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Getting ready for the ITV revolution

Aug 26, 2002  •  Post A Comment

Sometime early in the second half of this decade, interactive television will take off.
That will be when it reaches its “critical mass,” at around 15 percent to 20 percent market penetration, and that’s when a “third-party network” capable of running national interactive TV advertising across the various fragmented, incompatible technologies that now exist, could arise.
And that, in turn, will be the ITV-advertising equivalent of what happened when the home-video boom achieved its critical-mass penetration and Blockbuster was born. Only then will ITV be capable of becoming a significant national advertising force.
Those are the predictions of David Card, VP and senior analyst, Jupiter Research, who moderated a panel called “Interactive TV Advertising-The Way Forward” as part of the third annual Interactive TV Show USA, held recently in New York.
Mr. Card suggested that Liberty Media, the John Malone-owned company whose many media and technology investments include ACTV and OpenTV, is currently best positioned to launch that so-called third-party network. TiVo, too, may ultimately evolve into the third-party network, he said.
In the medium and long term, ITV’s advertising future looks bright, but the short term is a different matter, Mr. Card said. But Jupiter is projecting that by the end of this year, “Interactive TV will be a bigger market in terms of households than broadband Internet will be. … Cable companies are deploying different kinds of technologies,” Mr. Card said, which prevents ITV from having a national advertising impact. “You don’t really have a national audience. You have 100 percent penetration in one city and 2 percent penetration in another city, so unfortunately this is going to slow down the opportunity for full advertising revenues, commerce revenues and programming opportunities.”
Nonetheless, by around 2006, Jupiter predicts, ITV advertising will account for 6 percent to 8 percent of all TV ad spending.
“For any money to start flowing … there are going to have to be fundamental shifts in just how people perceive media,” said panelist Debby Mullin, VP, new media advertising development, Cox Communications. ITV advertisers “have to start thinking in terms of the market area and concentrations in market areas, as opposed to just trying to reach the entire country.”
“Right now advertising is interruptive in nature,” said panelist Kirt Gunn, president of Cylo Inc., an interactive agency specializing in emerging media. In the ITV future, advertising must be integrated into content and “must be supplementary to the content itself.” Cylo created what The Wall Street Journal called the “world’s first fully integrated interactive television campaign,” which was for Volvo, an automobile company whose target consumers include early technology adopters. That first ITV campaign, which included the first video advertisement meant to be seen on PDAs, ran just last year. The overall campaign cost $6 million, Mr. Gunn said, 10 percent of which was earmarked for ITV applications.
One of the current complications for potential ITV advertisers is that no standard policies or procedures yet exist for billing the consumer. “Who owns the data is really the question,” said Steve Salzinger, co-founder of Cauldron Solutions, a technology and services firm that provides transaction and content management systems for two-way cable.
“One of the structural problems … is that the middleware player thinks that they should be the major tax and tollway,” said David del Beccaro, president and CEO of Music Choice, a provider of digital music via cable and satellite. The middleware providers believe that they, rather than the cable operators-who already have billing relationships with consumers-should get the “lion’s share of the transaction.”
Billing issues aside, the “dollars [for ITV advertising] have to come from the television budget,” said Tim Hanlon, VP/director, emerging contacts, Starcom Mediavest Group. “There’s a high irony to that,” he added, because the “skill set to do a lot of these things actually is interactive, online.” Future media buyers and sellers will come from Starcom’s online media buying and planning unit, he predicted.
Currently, Starcom clients are “all over the lot” in terms of their receptivity to ITV advertising and their belief that there’s a future in it for them. Car companies may be farther down the road to ITV advertising, but even the big consumer packaged goods companies are getting interested, Mr. Hanlon said. “There are deals being done and there is judicious experimentation being done. … At the end of the day, all of our clients generally understand that there are changes afoot and that they need to do something.”