IP Democracy: Seeking Television 2.0 Advertising Models

The other day, Cynthia cited a New York Post article filled with quotes from TV and advertising executives skeptical about Google’s chances of success if it tries to extend its ad-sales reach into the TV market. While these execs no doubt have good points to make (the Post story ends with an Enron reference to underscore its cautionary message), the bigger picture is that the TV advertising business is in a transition that no one fully understands or controls.

For example, a day before the Post published its story, the Wall Street Journal ran a piece citing results of various studies on DVRs’ impacts on commercial-skipping. Though the results were somewhat mixed, the studies generally confirmed that a substantial amount of time-delayed DVR viewing involves commercial skipping. And, as a regular DVR user myself, its hard not to believe this tendency will increase in the future, as we get increasingly hooked on the convenience of watching virtually commercial-free pre-recorded programs.

The WSJ piece cites various attempts being made, including positioning spots at the end of commercial breaks, to minimize the impacts of skipping. Then there’s the move by Tivo, discussed in our recent Television 2.0 report, to run static ads when viewers fast-forward through commercials, including an option to click on an icon to watch long-form ads, receive more information or even make a purchase.

Noting that a “Pepsi ad featuring Britney Spears that ran during the Super Bowl a few years ago…was replayed more than the last-minute, game-winning play,” the WSJ piece concludes with ” Perhaps, if nothing else, the latest competition for viewers’ attention might inspire advertisers to create more ads that are actually worth watching.” IMHO, there’s a long way to go on that front.

A few days before the WSJ piece, USA Today ran a story on the “Start Over” service being tested by Time Warner Cable in its Columbia, SC system. Start Over allows digital cable customers who miss the start of a show but tune in before the end to push a button on their remote and go back to the start. While the service—which presumably uses the equivalent of a DVR at the cable system’s headend—allows viewers to pause and rewind, it does not allow them to fast-forward through commercials. I’m skeptical that this kind of service has much chance of displacing DVRs if it continues to force-feed commercials to viewers while DVRs allow them to watch 30-minute shows in 22 blissfully commercial-free minutes.

Which brings me back to Google’s approach to advertising, which is discussed by Omid Kordestani, Google’s senior vp for global sales and business development, in a 10/26 interview with John Battelle. As Battelle notes, Kordestani has played a key role in taking Google’s ad revenue from zero to $3 billion in a stunningly short period of time.

The difference between us and our competition is that we innovate through applying technology. The angle of a media company is you’re packaging content or advertising inventory. We look at ads as commercial information, and that goes back to our core mission of organizing the world’s information. When people in the media world hear this, they say, “What are these guys talking about?”

The measurability of online advertising will extend broadly to all areas of media. You have companies spending billions of dollars on television. As more and more consumers adopt technologies like TiVo, I think you’ll be able to have much more useful forms of advertising — more targeted, more measurable, and with new pricing models. Just imagine if we made it possible for our advertisers to quickly publish relevant ads that could range from the local plumber on one end to Super Bowl commercials on the other.

Batelle, co-founder of Wired magazine and author of a new book called “The Search,” appears to have coined the term “intent attached marketing.” The gist of it, he says in an online interview, is that “You’re not buying content attachment, you’re buying attachment to the intent as declared by a consumer.”

It seems likely that, in the future Television 2.0 marketplace— whether it be cable VOD, telco IPTV or Internet-delivered video by Google, Yahoo, AOL and MSN, or startups like BrightCove, Veoh Networks—successful advertising models will need to deliver real value to consumers, whether it be through an ad’s entertainment value or by providing relevant “commercial information” in a manner similar to that pioneered by Google’s search ads.

And, while privacy issues will need to be sorted out, it also seems likely that the targeting of TV 2.0 ads will be based on an increasingly rich mix of usage data and, for consumers willing to provide it, demographic and other personal data as well.

So, while it may be an uncomfortable time for traditional TV advertisers, networks and content owners, it seems reasonable to expect that the transition to Television 2.0 will ultimately provide both viewers and program producers increased flexibility in finding the optimal mix of ad-support and user payments as a financing mechanism. It will also feature ads that viewers are more likely to want to watch, and provide advertisers with far more certainty that their ads are reaching their target viewers and having a positive impact on their business. Who will be left standing and profitable as we move farther into the TV 2.0 transition is, of course, another question.

Posted by Mitch Shapiro on October 29, 2005 3:46 PM to IP Democracy