Key component of targeted online behavioral advertising for Comcast’s acquisition of NBC

After more than a year of deliberation, the Federal Communications Commission and the Department of Justice decided to allow Comcast to buy 51% of NBC Universal from GE. With the recent explosion of Hulu, Netflix, and other online media services, Comcast is doing everything it can to mitigate the obsolescence of its streaming TV. However, one of the conditions is that Comcast had to allow its rivals to license NBC’s programming, including its most popular shows (The Office, 30 Rock, etc.). This broadens the network of companies that can generate online advertising revenue from NBC programming.

A paradigm shift is taking place. Networks used to make shows available online as an added benefit, but now with advances in broadband technology, consumer appetite, and ad delivery systems, online media is not just a requirement, rather, they are beginning to trump cable broadcast programming in many areas. With services like Hulu offering their premium package for just $8 a month, “cutting the cord” on the $100/month cable package looks a lot more appealing. In addition, the more progressive outlets for on-demand media entertainment purchases, such as Apple and Amazon, are likely experiencing a competitive threat from new “free-to-consumer” or “low-cost” alternatives.

What’s in it for companies? How can you “give away” online multimedia entertainment at such a low price? Improvements in ad delivery systems have allowed significantly more targeted ads to be placed. Gone are the days when people were boxed in just by demographics. Now companies use cookies, survey information, and even your social media profile to put the right ads in front of you! The more “targeted” an ad can be, the more an advertiser is willing to pay a publisher for that space. Advances in behavioral targeting have allowed ads to change content and placement based on consumer interests and where they are in the buying cycle. Let me show you an example of how behavioral targeting is driving this movement:

1. You walk into an electronics retailer and sign up for the store’s “free” consumer card (for example, Best Buy Rewards Zone) to get discounts.
2. They record your purchase information and send you emails to tell you about different offers, your total savings, or even to confirm your membership, etc.
3. You view one of the emails and a cookie is placed on your computer. This cookie identifies all of your purchase information and profiles you, including demographic information.
4. You have a history of purchasing video games for your PlayStation 2.
5. You watch your favorite show on Hulu, from home, whenever you want, for free (or for a small monthly fee).
6. Watch PlayStation 3 ads on Hulu. While waiting for your TV show to continue, you click on the ad for PlayStation 3 on Hulu.
7. You’re now identified as an interested PlayStation 3 buyer, and you see PlayStation 3 ads everywhere you go on the web (maybe even within your email).
8. You finally buy a PlayStation 3.
9. Now on Hulu and all over the web you see ads for PlayStation 3 games and accessories. Games are the kinds of games you used to like to buy for PlayStation 2. Coincidence… definitely not.

Scary? A little. Is it profitable for website publishers and entertainment media? Absolutely. The best part is that consumers are lining up to participate in the “free entertainment.” While Comcast may have acquired NBC to avoid obsolescence and stay ahead, it would be foolish to think that behavioral targeting opportunities aren’t a central factor here. Where else can you imagine a company paying billions of dollars to reduce subscription revenue from $100 to $8 per month? The value of online entertainment for businesses is behavioral targeting.