June 11th, 2001

The TV's Eye Is Set on You

By Edmund Sanders
Los Angeles Times

Americans have been watching television commercials for more than 50 years. Pretty soon, commercials will be watching them.

Cable and satellite giants are installing technology that will enable them to zap targeted TV commercials to different homes based on the occupants’ age, gender, ethnicity, income and other personal details, including what shows they watch.

If neighbors are watching "West Wing" at the same time, the household with young parents will see an ad for Pampers diapers, while the retirees next door learn about the bonding strength of Fixodent. Wealthy homeowners might get ads for Nordstrom, while lower-income renters see commercials for Wal-Mart. Chevrolet could tout Corvettes to single men and Suburbans to families with kids. 

Eventually, companies hope to refine the technology to target different viewers in the same family. They might send ads for the new PlayStation 2 to the teenager’s room while reserving the life insurance pitch for mom and dad in the den.

AT&T, the nation’s biggest cable operator, plans to test such "addressable advertising" this fall on 30,000 customers in Aurora, Colo., who have upgraded to digital cable, which makes the targeting technology possible.

Other cable and satellite firms, including Cox Communications and Time Warner, are expected to follow with their own pilots. If all goes well, software developers predict large-scale roll-outs of targeted TV ads could begin next spring.

But will consumers embrace the technology as a convenience or view it as an invasion of their privacy?

The cable industry is betting that consumers will focus on the pluses, much as they have embraced supermarket loyalty cards that track their purchasing habits in exchange for discounts and coupons on products they frequently buy.

"If I told my male friends they’d never have to look at another tampon commercial, they’d say, ‘Sure. Here’s my information. Sign me up,’ " said Vicki Lins, a senior vice president at Los Angeles-based Adlink, which is developing addressable advertising in Southern California.

Adlink already allows advertisers to target individual neighborhoods. It helped S.C. Johnson Wax send TV ads for flea and tick spray to Southern California beach communities at the same time that it was airing ant and roach commercials in urban areas.

But Jeff Chester, president of the Center for Digital Democracy in Washington, an organization that analyzes new information technologies, worries that addressable advertising and other interactive features will allow cable companies to amass invasive profiles on what consumers watch and what they buy, perhaps without their knowledge.

"These set-top surveillance systems are being deployed without a public debate, and viewers may not understand what kind of information is being collected or how it’s used," Chester said. "We’re creating a dossier society."

Chester noted that cable companies also would be able to monitor when a household’s television set is turned on, giving them information about when customers are likely to be at home.

He said Congress needs to tighten federal cable laws to ensure that companies cannot collect any kind of information about subscribers without first clearly disclosing their practices and getting their subscribers’ approval.

Under the 1984 Cable Communications Policy Act, cable operators must disclose annually what type of personally identifiable information they collect about subscribers and obtain approval before sharing it. How the law would apply to customer information used internally by a cable company remains unclear.

Others say sending different TV ads to different households, particularly based upon factors such as ethnicity and income, would further divide American society. "For all its problems, television has been one of the greatest impetuses in unifying language and culture," said Robert Gnaizda, policy director at the Greenlining Institute, a San Francisco-based consumer group that battles redlining and other discriminatory practices. "If you start segmenting everyone, we may lose that."

Companies May Offer Incentives

Cable and advertising officials insist that they are moving slowly with the new technology and vow to seek customers’ permission before sharing any personal information with outside companies. Some companies may offer incentives, such as monthly rebates or premium channels, to those who sign up.

"This is an opportunity for customers to get information that is more relevant to them," said Tracy Baumgartner, a spokeswoman for AT&T Broadband. "Privacy is one of AT&T Broadband’s major concerns. The information we have about our customers is not available to third parties."

Addressable advertising has been the Holy Grail of cable for years, promising to combine the power of TV with the precision of direct marketing and the interactivity of the Internet. Cable companies hope advertisers will pay twice as much to reach such a targeted household as a random one.

AT&T stressed that the advertisers taking part in its pilot--who have not been identified--will not be privy to any personally identifiable information about subscribers.

ACTV, the New York-based software developer hired by AT&T and a leader in addressable advertising, says it does not plan to track television-viewing habits in the AT&T pilot, though such monitoring would be possible, chief technology officer Kevin Liga said.

Instead, the publicly traded firm--partly owned by Motorola and Liberty Digital--will help AT&T initially separate viewers into one or more of four demographic buckets: families with and without kids and those earning less than $50,000 and more than $75,000. Every household would fall into one of the first two buckets, and most also would be included in one of the second two.

The information will be gathered by searching AT&T’s own subscriber records and by running subscribers’ names through various outside databases.

Such consumer profiling is not new to cable companies. Time Warner, for example, is being sued for creating and selling profiles about its subscribers, including whether they buy premium channels such as HBO and Playboy.

Baumgartner said AT&T will send notices to customers informing them about the targeted ads and giving them an opportunity to opt out.

If consumers respond favorably to pilots such as AT&T’s, advertising officials predict that ads could be targeted within the same household. With the emergence of interactive TV, viewers may one day log in to their sets, just as they do with computers, allowing them to preset preferences for what types of shows they like to watch and what types of ads they would prefer to receive. Consumers might be able to use their remote controls to request additional information about an advertised product or ask that a coupon for the product be mailed.

"Wouldn’t it be nice to change the settings on your TV so your 4-year-old isn’t getting the Victoria’s Secret ads?" asked Ben Isaacson, executive director of the Addressable Media Coalition, a unit of the Direct Marketing Assn.

Advertisers Could Target Children

Gary Ruskin, a frequent critic of the commercialization of culture, worries that such targeted advertising may be harmful to children by making it easier for vendors to deliver their message.

"This could take control away from parents who are trying to shield their kids from commercial culture and allow advertisers to bypass the parents," said Ruskin, director of Commercial Alert, an advocacy group in Washington.

Analysts caution that addressable advertising still faces numerous obstacles. For one thing, TV viewers have not responded favorably to interactive features in the past.

"When people are watching TV, do they really want to be interactive, or do they just want to veg out and watch TV?" wondered Jim Nail, senior analyst at Cambridge, Mass.-based Forrester Research.

Cable companies also have much work ahead to upgrade their systems and develop new pricing models for ads.

The technology is made possible by the spread of digital cable, which allows viewers to receive up to four times as many channels as on most current systems. The upgraded system also includes a bigger return path within the cable, allowing for more interactive features. So far, about 10 million households have upgraded to digital cable, and operators expect the numbers to keep climbing.

Some advertisers remain skeptical that targeted TV ads will be worth the higher cost.

In Los Angeles, where Adlink has been working for several years to help advertisers reach demographic clusters containing several thousand homes, only about 10% of the ads are currently targeted, Adlink’s Lins said. "It’s a difficult sell," she said.

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