The Shape Of Interactive: The race is on to sign up customers and advertisers to interactive TV. But those taking part need to be up to speed before their feet are even in the starting blocks

The idea of interactive TV has teased us all for years. If the bold new interactive future that is Open appears, at the moment, to resemble little more than an updated Teletext service, that’s because our expectations have become too lavish. More sophisticated interactivity, however, will arrive in the spring. And, although Open is already pulling in up to pounds 1 million worth of sales a week, there will be much more to get excited about.

The idea of interactive TV has teased us all for years. If the bold

new interactive future that is Open appears, at the moment, to resemble

little more than an updated Teletext service, that’s because our

expectations have become too lavish. More sophisticated interactivity,

however, will arrive in the spring. And, although Open is already

pulling in up to pounds 1 million worth of sales a week, there will be

much more to get excited about.



The new-media research company, Fletcher Research, estimates that almost

13 million UK households will have access to interactive TV services by

2004. And already one in ten UK households have signed up to digital TV

- the gateway to interactive services.



Out of the 2.2 million total (at the last count), 1.8 million have opted

for the Sky Digital satellite option, which gives access to the Open

service. ONdigital has signed up 411,000 subscribers, but it’s

interactive services are so far hampered by bandwidth restrictions.



As for digital cable, which will potentially offer the most

sophisticated interactivity, Cable & Wireless, now owned by NTL, is

already trialling interactive services, while NTL itself is planning the

long-awaited launch of its interactive TV offering in the spring.

Telewest is launching its Digital Active service without interactive

services, but aims to have these up and running in the autumn.



Meanwhile, BT’s ADSL technology - based on telephone lines - is waiting

in the wings, while Yes TV is trialling video on demand to handfuls of

people in Cardiff, as is KITV in Hull, both using ADSL.



Early adopters of digital know that this is the platform for the next

generation of TV viewers. The culture minister, Chris Smith, has

confirmed that the analogue television signal will be turned off some

time between 2006 and 2010, providing that digital TV is available to

99.4 per cent of the population and 95 per cent of homes by that

time.



How quickly that sort of penetration will occur depends on a number of

factors. The advent of e-mail facilities - compiled with the help of a

natty iMac-style console - was supposed to familiarise consumers with TV

interactivity. Open has its version of the system running, as does C&W.

Unfortunately, although the system works well for communication between

Open consumers, the interface for sending e-mail to a wider world is

still complicated. Yet results from Microsoft’s six-month,

internet-based WebTV trials in London and Liverpool suggested that of

the one in three households willing to try the TV service, more than 90

per cent of them highlighted e-mail and internet access as the major

benefits the new technology would bring. Seventy per cent said they

would consider shopping online, but rather more said that games and even

education were more attractive inducements.



The challenge for advertisers, who have seldom wavered in their

enthusiasm for the prospect of interactivity, is to work out how they

should make best use of the options available and, more importantly, to

be in pole position come spring, when cable and satellite services will

be moving into interactive big time.



’If you look at the Gibbs SR ad that launched TV advertising in this

country in 1955, it was nothing but a print ad in a new medium. There’s

a danger this will happen with interactivity,’ Chris Harrison, managing

director of Grey Interactive TV, says. ’In France it’s been quite easy

to trace the evolution of interactive commercials. It moved from a

fairly pedestrian Renault execution to much more advanced offerings from

advertisers such as Buitoni. I’m sure we will see the same sort of

process over here when we get full interactivity. Hopefully we can

proceed a bit faster.’



The digital interactive services have to convince advertisers that they

shouldn’t wait for the holy grail of full interactivity. Open is using

an in-house sales force. For NTL, C&W and Telewest, the job of

convincing advertisers and their agencies what they want from

interactive TV is being left to the sales house, Real Media.



Meanwhile, the range of interactive advertising opportunities that will

be available to advertisers is emerging.





Banner ads



One legacy of the internet model that has infected the design of

interactive TV is that banner ads have become the vehicle of choice for

companies to test the waters on Open. Manchester United, Scottish Power

and Persil were among the first advertisers to try this route. They

lured viewers on to their site with special offers on a banner ad or, in

Persil’s case, the chance to win a weekend break in Rome.



Early research suggests competitions are one of the strongest traffic

drivers. Saatchi & Saatchi commissioned NDS to explore consumers’

attitudes towards interactive advertising. It showed that competitions

helped minimise consumer confusion, helped reassure those worried about

transmission costs and billing processes, and even about the dangers of

unsupervised purchases by children.



Open’s trial period also generated high response rates using the bait of

competition. It offered two games, but no advertising - not even

directional - to alert digital consumers to their presence. But the

prospect of a weekend away for the lucky winners ensured that these

competitions drew an incredible 61,000 responses a week.



Other advertisers are less enamoured of banner advertising. ’Any

advertiser interested in interactivity, whether it’s direct response TV

or the internet or digital shopping channels, must understand the nature

of the medium they are dealing with,’ explains James Stewart, the

interactive services manager, marketing at HSBC, one of the shareholders

in the Open platform.



’We have to remember that the internet is a lean-to medium and the TV is

a sit-back one, and the design of the content and the ads should reflect

that. You have to be much more simple and, at the same time, much more

dynamic on TV. People want to be entertained. The internet is more for

people looking things up. That’s why we have always said that we will be

available on TV and the internet, because they do such different

jobs.’





