In an unlikely pairing, satellite giant DirecTV in El Segundo has teamed up with rival Dish Network for an advanced advertising project.
The companies recently announced that they will form a joint venture to offer highly targeted television commercials known as “addressable advertising” for political campaigns.
Both companies have been using the technology for more than a year, but Keith Kazerman, senior vice president of ad sales for DirecTV, said the collaboration will offer its clients more reach.
“Listening to the market, the overall demand has been for scale,” said Kazerman. “And when I mean scale, it’s really the combination of our 12 million addressable households and Dish’s 8 million households combined.”
David Heger, an analyst who covers DirecTV at Edward Jones in St. Louis, said he found it out of the ordinary that the two rivals were shaking hands for this project.
“I was a little bit surprised in terms of seeing Dish and DirecTV teaming together,” said Heger. “Is it necessarily dramatically meaningful to either in terms of financial impact? Probably not, other than the ability to capture a bigger piece of the ad spend.”
The joint project also lends a bit of credence to the notion that DirecTV and Dish of Englewood, Colo., might be interested in merging.
The addressable ads will allow political candidates to send television commercials to specific households based on various data such as gender, political affiliation and income level.
The service works like this: A satellite will send ads to subscribers who have a digital video recorder. If that subscriber matches the political candidates’ target audience, the DVR will store the political ad and air it when a subscriber is watching one of DirecTV’s 46 participating networks or Dish’s 65.
Kazerman said political candidates win out because they only pay for the commercials aired. Traditionally, ad buyers book time on specific programs with the hope that their target audience will be watching.
Seth Haberman, founder and chief executive of addressable ad company Visible World in New York, said it’s not the first time the two companies have partnered. The satellite rivals launched an interactive ad platform four years ago that is continuing on a DirecTV channel and a Dish channel.
“By joining together like they did with interactive, DirecTV and Dish are trying to make themselves more relevant on the national and local stage,” said Haberman.
Other cable companies, such as Visible World client Cablevision Systems Corp. in New York, also provide addressable advertising.
DirecTV and Dish will open an office in Washington with a staff of five to handle addressable ads for political campaigns.
Kazerman said the office will offer efficiency since it provides one point of contact and one invoice. He declined to reveal how billings would be split between the two companies but said it was “a pure, collective endeavor.”
Cost of the ads will vary based on the number of attributes a candidate wants to target. He said the cost will be much higher compared with standard rates because of its effectiveness.
DirecTV first implemented addressable advertising more than a year ago to advertisers across all industries such as auto, financial and insurance. For example, personal insurer Allstate Corp. in Northbrook, Ill., ran a campaign advertising renter’s insurance. The company was able to isolate DirecTV subscribers who were renters and target its commercials to just those households.
Kazerman said there are no plans to expand the partnership beyond political ads.
The joint venture might give fuel to longtime rumors of a merger between the satellite providers.
Charlie Ergen, chairman and founder of Dish, said during the company’s third quarter earnings call that a consolidation would “make a lot of sense.”
Mike White, chief executive of DirecTV, also said a merger would be “pro consumer” in an interview with CNBC last year but regulators remain a concern. The previous merger attempt by the two was scuttled by anti-trust regulators.
But speculation of a renewed attempt at a merger has floated since an initial try more than 10 years ago, DirecTV said right now its main focus is growing the business.
The El Segundo company reported third quarter earnings of $699 million, compared with $565 million in the same period last year. Revenue rose 6.3 percent to $7.88 billion.
It added 139,000 U.S. subscribers in that quarter, the most since 2011. Even though the company struggles to get new American subscribers amid competition, DirecTV is hoping for growth in foreign markets and higher ad revenue. DirecTV today has more than 20 million subscribers including foreign customers; Dish has 14 million.
Marketing research firm Kantar Media in New York estimates that total political ad spending will hit $6 billion this year, with $3 billion going toward TV advertising. Kantar also estimates that $2.4 billion will go to local broadcasters, a slight increase of $100 million compared with TV ad spending in 2010, the last comparable election year.
Kazerman sees political ads as a strong growth market.
“The political category, from a growth standpoint, is growing very quickly,” he said. “And, frankly, with big data being such an important driver of that revenue growth, that was another important business point for us to try and leverage this type of marketing for the marketplace.”
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