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.