A targeted advertising system based on subgroups. Different subgroups are formed based on 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 are inserted in the program streams at a centralized distribution point such as a router or a cable television head-end. An apparatus is presented which receives m program streams, n advertisements, and creates p presentation streams containing targeted advertisements, where p is greater than m.