Inside NBCUniversal’s high-stakes experiment with TV ads

Shutterstock

• NBCUniversal is trying to prove TV advertising can
  match the targeting, precision, and speed common to digital
  advertising.
• So it teamed up with the crafts retailer Michaels,
  which traditionally hadn’t advertised much on TV.
• The plan was to marry data from parent company Comcast
  cable set-top boxes with Michaels’ 50 million registered users,
  and then see if highly targeted ads delivered more
  sales.
• Though it was a modest test in terms of ad spending,
  NBCU sees it as laying the groundwork for executing loads of
  data-driven ad campaigns.
• That would theoretically help the TV giant compete for
  budgets that go to Google and Facebook.

---

The TV industry is on a mission to show the ad world
it can do data just like the duopoly of Facebook and Google.

Nearly every big TV company is touting its ability to provide
advertisers with targeting that goes beyond traditional age and
gender, but NBCUniversal has been particularly vocal about TV’s
need to change its mass-marketing-centric ways.

It’s even hosted
cross-industry forums focused on what it sees as a dire need to
reform the business.

To that end, the company has recently engaged in a complex test
with Michaels to help make its case for a more programmatic
future. Yes, the big-box crafts retailer Michaels. We can
explain.

Business Insider/Jessica Tyler

Michaels doesn’t typically advertise much on TV because its
massive database is mostly useless in that medium.

According to Stephen Carlotti, the executive vice president of
marketing at Michaels Stores Inc., the crafts retailer has
typically divided its advertising into two buckets: “mass
marketing,” which has mostly comprised magazine ads, and direct
marketing, which includes everything from web banners, emails,
search ads, and Facebook posts.

It’s the digital-marketing portion where Michaels focuses and
does its most sophisticated work, particularly because it has a
massive database of 50 million consumers.

A database of that size is marketing gold. It’s the kind of
information most big marketers are dying for. In Michaels’ case,
it uses that database to target customers with specific ads and
offers.

“There are very few things we do that aren’t designed to drive
people to buy,” Carlotti said. But historically that robust
database has been pretty much useless on TV.

For the most part, TV is still an essentially analog medium, in
which ads are baked into slots and beamed out to entire markets —
say, all of Chicago — or the entire US.

But NBCU approached Michaels with a way to leverage that
information on 50 million consumers for better TV ads.

NBCU wants to dispel the notion that TV advertising is just for
blunt mass marketing, and that it moves too slowly.

The deal between the two companies has led Michaels to ratchet up
its ad spending on TV. And for NBCU, the company is betting it
has established a new model that can be applied to lots of other
advertisers.

The broader hope is that it puts TV in a new light, in an era
where every brand seems focused on connecting directly with
consumers and tracking the business impact of every dime it
spends on advertising.

“This has been a blind spot for TV,” Tony Effik, NBCU’s senior
vice president of client strategy, told Business Insider. He says
advertisers think of TV as a pure branding vehicle, not a way to
drive people to stores or e-commerce sites.

“That’s a misconception, and we’ve always had an issue with
that,” he told Business Insider. “This is the kind of mythology
we are trying to tackle.”

The plan was not simple, but it paid off. The question now is
whether it can be duplicated and made bigger.

Specifically, NBCU wanted to take Michaels’ database and match it
up with the data parent company Comcast had on its own
subscribers, and then use cable boxes to zap relevant ads just to
Michaels’ customers.

Here’s how it worked: Starting in mid 2017, NBCU and Michaels
worked with the enterprise marketing software firm Axciom to
anonymously mingle the various data sets.

Then they set up four audience groups. One got only digital ads
from Michaels, while another received video ads within NBCU
on-demand programming on the web and TV. Still another group got
both ads, and the last group saw no Michaels ads at all.

Because Michaels had data on which of its registered users saw
which ads and then eventually made purchases, it could figure out
which strategy was most effective. But since NBCU had never done
this before, there was a lot of groundwork to lay, Effik said.

“We had to build methodology, templates, processes, dashboards,
all the pieces,” he said. “Then we had to put an exec dream team
together. It was very labor-intensive.”

The results were promising. The most effective strategy was
running two sets of ads, with average sales jump 48% versus the
control group. So Michaels and NBC ramped up that strategy during
the fourth quarter. Then did it again in Q1 and Q2 of 2018.

“What we really wanted to find out was, could we get a similar
result and could we do this fast?” Effik said.

To be sure, on this tactic Michaels is spending “hundreds of
thousands, not millions.” So similar tests won’t exactly reshape
NBCU’s fiscal year.

But it may lead to racking up more of these types of deals, which
is crucial to TV’s future in a data-driven world.

Thomson
Reuters

“On a per-customer, per-dollar level, this was very successful,”
Carlotti said, declining to provide specific sales results. “It
suggests NBCU is quite serious about two things: applying data
and getting leverage out of the Comcast-NBCU relationship.”

Ah, but there’s the rub. Comcast has close to 30 million
subscribers in the US — a large number, but far from the whole
country. Plus, only 19 million of those homes can be reached with
dynamic targeted ads via Comcast’s video-on-demand product.

“The challenge going forward is scale, scale, and scale,”
Carlotti said.

What about doing the same thing with other players,
such as AT&T, which is making an aggressive push in this
direction?

“We would be excited to try similar things with other media
partners,” he said. “We haven’t found anybody.”

“If you think about where TV is in a competitive media landscape,
better targeting is the thing that it’s got to figure out,”
Carlotti went on. “And we’re asking, can we do this in tens of
millions of homes versus millions of homes?”

“That being said, two years ago we would have thrown up our hands
and said, ‘This is never going to happen.’ Now we feel like
there’s momentum.”