In the course of this year, Cox Media will insert more than 130 million local ads on an average of 75 networks across its 23 markets nationwide. Similarly, Bresnan Communications, with 28 markets in Montana, Wyoming, Colorado and Utah, will swap in about 1 million local ads a month.
That's a lot of ad inventory to keep track of, manage and bill for. Couple that with the complexities of inserting online, on-demand and addressable ads, and operators certainly have their hands full.
The back-office functions of the local cable ad-sales office are more complex than those of television stations or broadcast networks, which only need to worry about inserting ads on one channel or outlet. Traffic and billing systems must be robust, scalable and flexible. The systems must be able to integrate with insertion gear as well as schedule, verify and bill clients for ads that have run on multiple channels — and often in multiple zones or geographic areas.
Traffic and billing personnel must make sure ads appear when and where they are to appear or reschedule those ads every day. Quick turnaround for insertion as well as make-goods (ads that must be rescheduled if they don't run according to contract) is crucial and labor-intensive.
And that's just for the linear ad-sales business. It doesn't take into account video-on-demand or other advanced ads, such as addressable avails, which use different traffic, verification and billing platforms than the solutions currently used for traditional linear advertising.
A TEDIOUS CHORE
“No doubt about it, traffic and billing is cumbersome for cable operators,” said David Porter, vice president of marketing and new media for Cox Media, the ad-sales unit of Cox Communications. “The cable ad-sales business is fairly mature and, in many cases, we're on our fifth or sixth generation of T&B platforms. Major improvements have been made along the line. But it's still a complex business and probably always will be to a degree.”
He added: “It's a volume issue. But now we have advanced advertising options that make things even more complicated.”
Traffic-and-billing vendors have been actively working for years to eliminate much of the manual work done at local cable systems. While much of the T&B process has been automated, though, there are plenty of cases in which manual labor is necessary to make sure ads are placed correctly and billed appropriately.
Each day, many T&B administrators must continue to manually rearrange and reinsert ads that may not have run for a range of reasons.
It could be that a sporting event ran long and bumped a show that had specific ads sold in it, or the ad executive might have made a mistake regarding when and where a spot was to run. It could be that the “cue tone” that alerts hardware to activate a local ad wasn't read correctly, or the ad was inserted on the incorrect channel or at the wrong time.
Any ad that didn't run properly must be rescheduled and inserted. And it's all done manually.
“Our run rates are very high,” said Kelly Enright, regional vice president of ad sales. “But of course, we want to be better. Most traffic errors are silly human errors.
“It takes a lot of work making sure everything is accounted for and billed correctly. Automation has minimized those errors, but not altogether.”
Billing clients each month is also a trial, especially for smaller operators like Bresnan. Most of the larger multiple-system operators and National Cable Communications, the industry's national spot-rep firm, electronically deliver their monthly invoices to clients. But Bresnan still sends their local bills out via the U.S. Post Office each month.
In addition to the cost factor, Enright said, many of Bresnan's ad clients just aren't set up to receive electronic bills. That means the operator's four traffic-and-billing administrators spend the last five days of the month printing, stuffing and mailing between 1,500 to 1,700 contracts.
The environmentalist in Enright hates the fact that the company goes through so much paper and spends so much time mailing those invoices, but there's no other alternative right now. And many of Bresnan's clients would like to be billed on a calendar basis. The crux: Most T&B systems bill on a broadcast-calendar basis, which is calculated differently.
The broadcast calendar is a seven-day week that starts on Monday and ends Sunday. That means the April calendar started on March 31 and ended on April 27, Enright explained. The broadcast calendar is a holdover from the traffic-and-billing systems TV stations have used for decades.
“It's simply not easy for both calendars to work together,” Enright said. “When we have clients that want monthly calendar billing, we have to do that manually. It's another example of us adding products and markets, but the software has a difficult time keeping up with what we want to do.”
To be sure, many of the T&B functions used by cable operators today are holdovers from software applications broadcasters have used for years, operators and vendors said. Many of the cable-centric functions used currently have been shoehorned into existing broadcast-software programs.
Even with automation like electronic billing, T&B functions at the local cable system level remain cumbersome, partly because of the confined aspects of the business. Most local operations must have all the hardware and software to insert ads locally. That's a lot of repetition, Porter admitted, noting, “It's the nature of the local ad sales business.”
But advances in software are allowing operators to centralize some of the T&B functions, which should save cable systems and their ad clients time and money, he said. Cox inserts ads in 23 of its markets; Porter would like to eventually have four or six regional hubs handling traffic and billing for several systems.
“We see new opportunities with new digital inventory and you can be in one location and publish anywhere,” Porter said. “Digital gives us all kinds of opportunities and flexibility.”
It's that kind of technology that has allowed NCC to eliminate some of the traffic and billing problems that crop up in local systems, said its executive vice president of technology operations, Ken Little. The rep firm uses its own separate T&B systems, which consolidate affidavits and billing for agencies. The cable industry as a whole is moving toward such centralization, but that will take time.
Aligning the linear ad sales business with advanced services is also moving forward, albeit slowly. Part of the problem: Ad-billing software isn't advancing as quickly as content-delivery technology, according to both Porter and Enright.
