The two leading pay-television platforms in the United Kingdom are aiming to launch targeted television advertising. The objective is to extend the power of the traditional television spot through detailed demographic profiling at the household level. Television advertisers will be able to reach a specific audience through a mass medium, with greater control over who sees which commercials and how often they see them.

BSkyB will launch its long-anticipated AdSmart system across seven million subscribers by August 2013, following testing in staff homes. The full service will be launched in the first half of 2014.

It will allow advertisers to target 90 different demographic attributes and control other aspects, such as frequency capping. Advertisers will be able to specify a particular audience profile for their advert, or optimise a campaign by segmenting the audience, or a combination of both.

The approaches available will allow sophisticated advertising strategies, such as showing a particular advert to a household exactly four times, or running eight times at two-day intervals. This will dramatically extend the planning potential for media buyers.

Sky AdSmart uses technology from NDS, now part of Cisco, enabling the SKY+HD box to store different adverts received over satellite and insert them seamlessly into commercial breaks, based on the attributes of the individual household. The set-top box effectively becomes an ad server operating at the household level. Up to 200 different creative elements could be pre-positioned on the box at any time.

Initially, Sky will place adverts in the breaks on some of its own channels, within broadcast and on-demand programming, seamlessly replacing other adverts with targeted campaigns. Sky says other broadcasters could use the system in the future, “subject to the right commercial terms”.

A panel of around half a million internet connected boxes will be used as a viewing panel, recording an impression when at least 75% of an advert is viewed. Details will also be provided to the audience measurement organisation BARB to ensure that other campaigns are fairly billed, without double counting or payment.

The Sky segmentation covers 16 standard television regions and 15 large metropolitan areas, together with specific attributes developed in partnership with Experian, including 13 household types, 15 demographic and lifestyle segments, life stage and age of children, and 7 indicators of affluence.

The technology was demonstrated in public for the first time at the Future of TV Advertising conference in London. It showed how four different households could each see a different advert on the same national channel. NDS said that ten years of technology development had gone into the initiative. The underlying XTV DVR platform has been deployed with other operators, including DIRECTV.

Sky has been characteristically conservative in the deployment schedule for AdSmart, which has been in the pipeline for several years. Apart from the technology of delivery, which needs to work invisibly, there are many business issues involved, which need to be dealt with transparently.

Virgin Media also plans to roll out a targeted advertising trial “imminently” and launch a full service in 2013. Details so far seem sketchy. Cable has the advantage of an inherently connected platform that could theoretically combine online advertising models with television, although that would require a considerable culture change in buyers of “airtime”.

Unlike Sky, Virgin Media no longer has any of its own channels with which to test targeting propositions, having sold its channels and closed its airtime sales house, although it does have extensive video on demand and catch-up libraries. Virgin Media also lacks the scale of Sky, with just 3.8 million television homes, of which 1.1 million now have TiVo.

In the long term, targeting technology is likely to remain the province of platforms, rather than broadcast channels, further extending the power of operators.

Most commercial broadcasters have underinvested in advertising delivery, which is ultimately their main business. A key strategic question for companies like ITV, the main commercial broadcaster in Britain, is whether to work with Sky and risk becoming increasingly dependent upon the platform, or to continue to sell commercials they way it has for decades and risk long-term decline.