Interactive ads



There is now evidence that consumers are happy to interact with ads, and

not just for a reward. Certainly that’s the case in product categories

such as insurance and financial services, which already use direct

response TV.



Interactivity could have far-reaching effects on conventional TV ads,

signalling at its most radical the end of scheduled TV and a

comprehensive rethink of the 30-second ad break.



Whatever happens, advertisers will have to work out how the viewer will

interact. ’Think of it in terms of ’lazy interactivity’,’ explains

Motive’s head of digital media, John Owen. ’An advertiser needs to

communicate with someone with a beer in one hand and a remote in the

other.’



At the heart of all the interactive offerings will be the question of

how and when viewers are returned from the interactive walled garden,

back to the programming or, indeed, to the rest of the commercial

break.



Bruce Lynn, WebTV’s managing director, refers to what he calls

’interactive ad protocols’, meaning, in other words, that advertisers

should remember why the audience is there in the first place and not

steal viewers away.



’What we are thinking of offering when we launch interactive services in

the next few months is what we call a ’data glove’, by which we mean

that when viewers click on the interactive icon they get a split screen

intranet on a portion of the screen, in any format they specify,

containing the information they asked for,’ Howard Hughes, NTL’s ad

manager, explains. ’We look upon interactivity as a way of adding extra

value to the 30-second spot. And for advertisers, while the numbers are

small, experimenting with interactivity will be very cheap.’ The price

comparison touted around by all the platforms is of a tenfold reduction

in costs per lead generated against a conventional direct response TV

campaign.



NTL is confident of being first to market with full interactive

services, but C&W has already worked with two advertisers, MFI and

British Airways, to produce versions of what its own interactive

advertising might look like in its interactive TV trial in Manchester.

For other digital players, though, truly interactive advertising remains

a low priority.





Destination sites



So far the focus of the interactive market has been confined to

developing the straightforward e-commerce at the heart of the offering.

The format developed by Open is typical. Consumers access Sky’s

electronic programme guide to go into Open and then on to the shopping

site. Here it gets tricky.



In some categories, several company logos can appear on screen at

once.



In others, it is already necessary to scroll through a succession of

screens to see everything. But purchasing is simple. You enter your

credit card details, and that’s it. The system knows where to send your

goods. And it has already found favour with advertisers bold enough to

have taken the plunge.



Woolworths conducted a trial of its interactive store, Woolworths

Entertainment, with Open for eight weeks last summer. Only 1,000

subscribers had access to the system. The trial store offered the top

ten CD albums, videos and books, plus the top 20 computer games.



A transaction took 90 seconds, from pressing the remote control to get

into the Open service and four button clicks to process the order

through to Woolworths’ distribution company, Entertainment UK, and then

to the customer.



Approximately 2 per cent of Open viewers used the facility in every week

of the trial, while the average price per transaction was more than

pounds 15.



If Woolworths achieves the same response now that Open reaches a

potential 1.8 million households, the retailer could be dealing with

something like 31,000 transactions a week, generating a turnover of

pounds 24 million in the first year. And, of course, the trial response

figures were achieved without any promotion for the service, and with a

limited product offering. The Woolworths Entertainment range has now

been increased to more than 300.



One limit on the amount of products that retailers will want to offer is

the fact that Open has its own operating system. This means that stock

order codes have to be specially written for each product which, in

turn, increases the per unit cost on lower ticket items.



’We run a service called Car Choice, which offers finance deals on a

wide range of cars in the UK,’ James Stewart, HSBC’s interactive

services manager, explains. ’But it is a massive undertaking because it

means writing more than 3,000 codes. The more complicated the data, the

longer it takes to load the page, the longer your splash screen is up

there (on the TV) and the more chance viewers will lose patience and

move on.’





Own channel



It might seem elaborate now, but there’s no reason why an advertiser

might not buy and brand its own channel. The nearest thing so far is

probably QVC’s new interactive shopping channel, QVC Directory, which is

launching on Sky.





Sponsorship



There are, broadly, two kinds of sponsorship, as with non-interactive

TV: sponsoring a programme which exists, or backing the production of a

programme. Both of which would benefit if the ITC relaxes its

sponsorship rules.



There are already interactive opportunities. For example, Two Way TV,

which provides interactive programming, will work with sponsors for its

existing interactive game shows.



Wholesale backing of programme production is not a new approach to

securing the right audience for a product. Procter & Gamble was behind

the first TV soaps and also created the comedy series, Northern

Exposure. It may become more commonplace as the need for programming

increases.



The chief rule, with sponsorship as with all advertisers’ options, will

be not to underestimate the viewer’s antipathy to advertising. According

to Lowe Howard-Spink’s Ad Avoiders research, started in the 80s, the

number of people who agree with the statement, ’I enjoy the TV ads as

much as the programme’, increased to around 33 per cent in the UK in

1991, but it has since fallen.



A cautionary tale. When BT carried out its interactive TV trial in

Colchester, ads were confined to a channel called Adland. In the first

week, 55 per cent of households tuned in to the channel. But after that

it never got up to even 20 per cent in the next 25 weeks of the trial.



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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).