Targeted Ads Have Come to Your TV

The TV advertising we all grew up with was about mass-market messaging. Cable companies, TV networks, and local stations split up the rights to sell ad time during different shows, and they scheduled most commercials weeks or months in advance. It didn’t get much more sophisticated than showing different ads during "The Simpsons" than "60 Minutes," and everyone in a given region would see the same spots. 

That’s changing most quickly on content that comes to you through the internet. Nearly every streaming service that features ads for other companies, including Hulu, Peacock, and YouTube TV, shows targeted commercials. You’ll see them whether you’re watching shows on a television, laptop, or tablet. 

Television manufacturers also sell commercial time that can be targeted on the dedicated channels that come with your TV, such as the Roku Channel, Samsung’s TV Plus, LG Channels, and Vizio’s WatchFree+. Such commercials are also delivered by devices such as Amazon Fire TV, Chromecast, and video game systems. You may see targeted banner ads onscreen before you start watching a show, too. 

These days it’s very likely that any ad you see on a streaming service is being shown to you based on information about you stored in marketing databases, says Jane Clarke, CEO and managing director of the Coalition for Innovative Media Measurement, a TV advertising trade group. “There’s a whole level of data that never existed in television,” Clarke says. And as far as the advertisers are concerned, she says, “if it’s not targeted, that’s a problem.”

It’s an old cliché in the tech world that if you’re not the customer, you’re the product. When it comes to targeted ads on a smart TV, you’re both.

The kinks haven’t all been worked out yet, however. If you watch a lot of streaming TV, you might notice two telltale signs of this kind of advertising. “One is over-frequency, where you say to yourself ‘I’ve seen that same commercial 27 times,’ often one right after another,” says Andrew Fischer, CEO of Choozle, an ad-tech company. “The other one that makes me cringe is when you see a placeholder during a commercial break that just says ‘We’ll be right back.’”

Those are both moments when the systems aren’t working right or when ad time didn’t get sold. “That’s the infancy of the technology,” Fischer says. 

Targeted TV advertising wasn’t an especially popular choice for marketers until the pandemic. But then companies started scrambling to reach millions of people stuck at home watching TV. Spending on streaming service and smart TV advertising in the U.S. grew by 40.6 percent from 2019 to 2020, surpassing $9 billion last year, according to eMarketer, a market research company. That figure is expected to more than double by 2025.

The advertisers include familiar brands. The Trade Desk, a leading ad-tech company, says it ran connected TV campaigns for Hershey’s in the second half of 2020 to reach families with children and show more ads near stores with lagging Easter candy sales. A company called Origin Media says it has targeted television ads for Chef Merito brand spices to Latino households in Los Angeles and other parts of Southern California. Choozle says it helped a marketing company promote Luzerne County, Pa., as a destination to television viewers who were making travel plans as COVID-19 restrictions eased last year. (None of these advertisers responded to CR’s requests for interviews.)

Cable and satellite TV companies are also rolling out targeted commercials, but for now, most of the advertising they carry works the old-fashioned way. That may change in the near future. “Once marketers see real value from addressability, they will demand more,” says Alice Sylvester, a partner at Sequent Partners, an advertising consulting firm specializing in television.

The big cable providers have started trade groups, called Project OAR and Go Addressable, to develop their targeted advertising businesses. But neither of those groups nor the big cable companies agreed to speak to CR for this article.

Advertisers that want to reach specific kinds of consumers—and only those consumers—can draw on vast pools of information. “We may not know your name, but we know that’s our guy,” says Joel Cox of Strategus.

These personal details are wide-ranging. Your credit card company may sell lists of your purchases. Google and Facebook can help advertisers reach you based on what your friends searched for or "liked" on social media a day before you hung out with them. Your apps might give away your sexuality or your religion, or just use location data to track where you drive during lunchtime. (Note: CR works with Google, Facebook, Acxiom, and other online technology providers for marketing purposes.)

“All these things get smashed into these ‘identity graphs’ made up of hundreds of billions and potentially even trillions of data points,” Cox says. Your identity graph makes it easy for marketing companies to figure out what to pitch to you, how to pitch it, and when. 

