rates for a luxury-car ad
even on a lightly visited site about needlepoint, especially if the user’s
previous Web activity shows an interest in buying an automobile.
Matches the ad to the content actually being consumed, regardless
of format. For example, an article about buying homes serves up an
Contextual
insurance ad, or a documentary film on animals provides a good place to
inject a public service ad for animal protection.
Similar to contextual, this approach tends to match an ad to the theme
or genre of the published content. For example, a digital camera
Affinity
marketer can choose to advertise on sites or video channels dedicated to
consumer electronics.
Focuses on people’s work and lifestyle schedules, such as serving ads
for coffee to commuters between 7 to 10 a.m. This type of targeting also
works well for impending product releases and roadblock campaigns, but
Daypart is generally directed to an audience to increase the candidate consumer
base as prospects for more refined future targeting. Alternatively, it
also can be used in conjunction with other approaches to refine the
consumers being targeted.
Tracks the purchase history of users to establish trends. Similar to the
Purchase-based behavioral approach. People who bought one brand’s shoes might be
interested in more of the same, or those from another brand.
Aims to locate consumers who dropped off midway through the path
to a purchase and serve them a new ad in the hopes they will complete
Retargeting
the purchase. Called remarketing in the offline world, and sometimes
classified as part of behavioral targeting online.
Target pricing and value

For a given audience at a given time, on a given medium, there is a base rate that
service providers and aggregators charge advertisers. (Here the term advertiser is
used generically to mean the buyer of the audience, be it the agency, the buying
house or the actual advertiser.) This economic model is generally expressed as a
buyer’s demand curve (Figure 3).
Buyer’s Demand Curve
#2
Extra
Revenue #1 Base Rate
Number of Units Sold

#3
Base
Extra
Revenue
Revenue
$/Unit
Figure 3. Advertising demand curve
For a given buy-sell transaction, the seller defines a price for inventory, the units
being in time or audience impressions of one kind or another. Based upon the
number of units sold and the base rate (#1) per unit, the seller achieves their target
revenue (in this case the base revenue). If inventory valuations can be established at
different price points (#2 and #3), then clearly total revenue increases as a function
of addressing the variants of price and value of associated inventory. The maximum
achievable revenue resulting from a particular buyer’s demand curve is represented
by the area below the curve. By extension, the more price points defined, the more
chance there is of effecting a transaction and thereby increasing revenue.
This approach has been attempted by the media industry on both sides of the
buy-sell relationship9, each with their roots in broadcasting. Only the buyers have
enjoyed significant long-term success. The agencies and advertisers have arbitraged
increased values on this differential with the service providers and aggregators
largely oblivious.
The immediate benefit of targeting is to be able to more effectively and accurately

value inventory with a common measurement that ensures all potential revenue
remains with the inventory owner. There is a strong argument to be made that for
any given audience there should be many such demand curves, each with a different
9 In the mid-1990s the advertising community optimized broadcaster rate cards against audiences to yield optimized
campaigns that delivered reductions in advertising spending for clients but delivered better audiences. The sellers
were largely oblivious. Over the dawn of the millenium, large media providers in Europe started looking at their
inventories and turned to yield management techniques or variants. They met with mixed success, often as a result
of institutional inertia that did not enable them to fully implement these approaches through the entire sales cycle.
Today’s media company price matrix, reflective of the value of that audience to the buyer. However, such
demand side economics are rapidly running out of steam in an environment with so
finds it difficult at best to
much more inventory being generated by new media options.
generate buyer demand
curves for one medium, Today’s media company finds it difficult at best to generate buyer demand curves for
let alone to create one medium, let alone to create several permutations across the entire possibility
several permutations set. If service providers had a common infrastructure providing immediate audience
feedback, this problem would devolve into a software requirement and the will
across the entire
to implement a complementary business process. The best tools in a media
possibility set. organization’s arsenal are:
• Well-defined audience metrics
• Real-time capabilities to substantiate value
• A smart infrastructure to drive down transactional costs
• A well-defined sales process to execute business policy
There has been anecdotal information from actual customers citing that targeting
can increase CPMs by up to fivefold.10 It is broadly accepted that targeting increases
revenues:
• Through actual increased CPM values, brought about by the quality and accuracy
of the targeted audience
• With the ability to ‘multiply the inventory’ by leveraging the same available time
slots across narrower slices of parallel audiences
• By improving the efficiency of inventory utilization by finding better (or optimum)
audiences for what—to a different audience—could be regarded as low-grade
inventory
Mediums and their infrastructures

