July 2006 - Remote Possibilities

Interactive TV is a blessing, not a curse. But for DR marketers, the Holy Grail-viewers enabled to buy with only the TV remote-remains just out of reach.

By Jack Gordon

Say “interactive television” or iTV, and most direct response marketers probably think of digital video recorders (DVRs)-maybe TiVo, in particular. The train of thought then runs like this:

“As if it weren’t bad enough that cable and satellite systems have fragmented the viewing audience, scattering eyeballs over 100 channels, along come DVRs. So now viewers can skip my ads entirely, while they ‘interact’ with the slow-motion feature that lets them see some tight end catch a touchdown pass 11 times. And even if they watch my ad, in their own sweet time, and respond to my offer, I don’t know where or when the commercial originally aired. That makes a hash of my metrics and my media-buying strategy.”

In other words, if you are a direct response marketer, chances are you think of interactive television as a headache. But a number of forces are working to turn iTV into an advertising opportunity instead.

One of those forces is none other than TiVo Inc. itself. A sample initiative, launched in May 2006, is an ad-search service called TiVo Product Watch. Marketers can sign up to deliver “targeted, relevant advertising content” to TiVo subscribers who are actively looking for product information in categories, including automotive, entertainment, financial services and others. TiVo’s 4.4 million subscribers now can search for and watch video advertisements up to 60 minutes long. How many viewers will choose to do so is an open question. But as of the May launch, TiVo said that 70 advertisers, representing 100 brands, already had signed on.

The idea of motivated television viewers who could actually seek out your direct response ad or infomercial casts iTV in a very different light. And that’s just the tip of the iceberg, according to people who see iTV as a great potential boon to advertisers. “Interactive television” means much more than DVRs, and the potential is enormous, they say. Advertisers of all sorts will have the ability to engage consumers in far more personal and involving ways. Some are already doing so.

For direct response advertisers, in particular, the ultimate promise is that television viewers will be able to complete a purchase without leaving the couch, simply by clicking a button or two on the remote control. No need to write down an 800 number or a web site address. No need to leave the TV set to make a call or go online to buy the product.

Buying by remote is already happening on a large scale in Europe and Asia, enthusiasts say. In the United Kingdom, it is relatively common for viewers to order products (or at least to be capable of doing so) by pushing a “red button” on the TV remote. The technology is in place for the same sort of thing to happen on a large scale in the United States. So why isn’t it?

The Interactive Television Alliance (ITA), based in Los Angeles, is a nonprofit trade association whose purpose, according to President Ben Mendelson, is to “accelerate the deployment of iTV. We want to consolidate the industry to get interactive platforms out there in 18 months rather than in five years.”

Why? Because iTV offers advertisers new ways to connect with particular, receptive viewers and promises an antidote to audience fragmentation. As ITA likes to say, “10,000 relationships are more valuable than 1 million eyeballs.”

The “platforms” now lacking have more to do with new business models than with technology. A household doesn’t need a DVR to be a candidate for interactive programming-meaning, for our purposes, programs the viewer can select, alter and respond to via a TV remote. All that’s required, Mendelson says, is a digital set-top box (as opposed to an analog box). Any household that can use the remote to order pay-per-view movies has the basic technology necessary to order other products as well.

Of the 110.6 million total U.S. television households, 29.6 million are now digital cable subscribers, according to the National Cable and Telecommunications Association (NCTA). As for satellite customers, EchoStar’s Dish network has about 12 million U.S. subscribers and DIRECTV has 18 million, virtually all of them with digital boxes.

That adds to 60 million iTV-ready households, not counting those that get broadband-TV service from phone companies or those with Internet Protocol Television platforms such as Microsoft’s MediaCenter, which blur the distinction between TV sets and personal computers.

