The mention of interactive television advertising conjures memories of failed attempts — like Time Warner’s Full Service Network — that have clouded marketers’ perceptions of this real and rapidly growing industry.
According to Jupiter Communications, New York, by 2004 there may be 29 million U.S. households using interactive advertising, with expected ad spending reaching $4.2 billion. While U.S. cable and direct broadcast satellite industries slug it out over which interactive applications each will soon offer, European DBS and cable companies have been delivering on the promises of interactivity since 1997. After three years of interactivity to a limited number of television households in Europe, how developed is the market? And what have the foreign I-TV providers learned from their real-world experiences with I-TV?
Open, London, recently broadcast the first-ever 30-second interactive television commercial, which aired on the U.K. BSkyB direct broadcast satellite service March 27.
Market research company BMRB, also of London, estimated that since the introduction of interactive television in October 1999, 7 percent of Open’s 2.6 million subscribers have used the service to shop. The report further states that I-TV shopping growth this year in the United Kingdom could outperform the adoption rate of Internet commerce.
Open standards will propel I-TV — While I-TV providers in Europe outwardly trumpet the initial successes of interactive advertising, within advertising shops a conflicted picture emerges, and U.S. companies should take notice.
Nearly all of the major digital cable players in the United Kingdom and Europe have a different software platform for interactivity. With a universe of fewer than 10 million households receiving interactive programming in Europe, the challenge for advertisers is to create TV commercials that can be used across all the various platforms.
For instance, in order to place buttons or icons on interactive advertisements, advertisers have to go through the expensive process of individually transcoding the I-TV elements for each distribution channel and its platform.
Rates are results-oriented. Fletcher Research, London, found that platform providers and broadcasters, for the most part, are still figuring out what interactive TV advertising will look like, how it will work logistically and how to charge for it.
The compensation deals in France are similar to the U.S. I-TV agreements. For instance, digital satellite provider Canal Plus charges a premium of about 20 percent on the commercial avail and 6 francs (88 cents) for each lead generation. If advertisers wish to produce their own custom application and not use one of Canal Plus’ templates, then costs rise an additional 80,000 to 200,000 francs ($11,600 to $29,000).
Advertising drives interactive TV — Since the United Kingdom has a meager 13 percent cable penetration (3.1 million homes), it appears that for the foreseeable future the standard for delivering enhanced programming in England will be via DBS and its 28.8 dial-up return path. But in the United States – as DBS’ subscriber counts continue to climb and cable’s numbers hold steady at 69 million homes – the competing technologies are squaring off into heated competition. Universally, though, the interactive providers agree that advertising most likely will be the main driver of global I-TV.
As Steve Williams, managing partner at the United Kingdom advertising giant BMP OMD, said, “Advertising is turning into interactivity.”