Before we focus upon the infrastructure requirements of targeted advertising, it
is important to survey the current capabilities of the major mediums engaging
consumers and their ad dollars in today’s market. Figure 4 leverages the previous
content distribution model to illustrate the capabilities of mediums that represent
the bulk of the electronic media advertising space.
Examining the mediums, we observe that they differ substantially in their ability to
support interaction, and the degree to which they can get close to the consumer.
It is important to note that cable and satellite are increasingly leveraging IP
capabilities, but intrinsically, they have some network topology difficulties that limit
the bandwidth of the duplex channel from the consumer back to the service provider
or aggregator. Pure IP-based delivery has the greatest advantage. It can support the
10 IPTV World Forum in Budapest June 22, 1996.

greatest back channel bandwidth, and it can address the device uniquely. Arguably
cable and satellite can uniquely address the set top box, but their addressability is
unique to that device. IP is ubiquitous across all IP addressable devices.
It is important to understand that addressability is not the same as the ability to

support targeted advertising. Depending upon the entire delivery chain, some
devices may still require local storage or a highly scalable number of unique streams
to support individual ad placement.
IP Satellite Cable BCast TV

Network 1
DMA 1 DMA n 210 1
Zone 1 Zone n
Zip 1 Zip n
42,000+ 2
Zip+4 1 Zip+4 n
HH/STB 1 HH/STB n 111,400,000 1
Individual 1 Individual n 302,654,075 3
Unique Addressable Ads

1
Nielson Researrch, Aug. 2006
2
US Postal Service, Mar. 2006
3
US Postal Service, Aug. 2007
Figure 4. Capabilities of the mediums
The key point here is to realize that to place a targeted ad, one needs to consider:
• Desired proximity to the consumer
• Capability of the medium
• Cost of delivering unique content to, and removing it from, an Edge storage device
• Cost of managing the ad insertion logic at the Edge of Influence
• Anticipated value of the target at the Edge of Influence
All of these issues drive the economics of advertising, and they vary considerably
across different mediums.
TV-centric advertising
Most of the discussion thus far has been largely TV-centric. This equates to a
mass audience approach to advertising, and has led to a largely unsophisticated
sales process and ad placement regimen built around local and national market
measurements11. To be fair, in many countries it has evolved from treating inventory
as spots in slots to segmenting the viewing audience in terms of base and sub-
demographics, and valuing the audience in terms of impressions, rather than
viewers who happen to appear at a particular part of the program stream. As
audience sample measurements have become more timely, and generally perceived
as more accurate, we have seen service providers and aggregators shift from spot
management to audience management practices. Those that have embraced
audience valuations have generally fared better economically than those managing
spot inventories.
Client-centric advertising
Client-centric advertising focuses on the device leveraging information utilizing
tokens (or cookies) and history in placing candidate consumer ads. This technique
is much more scalable, as the processing for ad placement is largely done by the
client device. Some set top boxes, mobile phones, and PC browsers are employing
the same approaches. The unique value of this approach is the ability to aggregate
feedback and responses in real time, rather than waiting for the next survey
sampling or set top box polling aggregation to provide insight. This value has directly
translated into advertising ROIs addressing the classic “Half the money I spend on
advertising is wasted; the trouble is, I don’t know which half”.12
Webification
No discussion would be complete without the mention of Google, Yahoo, and MSN.
As an example, Google’s forays into the non-Web space, initially with the acquisition
of dMarc for Radio13 and subsequently with the internal trials, partnerships, and
development of video insertion, suggest that their approach to a three-screen
coverage is largely an extension of their current business model. Clearly, it would
make sense to leverage that approach as a single purchasing point for advertisers.
However, it does not make sense for those telecommunications providers and cable
companies that are supplying these models with the bandwidth necessary for this
business model. It makes even less sense for these service providers to share their
revenue in order to provide a conduit to the subscribers that they have painstakingly
collected.
11 This Business of Television, Howard Blumenthal and Oliver Goodenough, Billboard Books, 1998, ISBN 0-8230-7704-7.
12 John Wanamaker (1838-1922), owner of America’s first department store.
13 Google to Acquire dMarc Broadcasting, Google Inc., Mountain View, CA, January 17, 2006.
For advanced advertising Conclusion

