PERSPECTIVE: Open pays the price for implementing a naive business plan

The fact that the four dots after its name were considered critical

to the identity of BSkyB's interactive shopping service Open ..., which

closed last week, says much about the new, electronic economy. Though in

some ways more clever and more productive than the old economy, it has

proved itself subject to the same laws, beginning with getting the

business model right before you worry about how many dots should appear

after the name.



It is not just that Open made mistakes (we all do and, after all, this

was the beginning of interactive TV anywhere in the world) but that it

made such basic ones. Here was a business that had everyone caught up in

its valuation at pounds 2 billion soon after launch when the reality -

an interactive service that did not allow access to the internet and

which could only be accessed when you were not watching television - was

way behind the giant leap that everyone was raving about.



Open started out with four shareholders: Sky, BT, HSBC and

Matshushita.



As more than one chief executive found out to his cost, those four

shareholders had different objectives. The changing chief executives, in

turn, gave the early business different approaches. Its sales story -

based on high fees and commission deals - drained the interactive TV

marketing budgets of brands and even served to put off new entrants.



It wasn't just the high fees and commission deals that put advertisers

off. Some clients, particularly retailers, were nervous of what amounted

to giving Open ownership of their database of consumers by being on the

service. Tesco is thought to have looked at Open at length and concluded

they wanted to own the customer themselves. While clients such as Van

den Bergh Foods did not have this fear, they were never going to sell

much direct to consumer, unlike the retailers. But Open's business model

was built on a share of each transaction and this model was going to be

in trouble if the retailers were not there en masse.



Indeed, the fact that Open talked at all in terms of transactions - it

generated only 650,000 in total - suggests that orders taken was its

chief measurement of performance. But surely that was to miss the

crucial point: it's one thing to interact with advertising, for we do it

all the time via traditional media. It's another thing altogether to

interact with an advertiser via unfamiliar technology.



So is that it for interactive TV? No, of course not. It's a drawback in

terms of shopping on TV but not for the other basic interactive services

provided by digital television such as banking, travel services and,

most successful of all, gambling. Penetration figures suggest that

interactive television will be the most popular means of accessing the

internet in Europe by 2005. But smart people in the future will learn

from Open's mistakes.



Campaign-i, p15.



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