DirecTV Tunes Into Personalized Commercials

DirecTV plans to start offering personalized advertising in nearly 10 million homes in August or September, according to The Wall Street Journal.
DirecTV plans to start offering personalized advertising in nearly 10 million homes in August or September, according to The Wall Street Journal.

The ability to pump highly targeted advertisements to individual customers has long given the Internet world a competitive edge. Now the DirecTV Group (DTV) hopes to get a boost by taking a page from the Web playbook: It's gearing up to launch a new personalized advertising service for television in August or September.

DirecTV plans to dish up ads that cater to the specific interests of each household, starting with nearly 10 million homes, according to The Wall Street Journal. The company will use information gleaned by third-party data providers about various items and services that may be of interest to a particular household, the Journal reported. That information will then be loaded into consumers' DirecTV set-top box, which will be designed to spit out a relevant advertisements based on the interests and profile of each particular household.

Why Advertisers Need TV

The move comes as Internet sites grow ever more savvy in delivering targeted ads based on users' interests, using a wide array of data -- from online registration forms to previously visited websites -- to determine which ads might be a good fit. The targeted audience wins Internet shows a higher price per viewer for advertising. TV shows that sell ads for $25 per thousand viewers on the air might bring in up to $50 per thousand viewers online, says Gerry Kaufhold, a principal analyst with research firm In-Stat.

But the net effect -- and price -- would still end up being substantially less for the Internet ad because fewer viewers watch online, he adds. While Google, Yahoo and other advertising-dependent sites can deliver more personalized advertisements to consumers than cable companies, satellite TV providers and television networks, the websites still have nowhere near the reach of TV.

For example, a popular show may capture 10 million viewers when it first airs on TV, yet fetch only 1 million viewers when it runs online the next day, Kaufhold notes. "If you want to get your message to a mass audience, you still have to go TV," Kaufhold says.

Internet and TV Can Coexist

Hoping for both the personalization of the Web and the scale of TV, advertisers have been calling for highly targeted TV ads for over a decade. DirecTV boasts 19 million subscribers, 3 or 4 million of which may have digital recorders that could take advantage of the personalized advertising service. It would take some time for Google TV to develop the same reach, Kaufhold says.

Advertisers that are selling products and services aimed at the mass market -- such as McDonalds (MCD) or Procter & Gamble (PG) -- and need millions upon millions of potential customers are likely to favor advertising on TV, he adds.

But that doesn't mean Internet advertising is in trouble. There are times when Internet players can come in and fill a void, Kaufhold says. Television programs that rarely sell out their allotment of advertising slots may be more apt to team up with an Internet company to increase their revenues.

"Over the next five years, I see TV and Internet TV co-existing," Kaufhold says.

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