to evolve effectively Targeted advertising conversations range widely, depending on whether the
and assist in the discussion is with the advertiser, the agency, the content provider, the service
transition to new media provider or aggregator, different roles in each of these organizations, or the
consumer. Furthermore, these discussions are filtered by institutionalized workflows,
business models, both
and tend to be very subjective and defined by the technical capabilities of the
technical and business
content delivery platform and attached devices.
requirements must be
addressed. This leads us to conclude that for advanced advertising to evolve effectively and
assist in the transition to new media business models, we need to address both
technical and business requirements. Specifically:
• Advertisers need to think differently. They need to push the envelope of the
currently institutionalized media value chain. They’ll need to ask for more, and be
prepared to pay for a real media ROI.
• Agencies need to think multi—multimedia, multinational, multiaudience,
multiscreen. They need to understand that marketing concepts need not be siloed
after media budget allocations are made, and aggregate audiences up rather than
split budgets down. This requires agencies to buy media and develop creative in a
more integrated fashion.
• Service providers and aggregators need to manage their audiences in a more
value-centric manner. Audience measurements must be meaningful to advertisers
and agencies alike. Multiscreen platform measurements need to reflect value, and
not just be ‘deal sweeteners’. They need to consolidate platforms and workflows,
and realize that digital content is data that can be automated and scaled.
• Consumers need to understand that advertising is a valuable service. It subsidizes
their content experiences. They must understand that their time, privacy, and
payments have value that they can balance across the wide choice of mediums
increasingly being presented.
These changes will not happen overnight. That is why this transition to a digital
media business is so painful. The technology is constantly evolving, and the pace at
which it can be deployed is a function of economics and coexistence. There is one
constant beyond change itself, and that is that the days of proprietary infrastructures
are numbered and the future is IP. As the industry collectively marches down this
path of targeted advertising, privacy issues are likely to become a major feature in
the discussion. A balance between consumer and marketing must be bargained.
As we move from a centralized scheduled world of media to a more interactive user-

engaged world, we will start seeing increased self-organization in the media system
as a whole. This kind of intelligent systemic behavior, based upon simple rules of the
component pieces, is best understood in the context of Emergence Theory14. But that
is beyond the constraints of this discussion.
14 Emergence: The Connected life of Ants, Brains, Cities and Software, Steven Johnson, Touchstone Press, 2002,
ISBN 0-684-86875-X.
Appendix A
State of the Industry Over the Last 90 Days
This chapter provides excerpts from articles that describe the state of the industry.
WPP Division Stakes Claim to Data From Its Online Ads
“When it comes to data ownership, the web is still in the Wild West phase, but
WPP Group’s media-buying arm, Group M, laid down the law recently by changing
the terms of its online-ad deals to the following: “All data generated or collected
by the Media Company in performing under this Agreement shall be deemed
‘Confidential Information’ of Agency/Advertiser.”
With that phrase, Group M is making it very clear where it stands on a debate
that’s been around since the dawn of internet advertising in the mid-1990s: Who
owns the data and under what terms? Group M Interaction CEO John Montgomery
casts the move, first reported by MediaPost, as standardizing the way business
is increasingly being done at the world’s largest media-buying firm. “It’s to
ensure that data is confidential and cannot be accessed by our competitors,” Mr.
Montgomery said. “It’s a loophole we wanted to close.””15
Mobile Hotel Bookings Show ROI in Recession

“Hotel operator Marriott reported an earnings loss for the fourth quarter last
week, but there’s one small encouraging sign: the chain’s mobile bookings.
Marriott Mobile generated $2 million in gross revenue between its August 2008
launch and the end of the year. But revenue from mobile bookings in January
was headed upward fairly quickly, the hotel chain told Ad Age. Meanwhile, Omni
Hotels’ mobile site has grown 85% in the past six months, and Hilton’s mobile
channel has generated a 22% return on investment for the brand. Those kinds of
numbers are bright spots in a tough time for hoteliers -- and they show that even
in recession, companies are willing to invest in and experiment with new media
when the ROI is clear.
... A third of U.S. travelers have used their mobile phones to access the internet,
although only 15% of travelers showed interest in purchasing travel using their
handsets, according to a PhoCusWright survey based on about 800 responses. On
the upside, 48% of travelers who earn more than $200,000 a year said they were
open to getting travel offers, vs. 32% of those who earn less. Twenty percent of
the highest-earning group said they were interested in mobile bookings, likely
because they’re early adopters.”16
15 WPP Division Stakes Claim to Data From Its Online Ads, Michael Learmonth, AdAge.com, February 9, 2009.
See http://adage.com/abstract.php?article_id=134414
16. Mobile Hotel Bookings Show ROI in Recession, Rita Change, AdAge.com, February 19, 2009.
The Next Business Model for Ad-Supported TV?

