For at least 50 years, television advertisements have been ordered randomly within commercial breaks. But given the spread of digital video recorders (DVR) that allow users to blip-blip past the ads in fast-forward, it’s time to change this business model to maximize ads’ effectiveness, according to a new study.

The research, by Kenneth C. Wilbur of Duke University’s Fuqua School of Business and David Kempe of the University of Southern California’s Viterbi School of Engineering, was presented by Wilbur on June 23 at the Advertising Research Foundation Audience Measurement 4.0 conference in New York City.

“Think of two very different ads: the iconic Coca-Cola polar bears commercial, and a commercial for ‘natural male enhancement,’” said Wilbur. “The Coke ad will keep the audience glued to its screen, but the other ad will annoy some viewers, causing them to fast-forward or switch the channel. If the Coke ad is placed first during the commercial break, it still delivers most of the audience to the second ad. But if the Coke ad is placed second, it gets a significantly smaller audience.”

To account for these types of ad sequencing issues, the researchers have developed the Audience Value Maximization model. This new algorithm shows how to optimally select, order, and price ads based on a mathematical formula that considers advertisers’ willingness to pay and viewers’ propensity to switch channels during commercial breaks.
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