Nirvana for advertisers is still a few years away

An advertising backlash is upon us. Sixty million US households have signed up for the Do Not Call Registry. Fifty-four percent of online households have spam blockers; 20% have ad blockers. Personal video recorder households skip 59% of ads. Multitasking, especially among younger consumers, is sapping consumer attention away from advertising.

For marketers, the solution to the backlash comes in two flavors. First, permission-based marketing in its many forms: email, search marketing, and comparison-shopping engines. Marketers have to learn the fundamentals of creating, executing, and paying for these opt-in marketing approaches. The second solution is more intriguing: household targeted ads. Delivering relevant ads that are not connected to either content or permission but are delivered based on consumer profiles is every marketer's dream.

Don't get too excited. Workable ad delivery to selected households is still a ways off. There are glimmers of hope. Twenty million households already have addressable digital cable boxes, which means that no new devices or interfaces are needed. And direct marketers are ready and willing to pay hefty premiums -- up to $550 CPM rates -- for the privilege of targeting selected households. Moreover, 54% of marketers say they would accept aggregating delivery confirmation data -- rather than demand household-level metrics -- which alleviates potential privacy concerns.

But two major obstacles stand in the way. First, targeted TV ads aren't compatible with the way most TV is delivered today. Over-the-air broadcast and analog cable -- used by 56% of US households -- cannot uniquely identify households. Second, cable operators, media companies, and marketers aren't ready to embrace disaggregation of audiences. As one executive we interviewed put it, "The industry would rather see multiple, customized versions of the same ad than household-based inventory." Want further evidence? Think about how slowly marketers have adopted digital marketing, which also provides the opportunity to target ads to smaller audiences (see Fascinating Factoids). The cold reality is that media buyers and sellers still value reach over relevancy.

Our advice in the meantime? Experiment with geographic targeting from vendors like Visible World and SeaChange. Buy ads in video on-demand streams that can be targeted to the household regardless of what VOD content the household is watching. Finally, when buying TV ads, buy time at the end of the commercial pod -- when the largest number of PVR viewers will actually slow down and see your ad.

What to expect in 2004

Each January, our team reads the tea leaves to predict the coming year. For devices, media, and marketing companies, we believe that 2004 will be a year of turmoil -- caused by too many companies going after smaller markets. Especially battered will be PC makers, online music services, and dial-up ISPs. On the other side of the coin, cable and local content companies will get some spring in their step.

How right were we with our predictions a year ago? In "2003: The Year Of Consumer Control," we forecasted that 2003 would be the year that consumers wrested control of their media and advertising experiences. Given the year's activity in search, online music, video on-demand, and spam, our instincts were correct. We were not accurate with one prediction: PVRs did not make much of a dent in TV ratings. But we'll see what happens in 2004 . . . .

One quick note: There is still time to sign up for our Email Workshop on January 29th in Cambridge. This popular workshop provides data benchmarking, and best practices in email design, delivery, and measurement. Contact Bob Klehm at rklehm@forrester.com if you would like to attend.

Have a great January!


Chris Charron
Devices, Media, & Marketing Group Director

P.S. If you'd like to suggest research for us to write, or if there are data points you are looking to track down, feel free to drop me a line anytime at chrischarron@forrester.com.

Research Referenced In This Issue If you printed this email, get links to the research featured in this week's issue by going to www.forrester.com/go and entering the five-digit number of the report you'd like to read. 2003: The Year Of Consumer Control (16315) Devices And Media Winners And Losers In 2004 (33669) Email Metrics Beyond Opens And Clicks (16727) From Discs To Downloads (16076)    How Good Is Your Email Marketing? (33524) How Telcos Should Enter The Video Business (33062) Media & Marketing Data Overview: Covers Media Consumption, Multitasking, Cannibalization, And Paying For Online Content (14534) Retailers: Quit Wasting Search Engine Dollars (16444) Ten Email Best Practices To Live By (16436) The Myth Of Video Metadata Standards (33052) TV Ad Targeting Creeps Over The Horizon (33623) Visible World Makes TV Ad Targeting Work (16566) Will Ad-Skipping Kill Television? (15459)

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