• “Many in the advertising business are calling for a new business model for ad-
supported TV. It is clear that the value of traditional TV as a medium for delivering
advertising messages effectively is quickly eroding, and there is a scramble for
new technologies and models to fill the void. Three current and emerging ways for
consumers to get TV or video content (including advertising) offer a good place to
start to understand how we might answer these calls for change:
1. Traditional, linear-programmed, multichannel TV with optional DVR
and video on demand delivered by cable systems, telecoms or satellite
providers. Greater two-way interactivity is one or two years away.
2. Behaviorally or demographically addressable ads delivered at the
household or sub-household level using TV-distributor data within
acceptable privacy guidelines (baby-food ads in homes with babies, for
example).
3. Consumers searching for and fetching desired programs from internet sites
via broadband, bypassing cable or satellite services and bundled networks
entirely. Content may be played on computer or TV screens.
It is noteworthy that the more-traditional delivery methods (Nos. 1 and 2 above)
can be described with a verb that denotes a push of content (“delivered”), while
the third method uses verbs that indicate an active choice by the viewer (“search,”
“fetch—a pull of content. Even consumers in scenario No. 1 are searching for,
recording and retrieving content through their DVRs and watching their choices
when and where they want to -- and, by the way, skipping the commercials.
Consumers are increasingly embracing these more-empowering ways to enjoy
programs on their terms, and advertising is being bypassed in the process.”17
The New World of Apps-Only Advertising

“The widgets and other applications that were little more than digital window
dressing a few years ago have exploded into a vast new advertising venue. Many
apps now draw millions of users each day at the same time they’ve become a
broadly networked social medium in their own right. And, that, in turn, has given
rise to a new sort of apps-only media-buying agency.”18
TV Everywhere—As Long As You Pay for It

“Jeff Bewkes hopes to put more TV on the internet, but he’s going to make
consumers prove they’ve paid for it. ... If you want to watch your favorite TV
network or shows through broadband on any device -- PCs or mobile -- you can
do it as long as you subscribe to any multichannel provider,” Mr. Bewkes told
Advertising Age. “It’s a natural extension of the existing model.””19
17 The Next Business Model for Ad-Supported TV?, John Osborn, AdAge.com, February 20, 2009.
See http://adage.com/abstract.php?article_id=134746.
18 The New World of Apps-Only Advertising, Hoag Levins, AdAge.com, February 23,2009.
See http://adage.com/video/article?article_id=134798
19 TV Everywhere—As Long As You Pay for It, Michael Learmonth, AdAge.com, March 2, 2009.
The initiative, dubbed “TV Everywhere,” is intended to be an industrywide effort,

and Mr. Bewkes expects to ready a test of it this year. “This is not just for the cable
industry,” he said. “It’s about keeping the health of all these fantastic networks
while making them available at no extra charge on the online platform.”
Cable TV is one of the few sources of subscription-based content that most

Americans have shown a willingness to pay for. Yet that’s what keeps most of its
programming off the web, as the networks fight to keep the 50% of their revenue
that comes from cable subscriptions from suffering the same fate as newspapers
or record labels.
Both the networks and cable operators have a lot to lose if the subscription
model breaks down, but the networks are particularly vulnerable. For the last
two decades, cable has dined out on broadcast ad dollars, moving from 20%
of their revenue from advertising to 50% today. But the salad days are over; TV
advertising is flat, and operators such as Viacom have sustained themselves with
subscriber revenue in the midst of flat or declining advertising.
Advertisers Get a Trove of Clues in Smartphones

“The millions of people who use their cellphones daily to play games, download
applications and browse the Web may not realize that they have an unseen
companion: advertisers that can track their interests, their habits and even their
location.
...“It’s potentially a portable, personal spy,” said Jeff Chester, the executive
director of the Center for Digital Democracy, who will appear before Federal
Trade Commission staff members this month to brief them on privacy and mobile
marketing. He is particularly concerned about data breaches, advertisers’ access
to sensitive health or financial information, and a lack of transparency about
how advertisers are collecting data. “Users are going to be inclined to say, sure,
what’s harmful about a click, not realizing that they’ve consented to give up their
information.”
For now, advertisers are using a wide lens to survey people’s behavior on phones,
aiming at people by city rather than by specific neighborhood or street.
...“Everyone’s in an arms race to find out more and more about their users,” said
Eric Bader, the managing partner of the mobile advertising firm Brand in Hand.
Even application developers are handing over information about their customers
to marketers. Dockers San Francisco, a brand of Levi Strauss, for instance, is
beginning a campaign this week that will run on applications like iBasketball and
iGolf. It will show a model wearing khakis, and the iPhone customer can shake the
phone to see the model dance.
...Advertising systems can track not only the location of the phone, but also
that person’s travel pattern: uptown New York to Nob Hill in San Francisco, for
instance.
...For now, there are not enough people using smartphones to make it worthwhile
for advertisers to use highly specific criteria. But as more people switch to
smartphones, that will happen more frequently. The smartphone market in North
America increased 69 percent in 2008, according to the research firm Gartner.”20
Cable Faces Tough Upfront Market

