TV ad buyers and sellers both want to increase the number of ads that can be targeted to individual households. However, there are a number of challenges in achieving that. The most familiar challenge is the limited amount of TV ad inventory available for addressable advertising. Opening up more addressable TV supply — and opening up that inventory for TV networks to sell in addition to pay-TV providers — would likely induce more addressable TV demand. But more demand means more ads, which means the established method of storing, or caching, ads to fill that addressable TV inventory on the fly will need an upgrade. We break it down.

WTF is TV ad caching?
TV ad caching refers to how addressable TV ads are stored in order to be inserted into commercial breaks when people are watching traditional TV. Currently, these ads are stored on a cable or satellite provider’s DVR set-top box. By storing the ads inside the devices piping content to a person’s TV, the ads can be inserted on the fly without introducing a long delay. Think of it like pulling up a video saved on your phone versus having to download one that’s been backed up to the cloud.

What’s wrong with how addressable TV ads are stored?
It limits how many targeted ads can be served. Just like your phone can only hold so many videos, your set-top box’s DVR can only hold so many ads. Because you likely use it to store shows or movies that you’ve recorded, there’s only so much space set aside to store ads. Satellite providers DirecTV and Dish Network operate the largest addressable TV systems and are typically able to store around four gigabytes’ worth of ads, which translates to roughly 600 to 800 ads, according to Tom Morgan, who founded advanced TV advertising firm BlackArrow and is now principal at consultancy MediaD.tv.

Why would a DVR need to store more than 800 ads?
Right now it’s fine for a set-top box to store 600 to 800 ads because there aren’t that many opportunities for these ads to be inserted. Every hour, a TV network carries about 16 minutes’ worth of ads, but typically only two minutes’ worth can be addressable. In an extreme scenario where a person’s TV is on for 24 hours straight and all two minutes’ of that hourly addressable TV inventory is filled with 15-second spots, that’s 192 unique addressable ads that can be served. Although, there’s a wrinkle. DirecTV and Dish Network only refresh the ads stored on their DVRs once every 72 hours, Morgan said. That means, in that extreme scenario, those 600 to 800 ads would need to be able to fill as many as 576 addressable ad slots.

However, if more addressable TV inventory becomes available, that would create more addressable ad slots to fill. Moreover, if TV networks are able to sell that inventory alongside the pay-TV providers, then either the cache would need to be able to store exponentially more ads or be able to download ads more readily.

This is a problem, but can’t set-top boxes download more ads from the cloud or wherever?
Not really, at least not today. Some set-top boxes like Comcast’s X1 can connect to the internet, and the technology from addressable TV tech provider Invidi that DirecTV and Dish Network use to load ads on the DVR is expected to be updated to use the internet to deliver them, according to Morgan. But the vast majority of set-top boxes cannot connect to the internet.

Then how can TV access more ads?
Through the internet, but not through the set-top box. According to Morgan, smart TVs, which are able to connect to the internet, could be used to download ads to a TV. However, simply having smart TVs store the ads instead of the set-top box won’t fix the ad caching issue alone. Smart TVs do not have hard drives large enough to store as many ads as DirecTV’s and Dish Network’s DVRs currently do.

So smart TVs don’t solve the problem.
Smart TVs alone would not solve the issue. But since they can connect to the internet, smart TVs — as well as IP-enabled set-top boxes — could support a more intelligent way of managing how addressable TV ads are cached. Morgan has come up with one method that he has dubbed SPOC, which stands for Shared, Predictive, Open Cache. Morgan’s caching model aims to consolidate the number of ads that a smart TV would need to store at any given time by having ad assets be shared across ad sellers, relying on smart TVs be more discerning with which ads they store for a given household and open-sourcing the underlying caching technology so that no single entity controls it but so that smart TV and set-top box manufacturers can customize it to their own needs.

Sounds really complicated.
It is. But considering that advertisers are already projected to spend $2.5 billion on addressable TV ads this year despite the current inventory limitations, there would appear to be a significant return on any effort that would open up more addressable TV inventory.

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