Just imagine: you're watching a recently launched film on your TV (at a time that suits you) and an ad for a pizza chain comes on. You're hungry, so you click on it and fill in your order - and 15 minutes later, your dinner arrives. No scrabbling around to find that flyer that dropped on your doormat last week - and the advertiser only pays for ads that result in an order.
Sound unlikely? It's closer than you think. Forecasters have been talking about internet protocol TV (IPTV) for a while, but improvements in broadband delivery mean it won't be long before the talk turns into reality.
As things stand, though, there's still plenty of confusion in the market as to what IPTV really is. It's probably easier to start with what it isn't: IPTV is not watching TV online on your computer. In fact, it's more similar to cable or satellite in that it is TV delivered, via broadband lines, direct to your set-top box. What's different is that what you want to watch is beamed to your individual set (it's not broadcast to everyone), and it's a two-way dialogue - you can choose what you want to see and even interact with it.
Some of the confusion has arisen because of the number of players trying to get a piece of the action. Telecoms companies such as Alcatel, cable providers, traditional TV broadcasters, internet-based businesses such as Google and even software companies are all trying to get involved in what is, as yet, a market far from reaching its full potential.
The only way to broadcast
In effect, IPTV is neither TV nor the internet, but a new medium. Richard Eyre, the chairman of the Internet Advertising Bureau and an expert on convergence issues, says that although it is very early days, he expects IPTV will eventually become the only way that TV is broadcast worldwide.
"The notion of convergence has been around for so long that you could be forgiven for dozing off whenever it is mentioned," he says. "But the techno-logy is in place for it to become part of everyday life. The natural conservatism of people will mean it will take a while to take off but it will happen once the service providers start offering amazing deals on IPTV as they are beginning to do with broadband."
But Rishad Tobaccowala, the head of Denuo, Publicis Groupe's new strategic digital consultancy, says the change will not happen as quickly as some are predicting. "TV companies, internet companies, telecoms companies ... everyone wants to do IPTV and that struggle is going to slow things up," he says. "The other problem is the technology - all that new equipment that needs to be developed.
"As things stand, your computer needs to be rebooted all the time, but that wouldn't be acceptable for your TV set. It's more likely to take five to ten years than two to five years to get to 25 per cent of households."
While IPTV services have already been launched, mainly by telecoms companies, across the US, Europe and the Far East (a hotspot for take-up), as yet subscriber numbers remain modest. Analysts predict nine million people will have signed up across Europe by 2009, but current figures languish well below the one million mark.
In the UK, the BBC is planning to roll out new and archive TV content for peer-to-peer distribution via its web-based MyBBCPlayer system. BT, meanwhile, is working on the autumn launch of its IPTV service, BT Vision, a hybrid system combining Freeview with a broadband connection.
Social networking on your TV
Antony Carbonari, the commercial and interactive director of BT Vision, says the content-on-demand aspect is what makes the system different from traditional cable or satellite delivery. "Of course, content on demand is available to a certain extent on Freeview or Sky but broadband really brings it to the fore - you can choose from hundreds of thousands of hours of music or movie content and watch it whenever you want," he says.
The costs associated with TV via broadband are also totally different from broadcast. Because TV is delivered direct to individuals, it makes speciality programming economically viable - small production companies could film events such as niche sports, for example, and make the footage available via the server at minimal cost.
Interactivity will also change the format of the programmes we watch, Carbonari says. "In the future, you'll be able to link live programmes with webcams, for example, so you could have a show like Who Wants to be a Millionaire? with people across the country playing and appearing on screen via their webcams," he adds. "Or you could be watching the football and have a webcam link into your friend's living room so you can talk to them while they're watching the game. The internet is about social networks and bringing people together. IPTV means you will be able to do that through your television."
Although the technology still needs a lot of work, viewers will also be able to look forward to having the ability to personalise their electronic programme guides so that their favourite shows and channels are displayed as soon as they switch on - a world away from wondering if there's anything good on telly tonight. They'll also have the ability to "broadcast" consumer-generated video to friends and relatives and access all the things you'd expect to be able to do on your computer, like e-mail, instant messenger and Skype-style internet telephony.
"Young people in particular are already consuming more than one type of media at once - they talk to their friends online while they're watching TV," Eyre says. "As they grow up, they will be the drivers for take-up of this kind of service."
But will they be prepared to pay for it - and if so, how much? Recent research from Accenture revealed while consumers displayed a high level of interest in the kind of services that IPTV could provide, more than half would not be prepared to pay extra for them.
A new advertising model
That being the case, there has been a surprising lack of enthusiasm from the IPTV broadcasters for developing new advertising models to support any potential subscription revenues. "Most of the providers are approaching this as a pay-TV model," Eyre says. "If you can make a subscription model work, it's obviously a good one, whereas an ad-funded model requires investment in sales teams and a less consistent revenue stream."