“As the broadcast networks gear up for what’s shaping up to be their most
challenging upfront yet, the picture for cable is clouded with the same economic
uncertainty that’s already prompting advertisers to cancel as much as 10% to
14% of their first- and second-quarter upfront commitments. The cable upfront,
which last year increased by 9.3% to $7.65 billion, according to the Cable
Advertising Bureau, is working overtime to maintain its momentum as advertisers
cut back on everything from volume of inventory bought to number of networks.
...As one media buyer told Ad Age, “If you bought eight or nine cable networks
last year, you’re probably only going to buy four or five that really work for you
this year.”
But CAB CEO Sean Cunningham noted that so far some cable networks are doing
fine, thanks to what he characterized as a “flight to quality, a flight to the right
kind of value in that it’s properly priced as an offering that only gets better with
every week, month and quarter.”
Cable’s relative strength will also be a direct result of its continued ratings
growth, as it now controls 58% of season-to-date prime-time viewing compared
with broadcast’s 36% share, according to research from Interpublic Group of Cos.’
Magna Global. That’s up from cable’s 56% share of prime vs. broadcast’s 39%
share last season.
...In certain cases, such as Time Warner’s CNN, some networks that have large-
scale online audiences are seeing upfront redistribution from their TV property
to the web. Greg D’Alba, CNN’s exec VP-ad sales, said, “Even if we do have a
fluctuation in terms of options, we’re seeing a lot of that money stay in-house and
move from platform to platform.”
... Those outperforming the market thus far are demographically targeted
networks such as MTV Networks’ Comedy Central, Spike and TV Land, which cater
to young adults, young men and baby boomers, respectively. MTV’s Mr. Lucas said
Comedy and Spike are outperforming the market thus far based on little exposure
to automotive cutbacks and strength among thriving categories such as video
20 Advertisers Get a Trove of Clues in Smartphones, Stephanie Clifford, nytimes.com, March 11, 2009.
See http://www.nytimes.com/2009/03/11/business/media/11target.html?_r=1&scp=1&sq=advertisers%20get%20
a%20trove%20of%20clues%20in%20smartphones&st=cse
games, fast food, movies and home entertainment. “Targetability -- getting the
audience you need to get to move the product with little waste in an efficient
manner -- is what’s winning out this year,” Mr. Lucas said.”21
NBC’s Zucker Defends Network’s New Programming Schedule

“NBC Universal CEO Jeff Zucker tried to put the best spin possible on the media
industry’s increasing woes, saying during a question-and-answer session
today that he was placing faith in his company’s cable assets while NBC and
others attempt to figure out how to monetize TV and other programming in an
increasingly digital world.
...”I don’t want to say ratings don’t matter, because they do. This is not about
ratings don’t matter. This is about they are not the only gauge of success,” Mr.
Zucker said. “We’re in show business, and the show is important, and the business
is important. I think it was easier to be in the show when the business was easier,”
he said.
The media chief said NBC Universal was making some progress in the quest
to monetize traditional TV content online. Where he once warned that media
companies could not afford to lose analog dollars in exchange for digital pennies,
he joked today that he felt NBC was now able to get “digital dimes.”
...The TV business will remain in transition for some time to come, he added.
“What we’ve lost in terms of viewers and ad dollars on the traditional audience
system is not being made up, not even close, on the digital side. Until we do that,
there is a risk,” he said. “I think we’ll get there, but can we survive from here to
there is the question. A lot of newspapers have not been able to survive, and a
lot of local TV stations are having trouble surviving. So we believe in ubiquitous
distribution. We want our content to continue to be available. We want to find an
economic model that makes sense” and “the next two to three years is going to be
what that’s all about.””22
Future May Be Brighter, but It’s Apocalypse Now

