Interactive TV advertising looks like becoming the next big thing. The introduction of interactivity on the various digital TV platforms not only provides a new advertising medium, but has the potential to offer advertisers far greater customer information than has ever been possible before on TV.
The dilemma facing advertisers is that interactive TV is still at an early stage of development – similar to where the Internet was about five years ago – and no-one is certain how it will develop.
Even the most developed interactive service, SkyDigital’s Open, is still fledgling, so by committing to investment advertisers face the uncertainty of how well viewers will respond to it.
The concept of interactive TV advertising appears to be sound: in future, during an ad viewers will be able to click on an icon leading them to an interactive shopping area – the equivalent of an Internet site.
Quantum New Media Services managing director Paul Longhurst explains: “The plan for Sky is that you’ll get a drop-down box which will give you two options initially, three in the longer term.
“The two options will be either to store the site for a later visit, or jump through to the interactive space there and then. The third option, in the longer term, will be to click and order a brochure.”
A problem, however, with an ad which allows viewers to go through to an interactive space is that it will upset the advertising flow during a commercial break.
Clive McNamara, marketing director at AIT Group, which has been helping Woolwich launch on Open, explains: “There are definitely some problems with existing scheduling and buying of advertising time. Currently, you pay a premium for the first ad and the last ad and it dips off a bit in the middle.
“We know that if someone puts the interactive TV ad on first, then not only do half the people go and make a cup of coffee, but the other half go and interact, so fewer people watch the second ad. It interferes with the scheduling and the ratecard, and is causing some resistance within the industry.”
Longhurst believes a solution will be found whereby interactive ads will be scheduled in a different way to ordinary ads, and will probably be placed last during an ad break.
But that also creates a potential problem by upsetting programme makers. He says: “You could imagine Channel 4, for example, worrying that viewers will be away surfing and miss the programme. So we have yet to see how the ground lies on that issue.”
Another area of concern is the differences that exist between the digital service providers and the interactive platforms each is promoting. McNamara explains: “Not only are they different platforms, but they’ve got fundamentally different marketing propositions as well.
“They’re not attacking the market in the same way. So you will have to work out what your value proposition is and how that best fits into the service proposition that’s being promoted by the likes of Open, NTL and ONdigital.”
This is confusing advertisers and dissuading many from investing in the medium. It has also led Flextech Interactive to adopt a simpler approach.
Mark Bradford, commercial director at Flextech Interactive, the digital and interactive services division of broadcaster Flextech Television, says: “Our approach is to simplify the market. Over the past year, the market has been over-sold and advertisers are totally confused about what they can do.
“While other broadcasters are pushing their own individual platforms, we want any interactive advertising we develop to be platform neutral. Advertisers can buy interactive ads from us and they’ll run across all platforms. Let’s not build barriers to entry for this market, let’s facilitate moving it.”
When Flextech goes to market in the second quarter of this year, it will offer three interactive choices: a vote option, allowing viewers to vote for their favourite flavour of crisps, for instance; a request brochure or voucher option; and a tag-and-go option, where an interactive site can be bookmarked for later viewing.
“All this will occur within the length of the ad break, so you don’t leave the broadcast stream at any time. You have to respond within the length of the break, which avoids any arguments,” Bradford says.
The question remains how effective interactive TV ads will be in influencing viewers, because unlike ordinary ads, they will require viewers to take an active role in the advertising.
McNamara makes the point that people are already using Teletext to make purchases on their television sets, which he believes is a good sign for the prospects of interactive advertising. He adds that the cost of interactive ads could work out cheaper than DRTV.
He says: “At the moment, if you put an 0800 number on an ad, the total cost of buying that number and the fulfilment process might work out at about &£25 a lead. The cost of identifying interested consumers who only have to hit a button is minute in comparison.
“You can be a lot more accurate in how you identify people, and there is more chance of them identifying themselves because people are more likely to press a button on their remote control than pick up the phone.”
To make the most of interactive advertising, McNamara believes it will need to become a true direct marketing vehicle, and suggests advertisers will need to collaborate with direct marketers.
If viewers do take to the interactive medium, the ability to target will be hugely beneficial to advertisers, but will come at a price. It can cost over &£1m a year to be on the Open platform and Sky has already stated that its interactive advertising spots will be sold at a premium.
Intersource director Ian Howlett says: “From mass marketing TV advertising, suddenly you’ve got marketing to a segment of almost one. I would say if you can achieve that level of targeting, media buyers wouldn’t give a damn about expense.”
Once viewers have responded to an ad, that information is stored on their set-top box and the platform operator will then provide those names and addresses to the advertiser.
Bradford explains that the platform operator effectively owns that data, and advertisers will only be allowed to use the information they receive for a single campaign. He adds: “As broadcasters, we get the aggregate data. We don’t get names and addresses, we only know how many people responded so we can bill the advertiser.”
Rather than charging a massive up-front fee to make the ad interactive, Flextech will charge on a per-response basis. Bradford says: “Basically, if your ad doesn’t generate a response, you don’t pay. If it does work, you don’t mind paying because you know it’s working. You can offset the cost per response against the revenue coming in.”
“We don’t build up the cost of the ads because that’s a barrier to entry. With the figures we’re looking at now, it may be &£100 per spot just to make it interactive.”
Despite Flextech’s efforts to make interactive advertising as cheap and simple as possible, some companies remain sceptical about this new form of advertising.
Kirstine Ward, direct business consultant at the Customer Contact Company, suggests companies are reluctant to commit any real resource to it yet, and are waiting to see what response the forerunners through Open receive.
She says: “Interactive TV potentially offers more targeted marketing. But I think it’s going to be an uphill struggle to develop an experience that is wholly personalised. In the medium term, it may be better for a company to experiment on the Internet rather than TV, which is associated with more passive viewing.”
With so many companies investing in Web-enablement, advertisers have the choice of converting their existing Website content to more interactive TV material, or developing something completely new. Either way, Ward maintains that many companies are holding back because they know it might mean considerable investment for an unguaranteed reward.
Interactive TV is a new paradigm in advertising. It represents a fundamental change in the information advertisers will be able to gather and, over time, it will allow them to collect interesting data about how people respond to TV advertising.
How the concept ultimately evolves is open to conjecture. Intersource’s Howlett, for one, believes one-to-one marketing will become a possibility. He says: “Interactive TV can potentially build up such accurate profiles of individuals from their viewing and buying habits that every ad could be individually tailored to meet their needs.”
Interactive TV will bring viewers closer to a sale by providing them with the choice and control to learn more and take action. There remains concern, however, that consumers, used to passive TV viewing, may not immediately respond to it.
So far, marketers have focused on the cost and technical requirements of the medium, rather than its impact on customers. The potential for impact is undoubtedly huge. BSkyB is predicting that by 2002, 7 million UK homes will have access to interactive TV, and the rapid uptake of digital over the past year suggests this is a conservative estimate.
It is still early days, and it is tempting for companies to adopt a wait-and-see attitude. If the concept does succeed, however, there will be a far greater premium at stake down the line. And just as latecomers to the Web have discovered, it will be the brands that get in early which stand to profit most.