It's likely that the successful providers will be those that develop a business model combining subscription with advertising revenue. Different types of programming could even have different funding models - people are more likely to pay for event TV such as major dramas or soap operas, while less high-profile shows could be advertising-supported.
In the US, ABC broadcasts some of its shows online (though not yet via IPTV), with ads included as part of the broadcast. Channel 4 does the same over here. Other websites, like YouTube and iFilm, surround some of their content with commercial messages that users have to watch before they can get to the film they want to see.
Eyre, however, believes that giving consumers choice should be the most important consideration. "This is an entirely new medium, so why not exploit what it can do by giving the audience what it wants?" he says. "They can either watch the ads or pay a higher subscription if they really don't want to. Yahoo! has a radio service called Launchcast that you can either pay for or get for free if you get the version that includes commercials."
Patrick Christian is the managing director of Packet Vision, a UK-based company that creates delivery platforms for IPTV advertising. He says that the addressability of the new service will fundamentally change the type of companies that can advertise on TV, the way their TV ads look and what they can expect to achieve with them.
"Because you can gather information on individual subscribers, advertisers will be able to target their TV ads by area, by behaviour or even to individuals," he says. "It will mean far smaller businesses will be able to afford to advertise on television, and will also change how TV spots are priced - you won't have to pay cost per thousand because you will be able to tell exactly how many people are watching your message."
TV advertising will also be split into "push" and "pull" executions, he adds. "Even on the push side it will be different in that the platform can insert viewer-oriented spots into breaks so that rather than everyone seeing the same ads, you can deliver different ads to different groups of people."
You can even target by behaviour - if a person has been using the system to look for information on new cars, for example, car advertisers would be able to access that information and target those people with relevant ads.
The "pull" side refers to the viewer's ability to interact with the advertising, and IPTV supporters say the technology will make interactive ads very different from the kind of clunky executions we're used to seeing.
"It will be much faster and it will look like programming, combining video and allowing people to browse much more information than they can do now," Carbonari says. "There will be a comprehensive and searchable directory of ads and information that people can access via their TV. The list is endless as to how advertisers will be able to interact with consumers."
Another upside to this direct targeting is measurement. Just as advertisers will be able to decide who to send their message to, they will also be able to track exactly who has responded by expressing more interest or even by buying. "Internet advertising is pay-per-hit, not pay-per-opportunity-to-see," Eyre says. "But opportunity to see is the currency for all media trading, which is another thing that will have to change fundamentally."
The creative opportunity
For creative agencies, IPTV will mean a similar transformation. Ads will no longer be restricted to a 30-second or 60-second slot: instead, advertisers will have the choice of producing a range of programming of different lengths and formats, depending on what they are trying to achieve.
Advertisers could even launch their own channel - as Audi has done on cable and Sky - and, as legislation now stands, would not require a licence to do so. Although the European Union is trying to extend regulation of TV broadcasting to other platforms, IPTV is not yet subject to any restriction when it comes to content or advertising.
"You will be able to create messages of any length and do whatever it takes to make a sale," Tobaccowala says. "So you'll see a combination of shorter messages to intrigue people and longer programmes - up to an hour - for people who actively search out your content because it's relevant to them."
More advanced forms of sponsorship could also be made possible. According to Eyre, this is an opportunity for agencies to show how creative they can really be. "What tends to happen with a new medium is that people ask what old medium is it most like. So when TV launched, the first ads were people reading out radio scripts. IPTV will be one of those tests of how creative agencies can be and how bold clients are prepared to be in looking for ways to engage people. So you could see highly creative sponsorships, for example, where Coke might pay for a viewer to watch a film they want to see, but in return they have to agree to receive Coke-branded stuff."
All this is going to mean a big shake-up for an advertising business built and structured around making 30- second TV ads. Not only that, but the traditional players - broadcasters, ad agencies, media agencies and production companies - will find themselves jostling for position with new businesses: telecoms providers, hardware and software companies, and search and internet companies like Google.
"Agencies aren't structured to make new kinds of ads or to produce them digitally," Tobaccowala says. "It's going to mean an entirely new ecosystem for the business, a new production infrastructure - and that's going to take a long time to sort out."
Next week: Search Uncovered.
WHAT IPTV MEANS FOR ...
- A new creative canvas with almost limitless opportunities
- The ability to target groups or individuals by location and behaviour
- Clients will be able to tell exactly who has responded to their ads
- A new structure for your business
- No need to wonder which half of your budget is wasted - none of it will be
- You can target your advertising directly to your audience
- Payment by response, not by opportunity to see
- The chance to create programming about your products that prospective customers can choose to watch
- A struggle to retain dominance with competition from telecoms and internet companies
- A move away from broadcast to consumers seeking out only the content they want to watch
- A new way of charging for advertising - by response, not by cost per thousand
- A cheaper delivery system to enable specialist programming.