“The toll will be so vast -- and the institutions of media and marketing are so
central to our economy, our culture, our democracy and our very selves -- that it’s
easy to fantasize about some miraculous preserver of “reach” dangling just out
of reach. We need “mass,” so mass, therefore, must survive. Alas, economies are
unsentimental and denial unproductive. The post-advertising age is under way.
This isn’t about the end of commerce or the end of marketing or news or
entertainment. All of the above are finding new expressions online, and in time
will flourish thanks to the very digital revolution that is now ravaging them.
21 Cable Faces Tough Upfront Market, Andrew Hampp, AdAge.com, March 16, 2009.
22 NBC’s Zucker Defends Network’s New Programming Schedule, Brian Steinberg, AdAge.com, March 18, 2009.
The future is bright. But the present is apocalyptic. Any hope for a seamless
transition -- or any transition at all -- from mass media and marketing to micro
media and marketing are absurd.
The sky is falling, the frog in the pot has come to a boil and, oh yeah, we are,
most of us, exquisitely, irretrievably [destroyed].
...Amid 23% population growth in the past two decades, U.S. newspaper
circulation has dropped 20% -- one reason your morning paper, downsized every
which way, is no match for a stiff breeze. Craigslist, siphoning off $7 billion worth
of classifieds, is another.
...On the plus side, thanks to the internet, all of these papers -- especially the
Times -- have seen their readership soar. ... 1) Nobody clicks on ads, because why
would they? 2) The virtually infinite supply of online ad inventory will always
depress the price even the best publisher can fetch. Always. Immutably. Forever.
Mass media thrived on the economics of scarcity. The internet represents an
economy of unending abundance.
...In 2008, newsstand sales -- the profit engine of the industry -- fell 12%. According
to Media Industry Newsletter, gross ad pages so far in 2009 have dropped a
staggering 22% -- that coming off a dismal 2008. In recent months, Condé Nast
has folded Domino, Meredith has folded Country Home, Ziff-Davis has folded PC
Magazine, Hearst has folded CosmoGirl and O at Home, The New York Times has
folded Play, and Hachette has folded Home.
... Bernstein Research predicts a 20% to 30% drop in 2009 TV station ad revenue.
Stations’ share of TV ad dollars, according to TNS Media Intelligence, dropped
to 26% in 2007 from 34% in 2000. Affiliate fees from networks have essentially
disappeared, and the values of local licenses have plummeted, resulting in
massive write-downs by ownership groups. And two of the four major networks
-- CBS and NBC -- have publicly hinted that the days of distributing programming
over the air via affiliates are numbered.
... According to Nielsen Media Research, in the last reporting period, CBS’s prime-
time audience was down 2.9%. ABC was down 9.7%, Fox was down 17.5% and
NBC was down 14.3%.
... The average price of reaching 1,000 households with a 30-second spot in prime
time, according to Media Dynamics, has jumped from $8.28 in 1986 to $22.65 in
2008 -- but effectively more like $32, because between 150 and 200 of those 1000
households use DVRs to skip past the ads.
... Cable has problems of its own. It’s no more DVR-proof than broadcast. It is also
suffering a sort of distribution autoimmune disease, wherein the body attacks
itself. The very coax the industry has been stringing for 50 years is now the pipe for
broadband, which households increasingly are using to bypass pay cable entirely.
... Yahoo, at about 3.5 billion daily page views, is the most visited website in the
world. In 2008, it had a profit of $424 million on $7.2 billion in revenue. Not too
shabby, unless you compare it with 2005, when the company had a profit of $1.9
billion on revenue of $5.3 billion. Last spring, after a prolonged dance, it finally
rejected Microsoft’s takeover bid at $33 per share, or about $50 billion. Yahoo now
trades in the range of $12, for a market cap of $17 billion.
... The fundamental obstacle for online publishing, according to the president of
the Interactive Advertising Bureau: “It couldn’t be more straightforward,” Randall
Rothenberg says. “It is a disequilibrium between supply and demand.”
... But why pick on poor Yahoo? Consider Twitter, Facebook and YouTube, which
among them have altered human behavior of a grand scale. Two and a half years
ago, Google paid $1.65 billion for YouTube. The 2008 payoff: about $90 million
in ad revenue -- which might (but probably won’t) cover the costs of copyright-
infringement litigation and certainly won’t cover bandwidth charges. Facebook,
whose 2007 valuation of $15 billion has shrunk to about $3.7 billion, had 2008
revenue estimated at $300 million. And Twitter had $0.
Thus, the mantra: “We have the audience. All we need is a business model.” As if
adequate revenue were somehow guaranteed by physics or heavenly deity. It isn’t.
I’ve pored over Isaac Newton and the Ten Commandments. There is no “Thou
shalt monetize.””23
Digital Media in Tough Times—Key Takeaways

High
In the absence of new infrastructure buildouts and lengthening
sales cycles, vendore are likely the worst hit. They will necessarily
have to reinvent their business models to survive in this market. Vendors
There are newer media avenues to put out content, but few
means to monetize it. Already struggling against free Content
Impact of Recession
content overflow over the Internet, content providers Creators
will also have to deal with lack of traditional advertising.
While large system integrators will continue to have

an increased role in enabling cost-effective and System
efficient workflows, smaller niche providers Integrators
will struggle as business starts shrinking
Service providers will experience a marginal

decline in revenues. There will be price- Multiple Service Providers
driven competition. Competition will grow (MSOs)
from Internet based service providers.
Consumers will be least affected

as they will continue to gain
access to digital content Consumers
over multiple media
Low
Figure 5. Impact of the recession on the digital marketplace24
23 Future May Be Brighter, but It’s Apocalypse Now, Bob Garfield, AdAge.com, March 23, 2009.
See http://adage.com/article?article_id=135440.
24 Source: Frost & Sullivan, March 26, 2009.
Group M Revises Media-Spending Forecast Downward

