Interactive TV advertising....schmadvertising

I was interested to read some sobering opinions on interactive TV advertising, from the US market recently. Digital TV households there recently passed the 17million mark and (in this forum – 11/10/00) I quoted some impressive stats from two key players in the interactive advertising arena:

“The popularity [of interactive advertising] has certainly been maintained in the US. Two of the leading enhanced/interactive TV software developers (Wink and RespondTV) claim the following statistics:
Viewer response:
· Wink: “In the first quarter of 2000, 42% of all households who clicked to view the interactive offers in ads responded 'YES' to the available offers. Among ads that offer viewers the option to make purchases, nearly 20% of households who viewed an interactive offer for merchandise completed the purchase of that item.”
· RespondTV: “For the first half of 2000, enhanced campaigns achieved an average completion rate of 23%.”
Client-side demand:
· Wink: “Advertisers collectively aired over 1,000 interactive commercials during the fourth quarter of 1999.”
· RespondTV: “In the last six months we have enabled over 500 enhanced 30-second spots.”

However, over the past 6 months there have been a number of indications that interactive TV will struggle to live up to the initial hype. I believe some reasons for this are the following:

1: Fragmentation in the interactive TV market and, therefore, the lack of a single technical standard. To the advertiser, this means spending (over and over again) to re-author their interactive ads for each different market/platform.

2: Resistance from the programming channels. (Obviously crucial in that they provide the airtime inventory and audiences.) The resistance is based on the fact that successful interactive ads will remove viewers from the linear broadcast stream. To make matters worse for programming channels (especially those not controlled by the platform), the current revenue models have the bulk of revenue being siphoned off to platform operators (see point 4).

3: To viewers, the novelty is wearing off - as many sceptics predicted. One of the first interactive ads was for the Renault Kangoo on the French digital satellite service, TPS. 85% of total viewers responded and 3.5% of those ordered a test drive – very impressive for any direct marketing campaign. But TPS now report that about 10% of viewers respond to interactive advertising (with 6-8% of those converting to leads.) This works out at a total response rate of 0.6% - still way higher than a non-interactive TV ad (at 0.25%), but is it enough to justify all the extra costs?

4: Speaking of which, in addition to the production and re-authoring costs mentioned above, advertisers are often billed at every turn by platform owners: premium on standard airtime rates (usually of about 20%); a fee for carrying the extra data required for broadcast of the ad; payment for each viewer who “clicks” on the ad.

Unless the above issues are addressed, its difficult to see how interactive TV advertising will ever grow into more than a glamorous and overpriced approach to direct marketing.