WORLD: MEDIA ANALYSIS - Europe's advertisers look on as interactive TV takes a hold

Are European advertisers prepared for the impact of digital TV, Jeremy Lee asks.

In Italy, where anyone who isn't football mad is regarded with intense suspicion, Sky has carved itself a potentially lucrative niche: Sky Italia is offering viewers the chance to interact with the TV in their chosen team's major weekly game.

It won't be long before advertisers realise the value of this kind of interaction and develop a plan to capitalise on it. If a plan isn't forthcoming, the consensus is that advertisers will eventually demand it.

As Europe's digital television penetration grows, traditional spot advertising is being challenged on two fronts: the first threat is from interactive or enhanced advertising, which offers advertisers (depending on the digital platform they are using) the ability to use interactive elements in their advertising to engage with, or capture data from, their viewers.

However, the extent to which people are watching ads depends on the second challenge to traditional spot advertising, personal video recorders, such as the UK's Sky +. These devices enable viewers to choose the programmes that they want to watch and, more importantly, to skip any ad breaks.

By 2007, the number of digital TV households in Western Europe should reach 80 million, according to figures from Datamonitor. The UK and the Nordics are pioneering growth, although, perhaps surprisingly, France was the first European country to introduce digital TV. Europe currently languishes around the 30 million mark, which is about 20 per cent of homes.

The UK's first interactive ad was for Chicken Tonight and was broadcast on Sky in 2000. But it hardly blazed a trail locally, and the number of advertisers that subsequently took up the format grew slowly. Four years later, Sky carries an average of 25 interactive campaigns per month.

By 2007, the market should be more sophisticated and Datamonitor predicts European interactive digital TV services will generate 18 billion euros.

Despite this, Fraser Riddell, the head of international at MediaCom London, thinks spot advertising is safe for the time being.

"The good news is that the growth of interactive television will be gradual, giving agencies and advertisers who are only just finding their feet plenty of time to adapt," he says.

However, this argument comes with a caveat.

"Once digital and interactive platforms reach saturation levels of penetration (and this is still a long way off) it will not be realistic any longer for an advertiser to rely on only spot advertising to catch viewers' attention - many of them will be 'hopping out' of the main broadcast stream to interact with the TV somewhere else," he adds.

Alex Michaels, an account manager at mOne, agrees, but says that the European broadcasters are starting to get their act together.

"The current status of interactive television across Europe is that local broadcasters are continuing to roll out interactive services and maintain a high level of investment in this platform. However, we need to look at the individual providers for each market - such as Sky for the UK and Canal + in France and Spain," he says.

This means that advertisers will not be able to run pan-European interactive television campaigns anytime soon because this would require co-operation from broadcasters in each country.

Michaels adds: "I do not foresee a high interactive adspend until late 2005, when I believe we will see a more structured approach to this advertising across Europe.

Also, although several large advertisers have begun experimenting, it will need all the advertisers to get on board before we see the true benefits to interactive advertising. This can and will happen only once the European penetration is high and a larger audience base is available,"

Away from the technical difficulties, the various broadcasters take very different approaches to encouraging interactive advertising on their platforms.

According to Riddell, Sky is the best in Europe for pushing opportunities and for creating a series of case studies.

"In many other cases, new TV technology represents a bit of a sleeping giant for the advertisers, having been developed by broadcasters to feed a desire among viewers for a more interactive experience rather than for advertisers to make their communication plans more visible," he says.

Obviously, however, when the latter catches up, we can expect a significant increase in variety in TV plans for European advertisers, along the lines of what is being done with Sky Italia's football coverage.

But what about the impact of PVRs? Will these cause a dramatic change in people's viewing habits?

Sue Moseley, the managing director of Initiative Futures Worldwide, points out that even the most optimistic observer would put PVR penetration in the UK at 20 per cent in five years, leaving Europe lagging well behind.

However, the threat remains and, with the launch of the PlayStation 3 system, which has an integrated PVR, the market may soon get a kick-start.

According to Initiative research, 80 per cent of PVR owners are viewing through the PVR. However, Moseley says that they do not fast forward through ad breaks at the top speed in case they end up fast forwarding into the programme and therefore have to rewind.

Instead, they are fast forwarding at six or 12 times the normal speed so they can still see the picture, Perversely, they also pay a high level of attention to the ads.

Using anecdotal evidence, Moseley claims that, rather than an advertising-avoidance tool, PVRs are used to manage the consumption of ads.

"If a viewer sees an ad that he or she likes, such as Wieden & Kennedy's 'cog' or TBWA's spots for John Smith's featuring Peter Kay, they are likely to stop fast forwarding and watch it," she concludes.

So that old bugbear, the quality of the creative in TV ads, will assume even greater importance as we hurtle into the PVR age.

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