“WPP’s Group M announced today that it has revised its measured-media-
spending forecast for 2009, and the news isn’t good. The media unit predicts that
global measured media spending will drop 4.4% to $425 billion, a much bigger
drop than the 0.2% it predicted back in December.
The group said it expects a near identical drop of 4.3% to $155 billion in measured
media spending in the U.S., rather than the 3% it predicted in December. Looking
forward, Group M said the industry could see a drop of 6.8% in the U.S. in 2010.
London-based Adam Smith, futures director at Group M, said in a statement: “The

2008/2009 period is now a more serious advertising recession, in scale, duration
and relative to the global economy, than the extraordinary 5.1% real-terms post-
dot-com global advertising correction of 2001.””25
Mindshare’s New Metric for Web Video: Gross Ratings Points

“Good news for online video: Mindshare, a unit of WPP’s giant media buying
operation GroupM, is embracing a new metric that could speed the migration of
TV advertising dollars to the web.
Since YuMe specializes in placing video ads in premium video, including TV shows
on the web, a GRP metric will allow an advertiser to buy both TV and online for
the same campaign on the same standard.
The agency is throwing its weight behind a translation of TV’s gross ratings point
to online video developed with video ad network YuMe, meaning Mindshare
clients such as Unilever and Ford will start buying online video on a gross-ratings-
point basis, the same way they buy TV.
Agencies have for some time looked for a way to measure online video in terms
of gross ratings points (GRPs), or the sum of the reach of a campaign times the
frequency that the target audience was exposed to an ad.”26
Verizon Promises Targeted Advertising By End of Year

“Targeted, web-like TV advertising has been long-promised, but will Verizon’s
FiOS, a relative latecomer to the party, be the first to deliver it?
Verizon will start targeting advertising on a household level by the end of the
year, allowing advertisers to target homes, rather than shows, or to buy specific
demographics and behaviors via the set-top box. “This is not something on the
drawing board; it’s what we’re doing right now,” said Verizon CMO John Stratton
at Advertising Age’s Digital Conference in New York.”27
25 Group M Revises Media-Spending Forecast Downward, Michael Bush, AdAge.com, March 31,2009.
26 Mindshare’s New Metric for Web Video: Gross Ratings Points, Michael Learmonth, AdAge.com, April 6, 2009.
See http://adage.com/mediaworks/article?article_id=135812.
27 Verizon Promises Targeted Advertising By End of Year, Michael Learmonth, AdAge.com, April 7, 2009.
See http://adage.com/digital/article?article_id=135853.
The Dawn of Cable TV’s Addressable Advertising Nears

“Canoe, the technology consortium backed by the country’s six largest cable media
companies, will launch the television industry’s first national addressable advertising
system next month. A long-talked about concept, national addressable advertising
means a single advertiser with a single placement can simultaneously target
different versions of a commercial at different demographics of cable subscribers
across the entire country. The move is a major step toward a TV experience that is
more internet-like.”28
YouTube Moving the Needle on Ad Sales

“YouTube is still Google’s toughest sell to advertisers, but the video site is doing
better by one measure than most people think: YouTube is selling ads against about
9% of its video views in the U.S., up from just 6% a year ago. YouTube declined to
comment on the exact rate at which it is selling ads and keeps the exact percentage
a closely held secret. But Shishir Mehrotra, YouTube’s director-product management,
told Ad Age that the company is selling ads against “hundreds of millions of views”
each month. More important, he said, YouTube is selling ads against more videos
than its nearest competitor has total views.
A YouTube spokesman confirmed that the social site is placing ads on more videos
than Fox Interactive Media, parent of MySpace and IGN Entertainment. Fox
Interactive ranks No. 2 by ComScore’s measure, with 463 million views in February, or
about 8.7% of YouTube’s 5.3 billion views in the U.S.”29
Three Out of Five Broadcast Networks Down in Ad Revenue

“Three of the nation’s five big broadcast networks showed year-over-year declines in
2008 ad revenue, according to TNS Media Intelligence, a sign that one of the media
industry’s most stable venues continues to struggle in an extremely challenging
and changing economic and media landscape. In 2008, only News Corp.’s Fox and
General Electric’s NBC mustered gains in ad sales, and one analyst suggested the
two networks may have benefited from broadcasting either the Olympics (NBC)
or the Super Bowl (Fox) in that year. “In general, it was a disastrous year for most
advertising-based media,” said Marci Ryvicker, a media-industry analyst for Wachovia
Capital Markets...
The 2008 numbers are notable because it’s relatively rare for broadcast revenues to
decline from one year to the next. Indeed, until 2008, CBS’s ad revenue as measured
by TNS had risen steadily from 2005, when the network took in about $6.674 billion.
Likewise, ABC took in about $5.897 billion in 2005, and had seen steady increases.
Of the four biggest broadcast networks, only NBC, beset in the last several years
by ratings declines and programming issues, saw its 2007 ad revenue decrease
noticeably from the about $6.02 billion it raked in during 2006.”30
28 The Dawn of Cable TV’s Addressable Advertising Nears, Hoag Levins, AdAge.com, April 8, 2009.
See http://adage.com/video/article?article_id=135856.
29 YouTube Moving the Needle on Ad Sales, Michael Learmonth , AdAge.com, April 8, 2009.
See http://adage.com/digital/article?article_id=135859.
30 Three Out of Five Broadcast Networks Down in Ad Revenue, Brian Steinberg, AdAge.com, April 7, 2009.
See http://adage.com/mediaworks/article?article_id=135852.
For more information

