DirecTV and Dish Network Corp, the largest U.S. satellite TV providers that usually compete for customers, announced on Monday that they have joined forces to sell customized ads in a bid to gain a slice of $3.4 billion political ad market dominated by local broadcasters.
Both companies have been in a push to sell so-called addressable ads, which are targeted to their subscribers, based on data about their households.
Technology to deliver customized ads is widely used online by companies such as Google and Facebook Inc, but is only now starting to be offered by TV operators.
The technology allows for the companies to send one commercial to a 50-year-old swing voter in Florida, while a neighbor would be beamed a different commercial at the same time even if both people were watching the same program.
Dish's chief commercial officer Dave Shull said the companies could start selling spots as soon as February in the lead up to the midterm elections in November.
Individual political campaigns would provide the third-party data on the people to target. The companies will have a joint sales force in Washington.
The companies have said the data they will use is kept anonymous and aggregated, which blocks them from connecting a name and address with specific details about a household, and that customers can opt out from receiving targeted ads.
DirecTV's chief marketing and revenue officer Paul Guyardo said the companies have the ability to target small or large groups out of a pool of 20 million households, which could be useful to gubernatorial campaigns or ballot initiatives.
Shull said satellite companies have an edge over cable companies, which offer similar technology, because the satellite providers have a national user base. He said they can target state by state while cable companies have regional systems that may not cover an entire state.
Dish and DirecTV said they would consider partnering with cable companies if it means they can reach a larger base.
The satellite companies' agreements with the TV networks allow them to intercept and replace an average of two minutes of cable commercials every hour with its ads on popular networks such as Walt Disney Co's ESPN.
Both companies declined to give projected revenue figures for the venture but said they both expect a "material" boost to their ad sales businesses, which was an incentive to put aside their differences as arch rivals.
"We do compete a lot but we felt we could put a structure in place that had very significant upside in terms of the financial return to both companies," Dish's Shull said.
S&P Capital IQ analyst Tuna Amobi said in a research note on Monday that he doesn't expect the venture to be a major revenue contributor at the beginning or to be a serious challenge to TV broadcasters, but added that he sees potential long-term gains.
(Reporting by Liana B. Baker; Editing by Amanda Kwan)