SEPTEMBER 8, 2000
SPECIAL REPORT--INTERACTIVE TV
The Next Frontier for Advertisers | ITV gets consumers' attention and is tailor-made for target marketing -- but it has plenty of kinks
| Throughout more than 60 years of TV history, advertisers have paid broadcasters to interrupt our TV viewing time. In exchange for the minor inconvenience of listening to a sales pitch (or a string of sales pitches) every 10 minutes or so, the public gets to watch TV for free.
About 20 years ago, the cable TV industry tried to change this model by charging viewers a subscription fee and eschewing ads. Cable operators soon realized their folly, however, and now cable has as many ad spots as network TV. People still pay for cable because they get better reception, but without ads cable probably wouldn't be very profitable. To put this in couch-potato terms, cable needs advertisers like the Skipper needs Gilligan.
Now comes ITV to challenge this paradigm once again. The technology exists to let viewers watch whichever programs they like, whenever and at whatever speed. This means viewers can fast-forward through ads, leaving an advertiser to ask the question: Why plow bucks into an ad campaign that TV viewers can blow by without a backward glance? And if there's no advertising on ITV, what will pay the freight for the content -- or programming -- that someone will have to provide? In short, is ITV, like push technology before it and many Web businesses now, just a neat new technology in search of a viable financial model?
HUGE POTENTIAL. . While the answer may be yes for now, advertisers who ignore ITV risk missing out on a huge potential marketing opportunity. That's because anecdotal evidence shows that viewers pay more attention to interactive ads than to old-fashioned TV commercials. But like everything else about ITV, things aren't quite that simple.
ITV can be delivered in several ways. There are digital versions of cable-TV set-top boxes that permit two-way communication -- from the broadcaster and back to it. The viewer watches the programming at the same time that the broadcaster sends it, just like regular TV. That's great for advertisers, because viewers can't fast-forward through the ads. But they can get caught up in making a spur-of-the-moment purchase using a link in an interactive ad. That would fill the screen with a Web site. Take an extra two minutes entering your credit-card number and -- shucks -- you could well miss the next ad.
Inadvertently or not, the tech geniuses at TiVo and Replay TV have solved this problem with something called digital-TV recorders. These machines hook into, or are hard-wired into, a cable-TV set-top box. They work like VCRs, sucking programming from a central broadcaster's database, storing it in the viewer's set-top box, and presenting it in a form that lets viewers fast-forward, rewind, or slow the speed of what they're watching, just as they would a videotape.
COMPETING PROTOCOLS. . But set-top boxes have another complicating factor. They run on different, competing protocols -- six, at last count. This means a broadcast aired using one set-top box's protocol won't work on any of the others. Cable operators make the decision about which box they'll give to their customers, and the reach of a specific show that's viewed using one of these boxes is limited to the customer base of a given cable operator.
For now, of course, most ITV viewers don't use either set-top boxes or digital-TV recorders since they're not distributed widely. Instead, the vast majority of ITV's estimated 1.2 million watchers -- give or take a few household pets -- use what's known in the industry as a "dual-screen format." This refers to synchronized Web and TV broadcasts, which let the audience respond in real time via their PCs to something they're watching on their plain old un-interactive TV. Dual-screen ITV doesn't permit fast-forwarding and is less distracting than a digital set-top box because both the PC screen and the TV screen are on during the broadcast.
Dual-screen interactivity also delivers the broadest potential audience. Some 25 million homes have TVs and PCs in the same room, according to a study by cable channel ShowTime. Of course, only a tiny fraction of these homes currently enjoy this technology in the form of ITV. Still, the market that already has the technology necessary for ITV is a big one.
Not surprisingly, given the low penetration rates, a lot of the data concerning ITV comes from observing the dual-screen interactive crowd. Despite the inconvenience of trying to watch two boxes at the same time, the results of focus groups show that ads do unusually well with this group. "We did some direct-response testing to find out how it affects viewers," says Jonathan Leess, senior vice-president and general manager for enhanced TV at Walt Disney Internet Group, which handles interactive programming for all of Walt Disney's TV operations, including ABC. "Ninety percent of the respondents say they watch the commercial more than they did before."
ADS OR BRIBES? That's because the interactive nature of the medium allows ABC essentially to bribe viewers to watch ads on its ITV broadcasts. The advertising can get unusually creative. For instance, the enhanced-TV version of ABC's hit show, Who Wants to be a Millionaire includes a bonus question about the ads for viewers who are playing along with the show on their PCs. The question might be something like: "Which artist sang the theme song in the Toyota Camry commercial?" If you want to get the correct answer to the question, and potentially win more money on the Web version of the quiz show, you have to watch the ad. Other forms of behavior modification ad makers are considering include raffles or coupons that you can download only after watching an ad all the way to its stirring conclusion.
These are simple interactive ads that could conceivably fit into the standard 30-second format, as long as downloading the coupon takes just a second or two. The waters get murky, though, when this concept is taken too far, and ads link to Web sites. Viewers who don't have a digital-TV-recorder type of set-top box might become distracted and miss part of the program or, worse, miss the next 30-second spot.
I-PRODUCT PLACEMENT. Concerns over this issue may quash the much-touted idea of interactive product placement, where the ad is embedded in the TV show. The example people often cite: You're watching Friends, and you like the dress Jennifer Aniston is wearing, so you click on it and buy it. Ad execs are skeptical of the idea that viewers would interrupt a TV show to interact with an ad. "You might [click on Jennifer Aniston's dress] if something from the show were made available at the end of the show," says Bryan McCarter, managing director of Zenith Media's Zenith Interactive Solutions. But that would still cause you to miss whatever was coming next, assuming that American TV networks continue to mindlessly schedule events only on the hour and half hour.
One answer may be to change the entire notion of TV scheduling. British TV doesn't happen on the hour and half hour, making its TV listings a nightmare as a result. In the U.S., "cable has already eroded the idea of TV as a medium in 30-minute blocks. HBO movies run until odd times like 9:12," says Elissa Myers, president and CEO of the Electronic Retailing Assn., whose mission is to boost retail sales via electronic-distribution mechanisms such as ITV and the Net. "If I'm watching an ad and I click on the Coke Web site, it could be that the site is so engaging my head won't come up for 15 minutes, and I'll miss the beginning of the next half-hour block. It's happening already to the extent people have their TVs and PCs in the same room."
Also, if you can't tell when people are watching things, the notion of prime time goes by the wayside. So advertisers are likely to pay for a certain number of viewings, as opposed to paying a premium for a prime-time slot. If ads are going to be watched any old time, it might well be left up to the network operator running the ad server to decide which ads to show when. As long as the ads reach the right audience the right number of times, it doesn't matter how they are scheduled.
TARGET MARKET. Indeed, reaching the right audience is the greatest incentive for advertisers to use ITV. The cookie technology that follows your PC through the Net is applied to what you watch on TV. "When you play Jeopardy Interactive, we know who's playing it," says Alex Thompson, founder, president, and CEO of Mixed Signals Technologies, which makes equipment and software linking the Internet to broadcast TV. "If they know it's Alexandra, a 31-year-old woman, they'll give me a game board that is branded by Secret [deodorant]." The Secret logo or banner ad could be on that game board for the entire half-hour that the enhanced TV show runs.
So, advertisers are starting to realize that ITV is in their future, even if they don't quite know how to use it yet. "It's like the early days of Internet advertising," says Zenith's McCarter. "No one is sure what they should do about it, but they want to be ready to pounce once it's here." The only question, given the current technological morass, is how long it will be before advertisers know which way to spring.
By Margaret Popper in New York
Edited by Douglas Harbrecht
|
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