“The blessing of Bresnan is that we're small but we're also cutting-edge,” said Enright. “We offer high-def ads and we do VOD inserts. But our T&B systems have a difficult time keeping up with the products we are offering clients.”
Bresnan isn't alone in that spot.
At present, there aren't any available billing systems that integrate linear traffic and billing with advanced services, so different systems must run in tandem. It's a problem every cable operator must deal with.
“VOD ads are a fundamental shift in inventory management,” Cox Media's Porter said. “The long-form VOD ads are more like the Internet. They sit on a server and viewers see it when they select it. It's dynamic. It's hard to tack on an advanced-advertising feature to an existing linear system.”
He added: “Traditional T&B vendors are asking how they can support these new services. At the same time, we have Internet-based T&B vendors saying they can deal with the advanced services but they really don't know the industries like the traditional vendors do. So what's happening is that we're testing the market for on-demand services now and trying to determine which ones will become mainstream and desired by agencies and clients.”
Another piece of the tracking-and-billing conundrum: Agencies and clients are increasingly asking for detailed information on VOD and addressable ads — data that linear traffic systems cannot provide.
“Agencies are focusing on what they want and what their clients want,” Little said. “For example, more agencies want to know how many households in a specific geographic area watched content and for how long.
“The industry can provide that today, but in a disconnected way, and it doesn't affect billing, which is not generally based on performance. It's currently based on transacted terms. But the systems of tomorrow may connect viewer metrics with billing.”
Operators that offer advanced ad products must use two different back-office platforms, and it's unlikely that will change soon. Building a T&B solution for advanced advertising is challenging because there are so many ways to offer advanced ads to clients, said Bill Carleton, general manager of broadband solutions at Harris Corp.'s BCD Software Systems.
“Every operator has wildly different views of where and how to monetize advanced-advertising opportunities,” Carleton said. “Every ad-sales vendor-management business has a way of getting bills out to clients. The question is, how much granularity does the operator want and how much does the client want?
“Operators can insert ads on VOD content in so many different ways so building a T&B solution is challenging because there are so many ways to do it,” Carleton added.
Trafficking and billing for local ad spots will always be labor-intensive, NCC's Little said.
“It's the nature of the multichannel environment,” he said. “But linear T&B systems weren't designed for things like VOD. It's not impossible, but it is difficult.
“Building a T&B solution for VOD is difficult because there are so many ways to sell these ads. Some operators are marrying ads to VOD content. When a consumer picks a particular VOD movie, for instance, it picks the appropriate ad at the same time.”
“Other operators are inserting ads based on specific 'cue tones' and based on where the map address of a set-top box is, different ads are inserted,” he added. “Ultimately, it's possible to have an intermission and sell ads at a lower price point. Some of our clients are doing the first example and others are already testing the second.”
Addressable ads are another story, Carleton said. “We just don't have the scale to do that today.”
But there's a clear need for the industry to move toward technology that can manage ads across multiple platforms and delivery mechanisms, said OpenTV senior vice president of market development Tracy Geist. It may be complicated to expand existing platforms, but it's not impossible, she said.
The challenge, in her mind: Mining for the data that ad clients and agencies want.
“Virtually every set-top box has a mechanism that allows operators to collect clickstream data,” Geist said. “It's easy to collect data. It's more challenging to analyze that data in time for the next ad buy.”
Traffic-and-billing vendors aren't exactly eager to develop advanced-advertising solutions for the cable industry until the business model for that line of products shakes out a bit. At the same time, operators want solutions, but realize that until cable creates standards and protocols for advanced services, it's unrealistic to expect vendors to create different platforms to serve each operator's specific needs.
In the meantime, vendors like Harris and OpenTV are trying to find economical ways to solve some of the immediate problems plaguing operators. For instance, Carleton said, Harris is looking to cohesively merge VOD and linear spot bills in a way that is meaningful to the operators' clients.
Geist expects the gap between T&B software and advanced advertising technology to close a bit in 2008 — not because billing software will make a great leap forward, but because progress may slow on the hardware and technology front.
BIG EVENTS AHEAD
With the Summer Olympics from Beijing in August and November presidential election the horizon, 2008 is expected to be a big year for the linear ad business. That's likely to keep operators focused on traditional spots without brashly branching out into new advanced offerings.
“Operators have to hit the ball out of the park with stuff they already have in place this year,” she said. “2008 has to be a strong year, with the linear local ad sales business because 2007 was that strong. That will put their emphasis on things that are already in place rather than experiment and spend a lot of energy on new applications.”
Thus, the T&B vendors may be able to buy themselves some time to figure out how to integrate and create advanced-advertising solutions, she said.
Perhaps. But NCC has already created “Elections '08,” a central clearinghouse for candidates to craft and deliver specific, long-form political messages to would-be voters. Little said the offering has received a lot of interest this year and NCC has high hopes for the product. It's a small niche today, but executives expect it to grow because it allows politicians to discuss issues in more depth than a 30-second spot can deliver.
“Everyone knows the industry has to move ahead with the development of T&B systems for advanced ads and everyone is cooperating,” Geist said. “But it takes time.
“The market dynamic will force change and that's happening now. Our challenge is to keep pace and deliver on the needs of our operator clients on a timely basis.”
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