This white paper is sponsored by the Sun Microsystems Communications and Media
Industry Practice and Sun’s executive Media Advisory Board (MAB). Led by Sun and
leading media industry executives, MAB is focused on identifying practical solutions
to shared business challenges of cable and TV programmers, broadcast networks,
film studios, and other major content owners and aggregators. The paper was first
presented to participants of a Sun MAB roundtable on Advanced Advertising held
at the 2009 NAB conference in Las Vegas. In making this work freely available, Sun
MAB’s intent is to foster industry dialog on certain technologies and practices that
have potential to accelerate the realization of digital distribution business benefits,
particularly as they pertain to video content. The paper is available on sun.com.
The New Economics of Customer Reach: Advanced Advertising Sun Microsystems, Inc.
Sun Microsystems, Inc. 4150 Network Circle, Santa Clara, CA 95054 USA Phone 1-650-960-1300 or 1-800-555-9SUN (9786) Web sun.com
© 2009 Sun Microsystems, Inc. All rights reserved. Sun, Sun Microsystems, and the Sun logo are trademarks or registered trademarks of Sun Microsystems, Inc. or its subsidiaries in the United States and other
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The new economics of

Appendix A. State of the Industry Over the Last 90 Days.................................... 14

It is commonly accepted in the marketing world that better, narrower targeting

The disruptive force of the Internet Protocol

In the current landscape, the ability for a media organization to aggregate an

Implications of multiscreen marketing

Until we see a trading mechanism of user profiles emerge, targeting is not

Multiscreen marketing should be viewed more as an audience aggregation and

Defining the edge of influence

Unlikely any existing traditional Ad Sales

HH/STB 1 HH/STB n 111,400,000 1

Unique Addressable Ads

Figure 1. Searching for the network Edge of Influence

the normal way of • Money—how much they’ll pay for a service

• Advertisers will increasingly aggregate audiences, rather than dissecting them…

New behaviors, new business models

To achieve a common infrastructure, you need:

Ad Booking Ad Content Ad Instruction

It costs money to manage that content

$ ($) ($) manage and move that content to the

Figure 2. What is an ad, and what does it cost to deliver it?

Who or what is the target?

Table 1. Targeting an audience.

Traditional targeting of consumers based upon commonly accepted

Target pricing and value

Buyer’s Demand Curve

Number of Units Sold

The immediate benefit of targeting is to be able to more effectively and accurately

Mediums and their infrastructures

10 IPTV World Forum in Budapest June 22, 1996.

It is important to understand that addressability is not the same as the ability to

IP Satellite Cable BCast TV

DMA 1 DMA n 210 1

HH/STB 1 HH/STB n 111,400,000 1

Individual 1 Individual n 302,654,075 3

Unique Addressable Ads

Figure 4. Capabilities of the mediums

For advanced advertising Conclusion

As we move from a centralized scheduled world of media to a more interactive user-

Mobile Hotel Bookings Show ROI in Recession

The Next Business Model for Ad-Supported TV?

The New World of Apps-Only Advertising

TV Everywhere­—As Long As You Pay for It

The initiative, dubbed “TV Everywhere,” is intended to be an industrywide effort,

Cable TV is one of the few sources of subscription-based content that most

Advertisers Get a Trove of Clues in Smartphones

Cable Faces Tough Upfront Market

NBC’s Zucker Defends Network’s New Programming Schedule

Future May Be Brighter, but It’s Apocalypse Now

Digital Media in Tough Times—Key Takeaways

While large system integrators will continue to have

Service providers will experience a marginal

Consumers will be least affected

Group M Revises Media-Spending Forecast Downward

London-based Adam Smith, futures director at Group M, said in a statement: “The

Mindshare’s New Metric for Web Video: Gross Ratings Points

Verizon Promises Targeted Advertising By End of Year

The Dawn of Cable TV’s Addressable Advertising Nears

YouTube Moving the Needle on Ad Sales

Three Out of Five Broadcast Networks Down in Ad Revenue

For more information

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TV Everywhere—As Long As You Pay for It