There's a "You say potato, I say potahto' scenario going on in interactive TV. The term ITV is used to refer to two types of interactivity: one dealing with usage, the other with technology.
What You Need to Know About Interactive TV
Strictly speaking, ITV is an overlay in pay TV that enables an engaging experience. ITV is frequently confused with TV convergence, however -- the marriage of the TV set and the internet. This has become especially bewildering as the market speculates about an Apple TV set, which is expected to be named iTV.
What it boils down to is this: Interactive TV is delivered via the pay-TV set-top box and converged TV functionality is delivered via the web through internet-connected TV sets, over-the-top boxes like Roku or gaming consoles, according to Rex Harris, innovation supervisor at SMGx.
Interactive TV enables a participatory experience with content on the TV screen. Converged TV is basically content -- whether video or a web page or a Facebook stream -- routed to the TV screen from something other than your cable or satellite provider.
"Interactive television is about engaging with content [on the TV], not the hardware [with which you engage]," said Ashley Swartz, senior VP-ITV practice lead at Digitas . "The response path is no longer confined to the remote control. In a connected living room, the tablet or mobile device can act as the remote. Tomorrow it will be as easy as "talking' to your TV or simply gesturing . ... TV is the next great disruptor, which is a paradox, as advertisers look at it as their anchor."
How can I buy into interactive TV?
"Advanced advertising" spots are typically sold by service providers as pop-up overlays that can lead viewers to longer-form video, polling, trivia or a branded destination, turning what's often a 30-second spot into an active gateway for engagement. Cablevision has been at the forefront of ITV, giving advertisers the opportunity to have their own channels and programs. TiVo, Dish Network and DirectTV have also been active players, and some expect Comcast's NBC Universal is about two to three months away from making a significant advancement.
Canoe Ventures, the project of six cable giants -- Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision and Bright House Networks -- that lets advertisers include interactive elements in commercials, said last week that it is closing its ITV-ad business and will focus on video-on-demand advertising.
Canoe's newly appointed CEO, Joel Hassell, said in a statement that the individual carriers would continue pursuing ITV business through their own ad-sales teams and video-business units.
What device will be the primary driver of converged TV?
The most popular way to connect a TV to the internet is through game consoles like Microsoft's Xbox 360 and Nintendo's Wii. Twelve percent of U.S. households use such devices for online video content, according to a survey conducted by Strategy Analytics in November. Consoles were in more than 60 million households as of third-quarter 2011, according to Interpublic's MagnaGlobal unit.
Less prominent are over-the-top boxes from Apple , Google, Roku and Boxee, among others, which allow access to web content via a TV set. Blu-ray players and some DVR marketers also let viewers access streaming content. But more connected TVs entering the market and making watching online content more seamless will render the boxes obsolete. iSuppli estimates sales of internet-enabled TV sets will hit 148 million by 2014.
How big is the connected market, and how big can it get?
About 31% of U.S. households use a device or internet-connected TV to watch online video, according to market researcher Parks Associates.
About 17 million U.S. households own a connected TV and ownership of streaming media players has nearly doubled since the end of 2010, but only a fraction of people owning a web-capable TV actually connect it to the internet, according to research from NPD In-Stat.
"As it becomes easier to hook them up, we have seen activation rates increase exponentially," Ms. Swartz said. "I liken it to gaming consoles, which had a difficult time getting gamers to connect to the internet. Then Microsoft began shipping the Xbox with a LAN cable."
What are the challenges and opportunities for advertisers?
Interactive TV can transform advertising from a passive consumer experience into a "call to action" to engage with brands, ultimately deriving more value, Ms. Swartz said. A viewer can respond to offers instantly with the click of the remote, and brands can drive him to second screens like smartphones and tablets for further engagement.
"ITV brings the power of internet advertising -- which is better able to target users -- with the impact of a huge screen on the wall," said Frank Barbieri, exec VP-emerging platforms at video-advertising platform YuMe. "ITV has the potential to make TV [ad] buys more effective and efficient."
But according to eMarketer, just 8% of advertisers invested in connected-TV video ads in 2011, basically flat with 2010.
Once cable operators are fully onboard, "networks need to integrate interactive components to ads, and then the advertisers will follow," said Jack Myers, media economist and chairman of Media Advisory Group. "It hasn't been a scalable market, which has prevented advertisers from really participating."
In a Deloitte poll of 50 agency executives, brand owners, broadcasters, distributors and tech companies, 93% said that "advanced advertising," such as interactive or targeted spots, would not cannibalize traditional brand-building campaigns.
"There may, in fact, be greater opportunity in the short-term in improving advertising around online video than in "advance advertising' and connected TV," according to Deloitte's report.
One challenge for agencies is how to handle ITV buys, as there's no way to measure interactivity, said Nick Troiano, president of BlackArrow.
"Interactive TV won't take off until they can find a way to converge data from Nielsen and data coming out of set-top boxes," Mr. Troiano said.