NEW YORK Late last year when Tracey Scheppach, svp, video innovation director at Publicis Groupe's Starcom, was sifting through reams of set-top box data for Charter Cable's 300,000 subscriber households in Los Angeles, she made a startling discovery. Among the top 10 viewed networks in October 2007 were ABC, Fox, USA -- and the Jade Channel.

You may not be familiar with the latter one, unless of course you have an avid interest in Chinese culture, speak Cantonese and consume news and entertainment programming in that language. Another discovery: 25 percent of all the viewing throughout the Charter Los Angeles system for that month involved networks not broken out by Nielsen Media Research in its regular ratings reports.

"That's alarming," said Scheppach, indicating that the more exact down-to-the-second detail offered from digital set-top boxes, or STBs, is just one reason she believes that advertisers must make widespread use of such data to demonstrate more precisely how viewers are watching TV. Scheppach's employer and sister shop MediaVest are working with TNS and several cable and satellite operators as well as TiVo to unlock insights in the STB data.

Others agree that STBs should become a primary tool for advertisers going forward, helping them to better target the right messages to the right households and also to better justify the roughly $70 billion spent on TV ads each year. WPP has made investments in several tech companies focused on mining data from STBs, including OpenTV and Invidi, which will participate in its first U.S. market trial in Baltimore in the third quarter of this year, and TRA, a startup that links STB data to consumer purchase information.

Last month, in a speech to attendees at the American Association of Advertising Agencies Leadership Conference, GroupM CEO Irwin Gotlieb said such investments are critical to success for both media and creative shops.

"The challenge going forward will be to create multiple executions to fit a segmented marketplace… And we know that budgets will not grow in proportion to the work," he said.

In March the industry concluded the first household-level test of addressable ads using set-top box technology. During the 15-month trial, advertisers could deliver up to four different commercials simultaneously to different homes (depending on the consumer profile of the household contained in the STB) with a single ad buy. The test was conducted in 8,000 homes in Comcast Cable's Huntsville, Ala., system with Publicis' Starcom MediaVest Group, research company TNS, data services provider Experian and a handful of SMG clients, including GM, Kraft, Procter & Gamble and Miller Brewing. According to SMG, ad skipping (or "tune away") was down 38 percent on average across participating clients delivering addressable ads. Effectiveness, based on the cost per spot, increased 56 percent for those clients because they could spend less money to reach their target audience with relevant messages.

After testing ads across its entire portfolio of brands, General Motors is a believer.

"The advantages we see in it are improved efficiency and effectiveness," said Brenda Eitelman, GM's manager of media operations. "We're not over-delivering messages and therefore wasting money. And we're delivering them to people who want to hear them."



GM declined to cite its specific efficiency and effectiveness gains, but confirmed that they were "pretty close" to the averages for all participating clients.

The Huntsville partners are conducting a similar but much bigger test of more than 50,000 homes in the Baltimore market in the third quarter of this year. (This time Princeton, N.J.-based Invidi will replace OpenTV as the technology company serving the ads and collecting data at the STB level.)

GM's Eitelman expects to see similar results and hopes it will spur other cable and satellite operators to make their STBs available for addressable ad applications.

"Our goal overall is to deliver pertinent messages to people who want to hear them," she said. "It's both a cost-effective and customer-friendly thing to do."

Others agree. According to Janice Finkel-Greene, director of futures and technology, Interpublic Group's Initiative, STBs level the interactive playing field between traditional TV and the Internet.

"Set-top boxes are the key to closing the feedback loop -- it's the missing piece for broadcast, where the signal just goes out and we don't know for sure who gets it," she said.

Ratings samples like the ones Nielsen has in place help buyers make estimates, said Finkel-Greene. But STBs provide the "click-through" data stream for broadcast and cable TV that online media has had all along.

"It takes us beyond sampling to census," she said.

Or it could, if more cable and satellite operators were willing to free up the data they collect from these boxes, located in every subscriber's home and which detail usage down to each click of the remote.

So far, however, the distributors have not been willing to do that for two key reasons, executives said. First, the content distributors know they are sitting on a gold mine of data and haven't been able to settle on a business model that would allow them to exploit that value to its fullest extent. Secondly, there are privacy concerns, as federal regulations demand steep financial penalties from video distributors who identify and release the viewing habits of customers to marketers.



