DMN3 Blog

What was once a fringe technology is becoming mainstream. Do you know the impact of DVRs on your television advertising dollars? Here’s the latest news and ways advertisers are responding…

The use of DVRs in the U.S. is growing markedly. No longer a novelty, they are now in 38.1 percent of all U.S. homes. The penetration of DVRs has almost doubled in the last two years. Their use cannot be ignored by marketing professionals as they design their television marketing campaigns.

Depending on your viewpoint, DVRs are either a blessing or a curse. For television networks, DVRs allow viewers to shift their viewing habits to other times and enable television networks to hold on to viewers who are not able to view shows when they are broadcast. For advertisers, they allow viewers to fast-forward through television commercials, reducing the overall ROI of television advertising dollars.

The two questions for advertisers are:

1. What kind of impact are DVRs having on the viewing of television commercials?
2. What can advertisers do to adapt to the trend of increasing use of DVRs?

In their latest study regarding DVRs, DVR Use in the U.S., Nielsen reports that DVR playback is an important trend and contributes significantly to overall TV viewing and makes up a substantial fraction of the ratings for some television programs.

Whether commercials are viewed by homes with DVRs is especially important, not only because of the total penetration, but because DVR users tend to be younger and more affluent…precisely the demographics that many advertisers are trying to reach. More than half of DVR users are under the age of 45 and more than half have a household income greater than $75,000.

Do households with DVRs fast forward through most commercials? The answer to that depends on whom you believe.

A report issued in late 2007 by ABI research said that approximately 80 percent of DVR users skipped all or most commercials. If that is the case today, then advertisers would be facing a major reduction in their ROI for television advertising.

Nielsen reports a different story. In its latest study, Nielsen reports that viewers do watch commercials on their DVRs. They report that “Contrary to fears that DVRs would wipe out the value of commercials because of viewers fast-forwarding through ads, DVRs actually contribute significantly to commercial viewing. “

Among the coveted 18 to 49 demographic age with DVR group, Nielsen reported that in May, 2010 the rating for a primetime commercial minute rose 44 percent in three days following the broadcast. It also says that this lift to the viewing of commercials has held steady over the last several years. When factored for all 18 to 49 (total U.S.), playback added a 16% lift to the average minute of primetime commercials.

Smart advertisers are not sitting on the sidelines while DVR use becomes mainstream. They are looking at ways to mitigate any negative impact of DVRs as well as experimenting with ways DVRs can assist in serving more targeted ads. Here are two different examples of how advertisers are responding to the increased use of DVRs:

One response is the increasing use of “contextual ads” to stop some people from fast forwarding through commercial breaks. An example of this type of ad was Toyota Corolla’s commercial last November during the AMC zombie drama, The Walking Dead. The ad featured zombies attacking and the rescue came in the form of a Toyota Corolla, the subject of the 30-second spot. By piggy backing on the show’s context, the ad attempted to increase interest by the show’s viewers, including those who would later view it via playback on a DVR. Unfortunately the timing was awful as Toyota was dealing with news of increased deaths from unintended acceleration during the same time frame.

A much more proactive approach that actually exploits use of DVRs for advertising purposes can be seen in the deal between Starcom Media Vest Group and DIRECTV. The deal will use “addressable advertising technology” to send highly targeted ads into relevant homes.

The way it would work is that the group would segment homes by certain characteristics or demographics. Specific ads would then be chosen to run in homes based on the interests of that segment of homes. The ads will be streamed to each particular household and stored on the DVR. When time to run, a trigger goes off. The result is that different households with different interests would get different ads targeted to their interests at the same time during a program.

DIRECTV’s set top boxes would also gather data on ad performance which would be uploaded back to DIRECTV. This addressable advertising technology that targets the interests of specific audience segments should result in better ROI for the advertisers.

Further testing will be completed before the system is fully implemented.

“Contextual advertising” and “addressable advertising” are two ways advertisers hope to make lemonade out of lemons with the rapidly increasing DVR penetration in television viewing households.