Enhanced TV Will Be Great for Viewers, Chaos for Marketers

New Gadgets May Mean Addressable Ads, but They Also Mean Audience Will Fragment Even More

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NEW YORK (AdAge.com) -- Futurists tell us this: New technology will make our TV-watching more active, interesting and fun. For advertisers, however, this new video world to come will be onerous, difficult and almost insufferable.

In the not-too-distant future, consumers will use remote controls to respond to commercials; see ads sent directly to them through a TV set-top box; and use a web-enabled TV to stream video on-demand or tweet alongside an episode of "Modern Family." And these new TV ads could come at a premium to their normal 30-second counterparts.

There's lots of competition on the road to such a future -- among boxes that connect TVs to the web, set-top boxes that help deliver interactive and addressable ads, still more boxes also help viewers stream video and turn the TV into a home theater or video-game arena. But in this battle, the real losers will be advertisers trying to reach a mass audience, at least for now.

"Advanced television functionality has been around for years, but it has always been fragmented and inconsistent," said Michael Bologna, director-emerging communications at WPP's Group M. "That has been a problem for advertisers. Advertisers want to reach mass audiences."

Simply put: The more gadgets that debut in the marketplace, the more fragmented the audience. After decades of creating TV ads and bombarding the masses with them across broadcast and cable, must marketers now craft commercials aimed at that Xbox audience; that subset of viewers eager to use a remote to get a coupon e-mailed to them; and those residents of the home who don't mind their information compiled into their set-top box?

Marketers are approaching the new technology gingerly. They are leery of the added production costs that could arise from having to produce extra pieces of promotional content for new technologies. They are resigned to the fact that, in many cases, they may have to craft individual commercials for specific venues. And then there's the biggest question: Will consumers react to their newfangled ads?

"We have an enormous customer base, and we need to drive pretty big consumer volumes on a weekly basis," said Tony Pace, chief marketing officer of the Subway Franchisee Advertising Fund Trust. "A fair amount of people who consume television are very into their show, but they don't want to be doing anything else. So are they really going to be excited about responding to an interactive ad? There's a small group that's very eager, and the question is, how valuable are they to your brand or business? That's what we're trying to get a sense of now."

To be sure, some of this stuff is already available, and more of it is set to come into the marketplace (as any technophile eagerly awaiting the chance to buy a Google TV can tell you). Canoe Ventures, backed by a consortium of large cable companies, has already established technology that allows for national ads that give viewers the option to "request information" from the marketer. The ads are already on Comcast's Style network and, over the course of the next few weeks and months, are slated to be on E!, AMC and Discovery Channel, among others. The commercials offer "a core level of interactivity" that research has suggested "consumers really want," said David Verklin, Canoe's CEO.

So-called addressable advertising is also inching closer, with NBC Universal recently taking a stake in Invidi Technologies Corp., a company that has developed technology to distribute specific ads to particular households, based on selected data available about them, and then measure reaction to those narrowed ad pitches. Like other futuristic ad counterparts, the technology has been difficult to implement in broad-scale fashion, particularly because the competing cable and satellite companies use different kinds of equipment.

"This is not an easy thing to figure out," said Michael Kubin, an exec VP at Invidi, in a recent interview. "The technology is hard. There are a lot of barriers to implementation. Putting software into set-top boxes is not easy. There are a lot of barriers, but we have narrowed them down one at a time, and we are getting there."

Despite the hoopla accorded web-enabled TV sets, consumers' ultimate reaction to them is yet to be determined. "Very few people want to engage in online chat, follow friends on Twitter or vote for their favorite TV-show contestants through the TV," Forrester found in an August report, noting that some owners of the newfangled TV sets didn't use the web connections very often. Those that did used the TV set primarily to watch offerings from Netflix and YouTube.

Evidence even suggests no single wonder gadget will be embraced by the majority of the TV-watching population. Penetration of digital-video recorders in U.S. TV households will reach just about 33% by the end of 2010, according to research from Interpublic Group of Cos.' Magna Global. Likewise, Forrester predicts only one-third of U.S. homes will have a web-connected TV by 2015. New services and gadgets often cost new dollars that the recession-battered consumer lacks.

Marketers could be left scrambling to cobble together a string of commercials across an array of niches. One ad may cater to those who have embraced new technologies and have an interest in responding to a TV commercial. Another may focus on the "old-school" generation that likes to sit on the couch and watch TV in the normal passive fashion. A third may center on subscribers to a particular video distributor, like Comcast or Echostar. A fourth could work with Xbox, TiVo or a TV with a web connection.

One researcher suggests advertisers will face a split public: a leading edge that adopts the new technology and a broader base that won't see much initial use for it. "Just because we can do it doesn't mean the consumer wants it," said Alan Wurtzel, president-research and media development, at NBC Universal. "There are probably some consumers who would be very interested, but I just don't know how big it will be and how you scale it up."

Until that question is answered, look for marketers to build their own advertising experiments, testing them with one media outlet, then another, in an effort to build reach for their campaigns. Toymaker Mattel, for instance, has created an interactive digital-cable "channel" for its popular Barbie doll. To do so, it crafted deals first with Cablevision Systems Corp., then EchoStar's satellite-based Dish Network and, most recently, AT&T's U-Verse. "The idea, yes, is to continue to extend it, but we can only extend it as fast as technology allows," said Jeanne Hanahan, senior director-corporate media at Mattel. "Not every system or carrier has the platform that would be able to host what we want the channel to be."

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