A targeted advertising system based on subgroups. Different subgroups are
formed based one or more subscriber characteristics, and different
targeted advertisements transmitted to the different subgroups. In the
Internet-environment, the subgroups are formed by utilizing multicast
addresses. In cable-based and satellite-based systems, the subgroups are
formed by node configurations. The targeted advertisements may be
transmitted simultaneously with programming and inserted locally, or may
be inserted at a centralized distribution point such as a router 303 or a
cable television local head-end 306. An apparatus is presented which
receives n program streams and m advertisements, and creates p
presentation streams containing targeted advertisements, where p is
greater than n.