Advertisers can call up a list of bowling fans from a company called Cross Pixel. Bluekai, a data broker run by the tech giant Oracle, has a handy list of people who work as gardeners or landscapers. Want to reach high-school dropouts who make $50,000 to $75,000 a year and use teeth-whitening products? In a couple of clicks, you can combine three lists to find those people using information from Experian, the data broker best known for generating credit scores.

As an example, last year an advertising platform called Five Tier ran a TV ad campaign for a company selling heating, ventilation, and air conditioning systems.

The company used U.S. Census Bureau data to limit the ad to neighborhoods in Georgia where the average income topped $100,000. Then Five Tier identified recent home buyers in those areas and layered in data from sources such as Zillow to restrict the ads to TVs in houses that were 20 to 30 years old, the age when central air systems typically need to be replaced. The company also used shopping data to filter out anyone who had recently bought a new AC. Ultimately, the ad reached 144,583 people.

“At the center of targeting, data, and addressability is identity,” says Jason Manningham, CEO of Blockgraph, a TV advertising platform. That means recognizing who’s sitting in front of a screen, pulling up the information data brokers have collected on them, and then showing them the most valuable ad. 

Let’s say a sportswear company is selling some new limited-edition sneakers, and it wants to run commercials only in households where someone spends a lot of money on shoes.

If you’ve been using the web to shop for expensive sneakers, data brokers have been linking all that activity to identifying details such as your IP address, the unique number that singles out your home network. 

Your smart TV manufacturer and streaming services know your IP address, too. All the sneaker company and its advertising vendor have to do is buy a list of IP addresses belonging to sneakerheads and then send it over to one of those companies, such as Hulu. The next time anyone on that list turns on Hulu to binge on their favorite show, the streaming service can serve up the sneaker company’s ad. Targeted advertising online works the same way.

If you visit a store and then you go home, we can place an ad knowing that you just spent 50 minutes in a Best Buy.

But just because the sportswear company wants you to see the sneaker ad there’s no guarantee that’s the ad you’ll end up watching. Most digital ads get placed through automated, high-speed auctions, where advertisers bid to display their ads to consumers.

After all, we’re complex individuals: The high-powered business executive who breaks out a mountain bike on weekends can also be a jewelry-loving suburban mom. Maybe you spend a lot of money on skincare products and you’re also in the market for a luxury SUV. If Cadillac is willing to pay more than L’Oréal, you might see an ad for the 2021 Escalade. “These ads are being decided and placed on a millisecond-by-millisecond basis,” Joel Cox of Strategus says. 

And the system isn’t finished with you once you see the ad. Advertising firms are eager to follow your activity afterward, both online and out in the physical world, to see how well the marketing worked, or maybe to show you a follow-up advertisement later.

“If you visit a store and then you go home, we can place an ad knowing that you just spent 50 minutes in a Best Buy,” says Frank O’Brien, CEO of Five Tier. Then "we can tell if someone saw an ad, when they saw an ad, and what they did afterward.” Five Tier attributed 2,841 heating and air conditioning service appointments and more than 4,000 visits to the HVAC company’s website to its placement of those targeted TV commercials in Georgia.

All of the data streams that enable that kind of tracking aren’t perfectly integrated yet, but ad-tech companies are working hard at it, from Google and Facebook to specialized companies such as Five Tier. In addition to TVs, phones, and computers, targeted ads and consumer tracking have even spread to digital billboards and screens at gas pumps that show different ads depending on who’s passing by. 

Companies ultimately want their advertising campaigns to follow you as you shift from your phone to your TV to your car radio to the screen on a treadmill at the gym, with your web browsing, purchases, and travels in the physical world all seamlessly linked to measure how well the ads are working. Once it’s all synced up the way ad-tech companies want it, they’ll be able to turn your every move into a data point and another opportunity to turn your attention into advertising dollars.

“It’s only a matter of time,” O’Brien says. “On paper, it’s not that difficult. That’s going to be the world, hopefully for me, in a few short years.”

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