At this point, there are pockets of STB data available around the country, but nothing that comes close to covering the national footprint.

"We need to have scalability," said Finkel-Greene. "You can't make a national projection based on San Diego," where cable operator Cox has conducted some STB trials.

Scheppach of Starcom agrees, and has made it her mission to "free the data. I've even had buttons made up," she said. "It creates a revolution in the way you think about ratings."

She stresses that although she wants the STB data accessible, she doesn't expect cable or satellite companies to give it away for free.

And the cable industry is taking steps that could result in more STB data being released. A joint venture temporarily referred to as Project Canoe is currently being formed by the industry's major operators, including Comcast, Charter and Cox Communications. A formal unveiling of the venture and its new name are expected soon, said Vicki Lins, vp, marketing and communications, Comcast Spotlight, and a spokeswoman for Project Canoe.

"The goal is really to enhance value to advertisers by providing a national platform that will make it easier to buy, use and measure advanced advertising product," such as addressable and interactive ads, she said.

Sources said that David Verklin, who recently stepped down as CEO of Aegis Media Americas, is in line to become CEO of Canoe, possibly next month. Lins declined to comment on Verklin or the timing of any Canoe announcement, other than to say they are forthcoming.

Satellite companies are taking steps as well. Google has access to STB data from EchoStar, and DirecTV is working with TNS. Among the big research companies, TNS was one of the first to take an early and active role in exploring the potential of STB data, and now has what George Shabbab, COO, TNS Media Research, describes as a "material" business syndicating cable STB data to advertisers and networks, including Starcom and CBS.

In the third quarter, in addition to the Comcast Baltimore test, TNS is launching a second syndicated service called DirecTView, offering research from a panel of 100,000 STBs in the homes of DirecTV subscribers. Starcom has signed up as the first customer.

Not to be outdone, Nielsen Media Research has started its own STB research business through its Nielsen Digital Plus unit, headed by svp Jed Meyer. The company (which like Adweek is a unit of the Nielsen Co.) has quietly locked up STB access deals with big content distributors such as Charter, DirecTV, Comcast and Verizon. Meyer confirmed the agreements, but said the only one he could talk about was the Charter deal. Nielsen is using the Charter data to launch its own STB syndicated service in the third quarter. (Waltham, Mass.-based Navic, where former Initiative global CEO Alec Gerster is now CMO, is supplying addressable technology to the venture, but declined to comment further.)



Meyer said the service would be packaged with its Audience Watch system. Purchased along with Audience Analytics in February, it provides software for media metrics and analysis. The service, he said, would focus on comparisons between commercial and program tuning at the second-by-second level as well as analysis of HD tuning. "But the long-term play for us is" connecting the service to other Nielsen products, including NTI, other ratings panels and Nielsen Monitor-Plus, Meyer said. Also being explored: how the STB service might be connected to Nielsen HomeScan and other retail data to connect TV viewing directly to product purchases. Project Apollo, a Nielsen and Arbitron venture, was supposed to do that, but clients balked at the high cost and the plug was pulled earlier this year after years of investment and development.

But another player, TRA, is already up and running with a service that links STB and consumer purchase data. Run by media entrepreneur Mark Lieberman and veteran media researcher Bill Harvey, TRA matches STB data with sales information collected from 70 million-plus frequent shopper cards. So far, it has far less access to STBs, although the company is working on that. TRA has deals with two systems with a combined 400,000 boxes, including Charter in Los Angeles, and hopes to have agreements in place representing 1 million STBs by the end of 2008.

As a Web-based system, Harvey said, TRA avoids the pitfalls that Apollo ran into: "That was dependent on the high cost of installing hardware in the home and paying customers to perform work using that hardware. We eliminate both those categories."

The service also allows clients to alter ad campaigns "on the fly," depending on how consumers react to ads (or don't) through their purchase behavior.

"We can see what ROI is for the first time on television," Harvey said.

STB data, said Lieberman, "will become the underpinning for much of the media buying decisions" in television.