The reason iTV’s proliferation in the United States has been frustratingly slow, ITA officials say, is that existing business models present obstacles rather than incentives. Corporate interests are invested in the old system. Allison Dollar, ITA’s CEO, cites a few examples:

  • Cable operators are subscription-based and have no incentive to offer value-added services to advertisers.
  • Media agencies get paid based on the amount of media they buy. By offering pinpoint targeting and tracking down to the level of individual households, iTV threatens to reduce the media buy. Under the current model, that saves money for the advertiser but reduces the agency’s income.
  • Broadcast networks are invested in the unaccountable audience-measurement system. Since iTV is so easy to track, networks are disadvantaged in price negotiations for non-performing shows.

The business questions are many and sticky, Dollar says: “How do you compensate people who sell ad time? How do you work with the production house?” That’s not to mention the complications that arise when mobile media enter the iTV picture.

“If media buying happens on an up-front schedule,” Dollar points out, “how do you create ways for advertising to be seen on cell phones and other devices?”

Mendelson describes the challenge as a matter of getting people from different segments of the TV industry-”content, distribution, technology and advertising”-into the same room to come up with agreeable solutions. That’s the role ITA is trying to play, he says. “We’re the only association with people from cable, satellite, broadcast, broadband and telcos on the same board of directors. Normally, those people hate each other-especially cable and satellite.”

None of this is to say that interactive television advertising isn’t occurring in the United States. It’s happening, and sometimes on a large scale. Over the past few years, iTV campaigns have been tested by organizations ranging from Coca-Cola, American Express and Royal Caribbean Cruise Lines to the U.S. Army. Auto makers, including Ford, Mercedes and Volvo, have been particularly active.

Many interactive advertisements take viewers to a web-like environment, where they can use the remote to choose various video clips, drill down on product features or even play games. Many also allow the viewer to use the remote to order coupons or brochures describing products and services.

A recent example is an iTV campaign for the 2007 Dodge Caliber. Launched in May, the campaign for the new Dodge automobile will run through the end of July, reaching more than 12 million subscribers to the Dish satellite network and selected cable networks.

Developed by Turner Media Group (TMG) of Denver, a producer of interactive advertising and owner of eight specialty channels that run on the Dish network (The Healthy Living Channel, The Men’s Channel, iShop TV and others), the campaign uses 30-second spots with a pop-up message that viewers can click to go to a web-like environment. They can then use the TV remote to view photos of the new Dodge; see weekly features focusing on different aspects of the car; locate dealers by zip code; click through to TMG’s iDrive TV channel to watch an expanded version of the 30-second spot; and request a Dodge CD filled with product information and games.

When viewers order the CD, the request goes straight to Dish Network, which fulfills the order. So the viewer doesn’t even have to enter a name and address, as when using a web site. “Interactive television is not where it should be, given the technology available, but we can not only do it, we’ve done it,” observes Art Cohen, TMG’s senior vice president for advertising sales. Campaigns similar to the Dodge initiative have become far more common in just the past two years, he says.

What is not commonplace-yet-is the ability to complete the purchase of a direct response product using only the TV remote, as easily as one would order, say, a pay-per-view movie or prize fight.

“A very small percentage of iTV in the United States so far involves someone actually buying a product with the remote,” admits Jodie McAfee, senior vice president of corporate development and marketing at TMG. Part of the obstacle is technological: “To purchase with the remote today, you usually have to enter your entire credit card number, plus the expiration date and your zip code,” he says. “That’s a little more lifting than most of our clients want the customer to have to go through.” McAfee expects that problem to be licked by next-generation buying software, available soon, which will allow viewers to buy by remote with only a four-digit PIN number.

The hurdle could be worked around today if satellite and cable companies acted as middlemen in TV-remote transactions, just as the Dish network fulfills orders for those Dodge CDs. The networks, after all, already have viewers’ billing information. But that idea leads back into the forest of old business models and the new relationships that ITA is trying to forge among different segments of the industry.

Right now, interactive advertising offers direct response marketers valuable new ways to connect with targeted, motivated viewers. But DR nirvana-click to buy-remains just beyond the horizon.

Jack Gordon is editor at large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, please e-mail the magazine at [email protected].


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